Here is a on whether a Canadian registered charity that is a public foundation can borrow money to pay for equipment to be used in charitable activities
CRA advanced tax ruling in French

Here is the actual CRA letter in French CRA advanced tax ruling in French


WARNING – HERE IS A GOOGLE TRANSLATE VERSION OF THE CRA LETTER – It is whatever the opposite of official is and definitely not to be relied on – but it gives a sense of the topic and whether you should get further information on the letter.

DOCNUM 2009-0343371R3
SUBJECT Public Foundation
SECTION 149.1(1), 149.1(3)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu’exact au moment émis, peut ne pas représenter la position actuelle de l’ARC.


1. Whether the loan will be a debt incurred for the purchase of an investment under 149.1(3)(d)?

2. Whether a business will be carried on by the foundation for paragraph 149.1(3)(a)?

3. Whether the foundation will continue to be operated exclusively for charitable purposes for the definition of charitable foundation in subsection 149.1(1)?

POSITION ADOPTED: 1. Yes. 2. No.  3. Yes.

REASONS: 1. The arrangement may be considered to be a form of investment in the particular circumstances. 2. No business based on the facts. 3. Confirmation obtained from Charities Directorate.




Subject: Request for Advance Rulings XXXXXXXXXX

This is in response to your letter of XXXXXXXXXX in which you request advance rulings on income tax on behalf of XXXXXXXXXX.

This also responds to your letter of XXXXXXXXXX, XXXXXXXXXX your emails and telephone conversations (XXXXXXXXXX), for which additional information was provided to us.

Unless otherwise indicated, all statutory references herein refer to provisions of the Act, the Income Tax Act, RSC 1985 (5th Supplement), c.1, as amended (“Act”).


1. XXXXXXXXXX is a company without share capital, which was incorporated by letters patent XXXXXXXXXX XXXXXXXXXX under.


3. Objects are described XXXXXXXXXX XXXXXXXXXX section of its letters patent. XXXXXXXXXX was established exclusively for the benefit of XXXXXXXXXX. According to the letters patent of XXXXXXXXXX, the latter may acquire any type of movable and immovable, and may also conduct rental property.

4. XXXXXXXXXX is a “charitable foundation” and a “public foundation” under the definitions in subsection 149.1 (1), and a “registered charity” under the definition in subsection 248 (1).


6. XXXXXXXXXX is a corporation which was incorporated under an Act of XXXXXXXXXX. XXXXXXXXXX is a “charitable” under the definition in subsection 149.1 (1).





11. However the XXXXXXXXXX capital budget does not allow him to incur the cost of the project estimated around $ XXXXXXXXXX XXXXXXXXXX.

12. The parties involved (XXXXXXXXXX) agreed that XXXXXXXXXX commits the expenditure necessary to draft and carry XXXXXXXXXX rental of equipment for XXXXXXXXXX (for the benefit of XXXXXXXXXX). All necessary approvals for the Arrangement was obtained from XXXXXXXXXX.

13. XXXXXXXXXX, a memorandum of understanding was signed between XXXXXXXXXX, which included a proposed lease.

14. The federal government is committed to providing a subsidy XXXXXXXXXX XXXXXXXXXX $ for disbursements to be incurred by the XXXXXXXXXX XXXXXXXXXX project.

15. XXXXXXXXXX is ultimately responsible for the administration (including tendering) and monitoring of project milestones XXXXXXXXXX.

XXXXXXXXXX has already concluded contracts with suppliers to purchase equipment for the project, which must be manufactured by suppliers. XXXXXXXXXX also concluded a contract with a general construction contractor for the work of installing equipment XXXXXXXXXX.


16. XXXXXXXXXX get a loan from a financial institution for funding the project XXXXXXXXXX.

XXXXXXXXXX has already obtained a commitment from a financial institution for a loan for a period of years XXXXXXXXXX (repayable over a period of years XXXXXXXXXX) to finance the project, with an interest rate of XXXXXXXXXX%. The loan period was set at XXXXXXXXXX years to ensure that rental payments are not too high for XXXXXXXXXX.

The loan amount will equal the total project cost (XXXXXXXXXX) is estimated at about $ XXXXXXXXXX (including the cost of equipment, installation costs and expenses of improvements to the building).

17. XXXXXXXXXX will acquire a new XXXXXXXXXX.

18. XXXXXXXXXX incur all expenses necessary for the project and will receive a grant of $ XXXXXXXXXX federal government. XXXXXXXXXX XXXXXXXXXX will be the exclusive owner of the new equipment during the rental period.

19. The work required for installation of equipment will be completed XXXXXXXXXX XXXXXXXXXX.

20. A lease will be signed between XXXXXXXXXX and XXXXXXXXXX. The lease will be concluded when the project is completed. It is impossible to determine the amount of rent until the project has not been completed, because rents will be based in part on the total project cost.

The lease will provide for the hiring by XXXXXXXXXX (lessor) to XXXXXXXXXX (tenant) XXXXXXXXXX equipment and all other property connected therewith, including XXXXXXXXXX.

The lease term will XXXXXXXXXX years. The lease payments will commence on the first day of the month following the month during which the installation works will be substantially completed XXXXXXXXXX and XXXXXXXXXX.

The lease will provide that at the end of the lease, the landlord must offer the tenant to sell the property covered by the lease for a retail price of $ XXXXXXXXXX and the tenant must provide the lessor to purchase the property covered by the lease for a purchase price of $ XXXXXXXXXX.

The lease will provide that during the term of the lease, the lessee shall at its expense, see to the maintenance and repair of equipment.

The provincial government XXXXXXXXXX XXXXXXXXXX provide proof of insurance coverage that is satisfactory to XXXXXXXXXX. In case of destruction of equipment covered by the lease, XXXXXXXXXX receive reasonable compensation for equipment.

21. The lease will provide that the amount of rental fees will be payable monthly by XXXXXXXXXX (on behalf of XXXXXXXXXX) at XXXXXXXXXX, will be determined by mathematical formula XXXXXXXXXX



23. XXXXXXXXXX no role in the operation of new equipment or maintenance. When the equipment has been installed, the operations of XXXXXXXXXX is usually limited to the simple management for rental. XXXXXXXXXX will handle warranty issues if necessary.

24. During the period XXXXXXXXXX years under the lease, XXXXXXXXXX will receive monthly payments of rent and take the necessary steps to ensure that the amounts of rent will be calculated correctly.

25. At the end of the lease (for a period of years XXXXXXXXXX), goods covered by the lease will be sold to XXXXXXXXXX XXXXXXXXXX for a sale price of $ XXXXXXXXXX.

It is anticipated that the new equipment XXXXXXXXXX could have a useful life up to XXXXXXXXXX years, depending on circumstances. The fair market value of new equipment should be more than $ XXXXXXXXXX XXXXXXXXXX years after.


26. The proposed transactions are designed to allow for a new XXXXXXXXXX XXXXXXXXXX without having to use part of its capital expenditure budget. XXXXXXXXXX commit the necessary capital expenditure to the new system and will proceed with the leasing of equipment for the benefit of XXXXXXXXXX XXXXXXXXXX. XXXXXXXXXX obtain ownership of the equipment at the end of the lease.



27. To the best of your knowledge, and that of XXXXXXXXXX, none of the issues covered by this application of advance rulings is addressed in an earlier statement XXXXXXXXXX, is reviewed by a tax services office or tax center in compared with a previously filed by XXXXXXXXXX, is the subject of an objection by XXXXXXXXXX, is in court or if a decision was rendered, the time for appeal to a higher court came to maturity, and is the subject of a decision already made by the Income Tax Rulings Directorate.

28. The main contact on the taxpayer affected by the rulings are:

– Registration Number: XXXXXXXXXX
– Tax Services Office: XXXXXXXXXX
– Tax Centre: XXXXXXXXXX
– Its annual return as a charity is produced at the Charities Directorate in Ottawa.
– Head Office Address: XXXXXXXXXX

29. All significant transactions were carried out prior to the submission of the application of advance rulings or could be undertaken after the conclusion of the proposed transactions, which will be part of a series of transactions (as defined in the definition in subsection 248 (10)) which will include the proposed transactions are described herein.

Advance ruling

Provided that the statement of facts, planned operations and goals, planned operations, constitutes a full disclosure of all relevant facts of all proposed transactions and all the goals planned operations and that operations are carried out as described above, our decisions are as follows:

A) The loan to be obtained by XXXXXXXXXX in the proposed transactions will not constitute a debt to be covered by paragraph 149.1 (3) d).

B) The proposed transactions described above, by themselves, will not ensure that XXXXXXXXXX exercise a commercial activity for the purposes of paragraph 149.1 (3) a).

C) The proposed transactions described above, by themselves, will not ensure that XXXXXXXXXX cease to be operated exclusively for charitable purposes of the definition “charitable foundation” which is provided in paragraph 149.1 (1).

For purposes of this, only facts and proposed transactions described herein have been considered. The documentation provided in support of your application is not part of the facts and proposed transactions.

These decisions are made subject to restrictions and conditions set out in Information Circular 70-6R5, 17 May 2002, published by the Canada Revenue Agency (CRA) and CRA binding, provided that proposed transactions described in paragraphs 16 to 21 are completed before XXXXXXXXXX. These decisions are based on current law and does not reflect changes that are proposed.


The decisions should not be construed as acquiescence on the part of the ARC, to the effect that we have accepted, reviewed or determined other tax consequences that may result from facts and proposed transactions described in the present.

The statement of our fees for time spent studying your file will be sent under separate cover.

Please accept, Excellency, the assurances of our highest consideration.

Section Manager Sector
  Financial and exempt entities
Tax Rulings Directorate
Branch Policy
  Legislative and Regulatory Affairs