Absolutely yes.  And many thousands of charities do so. 

The Income Tax Act (Canada) allows charities to conduct their charitable purposes by: 1) giving money or assets to another “qualified donee” (see below); or 2) by conducting their “own activities” (at home or abroad). There is no ‘third option’. A Canadian charity cannot just transfer or grant money to a foreign NGO or charity. In general, the same notion applies to operations within Canada. A Canadian charity cannot just give or transfer funds to another Canadian organization that is not a qualified donee (e.g., a registered charity).

Transfers to Another Qualified Donee

Qualified donees are organizations that can, under the Income Tax Act (Canada), issue official donation receipts for gifts that individuals or corporations make to them.
Qualified donees include:

  • registered charities;
  • registered Canadian amateur athletic associations;
  • registered national arts service organizations;
  • housing corporations in Canada set up exclusively to provide low-cost housing for the aged;
  • a municipality;
  • a municipal or public body performing a function of government in Canada;
  • the United Nations and its agencies;
  • universities outside Canada with a student body that ordinarily includes students from Canada (these universities are listed in Schedule VIII of the Income Tax Regulations);
  • charitable organizations outside Canada to which the Government of Canada has made a gift during the donor’s taxation year, or in the 12 months immediately before that period;  and
  • the Government of Canada, a province, or a territory.

A Canadian charity can transfer funds or assets to another qualified donee. For example, a Canadian charitable organization with no experience in foreign operations that wishes to aid people in Darfur may decide to support Doctors Without Borders Canada, a Canadian qualified donee. There is no need from a CRA point of view to have an agreement between the donor charity and Doctors Without Borders Canada. If the donor charity wishes to restrict the gift to Darfur, then it may wish to have a direction or agreement to that effect. Similarly, if a donor requested that his or her donation to a community foundation (qualified donee) should be applied toward dealing with the issue of AIDS in sub-Saharan Africa, the foundation could transfer the funds to the Stephen Lewis Foundation or Canadian Crossroads International, both qualified donees, without the need for an agreement or monitoring. For many Canadian charities that do not have experience in direct charitable activities outside of Canada, a donation to another qualified donee is the simplest and safest way to have a global impact.

“Own Activities” and Intermediaries

Foreign charities and NGOs are rarely qualified donees. Therefore, as a general rule, a Canadian charity cannot transfer funds or assets to them except in furtherance of the Canadian charity’s “own activities” in a structured arrangement, as discussed below.

There are a number of different structured arrangements through which a Canadian charity can operate abroad, including:

  1. Canadian employees or volunteers of the Canadian charity directly working abroad;
  2. Agency Agreements with an Agent;
  3. Contractor Agreements;
  4. Joint Venture Agreements/Joint Ministry Agreements; and
  5. Cooperative Partnership Agreements.