Foreign universities and schools that want to provide official tax receipts to support the efforts of their Canadian donors have a few options.
Prescribed Foreign University
The Income Tax Act (Canada) allows donors to claim charitable credits or deductions for gifts to a university outside Canada that ordinarily includes students from Canada in its student body. The universities that qualify are listed in Schedule VIII of the Income Tax Act Regulations.
Donors can make direct gifts to a prescribed university. Students may also claim tuition, education and textbook tax credits on their Canadian income tax return for attending these institutions.
he Canada Revenue Agency (CRA) reviews applications for prescribed status and takes the administrative position that in order to qualify for prescribed status a university must meet the following conditions:
- it maintains an academic entrance requirement of at least secondary school matriculation standing;
- it is organized for teaching, study and research in the higher branches of learning;
- it is empowered, in its own right, to confer degrees of at least the baccalaureate level (Bachelor or equivalent), according to academic standards and statutory definitions prevailing in the country in which the university is situated; and
- it ordinarily includes Canadian students in the institution's student body.
CRA requests student data for the last ten years and has stated in a technical interpretation from 2008 that these students can include Canadian residents enrolled in distance learning programs.
CRA informed us recently that it plans to interpret this section more restrictively and will be reviewing those currently on the list. We recently had a case where the CRA turned down a university which had a long history of Canadian students in its student body because the university only received the right to grant degrees in the last few years (rather than having its students receive degrees thorough an affiliated institution). The CRA claimed that the university had to be able to grant degrees on its own for the last ten years. We believe this position is wrong and would not be upheld by the courts. Our Charities and Not-For-Profit lawyers can help universities challenge CRA on these decisions.
Canadian Friends Charity
Universities and schools that do not qualify for prescribed status can create a Canadian charity to support the foreign school. This option requires the creation of a independent Canadian charity.
Canadian law prevents the Canadian registered charity from simply granting money to the foreign university. Instead the Canadian charity must carry on its own activities. Typically, the Canadian charity carries on its own scholarship program, pays for teachers’ salaries, or buys books for the school’s library. This option requires directors or trustees to run the Canadian charity and be in control of its activities. The charity and the school will need written agreements regarding any activities the school carries out under the direction of the Canadian charity and the school must provide reports to the Canadian charity regarding these activities.