Both the Federal Court of Appeal and the Federal Government have now weighed in on Canada’s rules for exporting important pieces of art. Most recently, in Canada (Attorney General) v Heffel Gallery Limited, 2019 FCA 82, the Federal Court of Appeal restored and redefined certain cultural property eligibility criteria that will be welcome by museums and art galleries looking to obtain cultural property tax certification for international works of art.


The Income Tax Act (Canada) contains certain tax incentives to encourage donations of cultural property to eligible designated institutions and public authorities in Canada. These tax incentives are designed to ensure that important works of art remain in Canada for the benefit of Canadians.

To qualify for the tax incentives, the donated property must be of “outstanding significance” by reason of its close association with Canadian history or national life, its aesthetic qualities or its value in the study of the arts or sciences. In addition, it must be of “national importance” to such a degree that its loss to Canada would significantly diminish the national heritage.

Review Board Decision

In the present case, Heffel Gallery Ltd. applied to the Department of Canadian Heritage for a cultural property export permit in order to send a painting, entitled Iris bleus, jardin du Petit Gennevilliers (“Iris Bleus”), to a purchaser in England. This application was made following an auction of Iris Bleus, painted by French impressionist Gustave Caillebotte, which was sold a commercial gallery in London, England for $678,500 CAD.

The application was made pursuant to the Cultural Property Export and Import Act (Canada) (the “CPEIA”), which imposes export controls on certain objects that fall within the Control List in order to preserve the national heritage in Canada. The determining factors for an object that is the subject of an application for an export permit is the same as for the aforementioned tax incentives – whether the property is of “outstanding significance” and “national importance”. If the object meets the criteria, the permit will be denied.

The Canadian Cultural Property Export Review Board (the “Review Board”) denied the requisite export permit on the grounds that the painting was of both “outstanding significance” and “national importance”. At the Federal Court, the decision was quashed on the grounds that the painting failed to meet the criteria for “national importance” (2018 FC 605). The Federal Court decision was appealed.

Federal Budget

In the meantime, in the Federal Budget that was tabled by Finance Minister Bill Morneau on March 19, 2019 (the “Budget”), the Government proposed to change the rules to confirm that donations of important works of art, whether of foreign or Canadian origin, qualify for enhanced tax incentives.

To do so, the Budget proposed to introduce amendments to the Income Tax Act (Canada) and the CPEIA to remove the requirement that property be of “national importance” in order to qualify for the enhanced tax incentives for donations of cultural property, such that property in question must only demonstrate the “outstanding significance” requirement (see our 2019 Federal Budget Edition for details).

The Federal Court Decision

Following the Budget, on April 16th, 2019, the Federal Court of Appeal released its decision (2019 FCA 82) on this matter. The Federal Court of Appeal overturned the decision of the Federal Court and restored the decision of the Review Board, confirming that cultural objects originating outside of Canada may still be found of both “outstanding significance” and “national importance”.

In their reasoning, the Federal Court of Appeal reasoned that the Federal Court failed to apply the appropriate standard of review which would have required the Court to defer to the Review Board’s interpretation. The Federal Court of Appeal also pointed out the impact that the tax incentives have in preventing “culturally ghettoised” Canadian institutions, the vital role that the incentives play in the operation of the scheme of the CPEIA as a whole, and the safeguards in place to limit the impact the CPEIA may have on property rights.

The Federal Court of Appeal decision provides clarification that significant works of art that originate outside of Canada, do not require a direct connection to Canadian cultural heritage to qualify for enhanced tax incentives.

By tweaking the applicable test for determining what constitutes important works of art, the sustained tax incentives will hopefully continue to encourage Canadians to donate cultural property to designated institutions in Canada. The proposed amendments to the legislation will be welcomed by Canadian art galleries, making it easier to apply for certification of cultural property for particular works of art.

It remains to be seen whether the Budget’s legislative change will be enacted. In light of the Federal Court of Appeal decision, the changes may no longer be necessary.