1 Cross-Border Legal and Tax Issues for Ministries Robert B. Hayhoe [email protected]416.595.8174 Canadian Council of Christian Charities September 2003 Annual Conference Mississauga, Ontario M I L L E R T H O M S O N LLP Barristers & Solicitors, Patent & Trade-Mark Agents
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1 Cross-Border Legal and Tax Issues for Ministries Robert B. Hayhoe [email protected] 416.595.8174 Canadian Council of Christian Charities September.
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– T3010 annual return questions– T2050 application for registration
questions– significant audit attention
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Indirect Foreign Activities by Registered Charities
• Always subject to “own activities” test
• RC 4106 “Registered Charities Operating Outside of Canada”– need binding written agreements– agency/joint ministry arrangements
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Joint Ministry Agreement
• Core elements:– pooling of resources for common
project– requires decision-making structure
• Canadian votes proportional to monetary contribution
– joint liability– stringent recordkeeping requirements– term and termination
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U.S. Perspective on Joint Ministry Agreements
• Some US lawyers believe that “Joint Venture” terminology suggests a separate entity under US law and may create additional tax and liability issues– agreements must be drafted carefully to
reduce this concern
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Agency Agreement
• Principal (Canadian charity) hires agent (foreign charity) to complete some task
• Project choice is made by principal• Operational decisions can be made by
agent• Liability flows from agent to principal
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Fee for Service
• Canadian charity may hire foreign charity for specific services– missionary training– evacuation facilities– supervision of short terms teams
• Need invoices• Need prior written contract unless nominal
amount (under $5,000 per year)
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Recordkeeping
• Registered charities must keep records in Canada to show charitable nature of all activities
• Foreign indirect activities:– agency or joint venture agreement– operational reports– financial reports (with backup)– segregated bank accounts for agents
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Choice of Arrangement
• Multi-Lateral Integrated Ministry– joint ministry arrangement– may be limited to Canadian participation