Definition Of Registered Charity Changed For Donation Of Approved Medicines

Budget 2007 introduced a tax incentive that provides a special deduction to corporations for approved medicines donated, for the purpose of international aid, to a registered charity that has received funding under a program of the Canadian International Development Agency, for gifts made on or after March 19, 2007.

The corporations are eligible for a charitable donations deduction equal to the fair market value of the property gifted. In order to provide an incentive for corporations to participate in international programs for the distribution of medicines, Budget 2007 also proposed to allow corporations that make donations of medicines from their inventory to claim a special additional deduction equal to the lesser of

  • 50 per cent of the amount, if any, by which the fair market value of the donated medicine exceeds its cost; and
  • the cost of the donated medicine.

This additional deduction was to be available only when the donee is a registered charity that has received a disbursement under a program of the Canadian International Development Agency, and the gift is made in respect of activities of the charity outside of Canada.

Budget 2008 proposed to change the definition of an eligible charity for this purpose. An eligible charity will be a registered charity that, in the opinion of the Minister of International Cooperation, meets conditions prescribed by regulation. (In the event that no such Minister has been appointed, the opinion will be required of the Minister responsible for CIDA.) The main purpose of these conditions will be to ensure that eligible charities:

  • act in a manner consistent with the principles and objectives of the World Health Organization Guidelines for Drug Donations;
  • have expertise in delivering medical donations to the developing world; and
  • implement appropriate policies and practices with respect to the delivery of international development assistance.

Currently, the additional deduction is available in respect of medicines that meet the requirements of the Food and Drugs Act even if those medicines' expiry date is imminent. Budget 2008 proposes that eligible gifts must be donated at least six months prior to the expiration date of the medicines.

These changes will apply to eligible donations of medicines made on or after July1, 2008.