Under Tariff item 9815.00.00 donations are Customs duty free if they are either:
1. Clothing and books donated to any charitable organization in Canada by residents or
2. Any goods donated by non residents to a religious, charitable, or educational institution in Canada.
Keep in mind though that in order for the exemption to be applied a Customs Officer must be satisfied that the clothing and books are being imported for charitable reasons.
An institution that is a recipient of a donation from a non resident does not need to be registered with the Canada Revenue Agency; however, again, a Customs Officer must be” satisfied as to the bona fides of the religious, charitable, or educational institution.”
If the Officer is not satisfied as to the bona fides of a particular institution, the importer must pay all duties and taxes assessed as per the Customs Tariff and Excise Tax Act, if any, and then request a refund where applicable on Form B2 (adjustment request form) with supporting documentation to the local regional customs office.
Under Tariff 9815.00.00 goods may also qualify for relief from GST/HST under one of the following three provisions:
1. Section 1 of Schedule VII of the Excise Tax Act – to be used to relieve GST/HST for goods not subject to excise duties.
2. Section 4 of Schedule VII of the Excise Tax Act and
3. The Charitable Goods Remissions Order.
Tariff 98.15 is identified in Section 1 of Schedule VII among other goods that are non-taxable for GST/HST.
Section 4 of Schedule VII identifies donated goods imported by a charity or public institution in Canada as non taxable for the purposes of GST/HST.
* To qualify for Section 4, the recipient must meet the definition in subsection 123(1) of the Excise Tax Act as follows:
Charity– “means a registered charity or registered Canadian amateur athletic association within the meaning assigned to those expressions by subsection 248(1) of the Income Tax Act, but does not include a public institution”
Public Institution– “means a registered charity (within the meaning assigned by subsection 248(1) of the Income Tax Act) that is a school authority, a public college, a university, a hospital authority or a local authority determined under paragraph (b) of the definition “municipality” to be a municipality”
So how does subsection 248(1) of the Income Tax Act define a registered charity?
It says a registered charity is:
“(a) a charitable organization, private foundation or public foundation, within the meanings assigned by subsection 149.1(1), that is resident in Canada and was either created or established in Canada, or
(b) a branch, section, parish, congregation or other division of an organization or foundation described in paragraph (a), that is resident in Canada and was either created or established in Canada and that receives donations on its own behalf,
that has applied to the Minister in the prescribed form for registration and that is at that time registered as a charitable organization, private foundation or public foundation.”
And subsection 149.1(1) defines:
Charitable Foundation – as “a corporation or trust that is constituted and operated exclusively for charitable purposes, no part if the income of which is payable to, or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee or settlor thereof, and that is not a charitable organization;”
Charitable Organization – as “an organization, whether or not incorporated,
(a) all the resources of which are devoted to charitable activities carried on by the organization itself,
(b) no part of the income of which is payable to , or is otherwise available for, the personal benefit of any proprietor, member, shareholder, trustee, officers or officials at arm’s length, and
(c) more than 50% of the directors, trustees, officers or like officials of which deal with each other and with each of the other directors, trustees, officers or officials at arm’s length, and
(d) where it has been designated as a private foundation or public foundation pursuant to subsection (6.3) of this section or subsection 110(8.1) or (8.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or has applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition “registered charity” in subsection 248(1), not more that 50% of the capital of which has been contributed or otherwise paid into the organization by one person or members of a group of persons who do not deal with each other at arm’s length and, for the purpose of this paragraph, a reference to any person or to members of a group does not include a reference to Her Majesty in right of Canada or any province, a municipality, another registered charity that is not a private foundation, or any club, society or association described in paragraph 149(1)(l);”
Hopefully you are not completely overwhelmed at all the legal jargon…and lastly
Charitable Goods Remissions Order
To benefit from the charitable goods remission order, the recipient does not need to be a registered charity and is not subject to all taxes payable under Division III or Part IX, and under any section of the Excise Tax Act, and is not subject to the customs duties applicable under Section 21 of the Customs Tariff on imported goods donated by a non resident of Canada to a religious, charitable or educational institution in Canada.
In order to use Tariff item 9815.00.00 on goods, commercial importers must complete Form B3 using the applicable GST code in Field 35. The GST code will be either:
“51” for Section 1 of Schedule VII
“54” for Section 4 of Schedule VII
and to receive the benefits of the charitable remissions order Field 26 (for Special Authority) should read “97-2037“.
In summary, the key points to understand is that
1. In order to receive the exemption of tariff 9815.00.00 at the time of importation you will have to satisfy the customs officer that your organization or group qualifies.
2. If , they are not satisfied and you end up having to pay the duty and tax then you can get this money back by completing form B2 and providing supporting documentation after the fact.
3. The legislation has clear definitions of what type of organizations qualify so make sure that you do before claiming this exemption.
4. Completing form B3 at the time of importation accurately with correct GST code and special authority code if applicable is key for commercial importers who qualify to receive any exemptions they are entitled to.
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