• First Reference
  • About us
  • Contact us
  • Blog Signup 📨

First Reference Talks

Discussions on Human Resources, Employment Law, Payroll and Internal Controls

  • Home
  • About
  • Archives
  • Conference
  • Resources
  • Buy Policies
You are here: Home / Not for Profit / Charities and not-for-profits: Beware the usual rules

By Drache Aptowitzer LLP | 2 Minutes Read May 9, 2017

Charities and not-for-profits: Beware the usual rules

charitiesCharities and not-for-profits are obviously subject to a layer of laws that are related to their special status. Often overlooked though, is that they are equally subject to the same rules and regulations as other economic actors. Indeed, sometimes there are linkages between these two worlds making the need for good legal awareness that much more critical. For example, the CRA often raises improper T4 habits as proof that the CRA has improper books and records. The punishment for this offence can be revocation of charitable status even though there is an explicit penalty for any employer that is offside these rules.
Making matters worse is that the withholding regime can be particularly complicated for charities and not-for-profits given that their activities are often much different than the standard business. For example, many Churches bring in pastors from foreign countries for guest sermonizing or scholar in residence programs (the same can be true for health groups but in a different context). Similarly, organizations may create different types of employment arrangements for individuals delivering or monitoring their programs abroad.
In situations where entities bring non-resident contractors into Canada to perform work the Income Tax Act requires a base amount of 15% to be withheld from their income. Obviously, this amount needs to be then remitted to the CRA and the proper tax slips generated. This situation is that the 15% base amount can be lowered if Canada has a tax treaty with the home country of the contractor and that treaty speaks to this point. The issue can become even more complex when there is a question about the applicability of the treaty or if the contractor’s home base is in doubt. Clearly, a review of each country and the contents of its tax treaty is beyond the scope of this article, but it should be sufficient to note that these issues are extraordinarily complex and require a consultation with skilled advisors in the area.
Fortunately, for organizations that may have misstepped in the past the CRA’s voluntary disclosure program (VDP) may be available to them. Typically, charities and not for profits do not use the VDP because they do not pay tax. But, because the improper issuance of T4 slips can result in penalties, the VDP is a way to resolve the issues and avoid attendant penalty consequences. In cases where an organization has failed to properly withhold and remit source deductions from anyone, including non-residents, it may disclose this fact through the VDP and—if the disclosure qualifies—the CRA would waive the penalties and possibly reduce the interest charged. Unfortunately, if the organization has failed to withhold the proper amount from the contractor and the contractor is unwilling to send this amount back to the organization, the organization must pay the withholdings out of its own pocket.

  • About
  • Latest Posts
Drache Aptowitzer LLP
Drache Aptowitzer LLP has extensive experience in taxation matters as well as assisting Charity and Not for Profits. Adam Aptowitzer has argued cases all the way up to the supreme court in defence of taxpayers to get a fair deal. Their dedicated team of experts can give you the guidance you need for fair results.
Latest posts by Drache Aptowitzer LLP (see all)
  • The Lord works in mysterious ways - February 12, 2020
  • It’s a whole new ball game for charities at the FCA - January 15, 2020
  • Charities in the waiting room - December 11, 2019

Article by Drache Aptowitzer LLP / Not for Profit / charities, CRA, T4, VDP, voluntary disclosure program

Share with a friend or colleague

Get the Latest Posts in your Inbox for Free!

About Drache Aptowitzer LLP

Drache Aptowitzer LLP has extensive experience in taxation matters as well as assisting Charity and Not for Profits. Adam Aptowitzer has argued cases all the way up to the supreme court in defence of taxpayers to get a fair deal. Their dedicated team of experts can give you the guidance you need for fair results.

Footer

About us

Established in 1995, First Reference is the leading publisher of up to date, practical and authoritative HR compliance and policy databases that are essential to ensure organizations meet their due diligence and duty of care requirements.

First Reference Talks

  • Home
  • About
  • Archives
  • Conference
  • Resources
  • Buy Policies

Main Menu

  • About First Reference
  • Resources
  • Contact us
  • 1 800 750 8175

Stay Connected

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube

We welcome your comments on our blog articles. However, we do not respond to specific legal questions in this space.
We do not provide any form of legal advice or legal opinion. Please consult a lawyer in your jurisdiction or try one of our products.


Copyright © 2009 - 2022 · First Reference Inc. · All Rights Reserved
Legal and Copyright Notices · Publisher's Disclaimer · Privacy Policy · Accessibility Policy