Summary Policy

Date
November 3, 2005

Reference Number
CSP - U02

Key Words
Undue benefits - Sanctions

Policy Statement

Under the Income Tax Act, a registered charity cannot confer on a person an undue benefit (e.g., a transfer of property or other resources of the charity to a person who does not deal with the charity at arm's length or who is the beneficiary of a transfer because of a special relationship with a donor or charity.)

A registered charity that confers on a person an undue benefit is liable to a penalty equal to 105% of the amount of the benefit. This penalty increases to 110% and the suspension of tax-receipting privileges for a repeat infraction within 5 years.

References

• Arm's Length, CSP-A07.
• Confidentiality, CSP-C12.
• Financial Penalties, CSP-F17.
• Sanctions, CSP-S17.
• Suspension, CSP-S18.
• Income Tax Act, R.S.C. 1985 (5^th supp.) c. 1, ss. 188.1(4), (5) and para. 188.2(1)(b).