CRA Responds to PearTree Financial Services’ Request for Clarification of Publicly Issued Statement
TORONTO (December 19, 2012) — The Canada Revenue Agency (CRA) has confirmed that flow through share gifting arrangements are specifically not included in the category of gifting arrangements which were the subject of a news release issued by the federal government agency on Oct. 30, 2012, entitled, in part, “Protecting Canadians from gifting tax shelter schemes”.
The clarification on the CRA’s position came in a letter dated Dec. 3, 2012 from officials in the CRA’s Tax Shelter Audits Section Aggressive Tax Planning Division, responding to a direct concern expressed by Peartree Financial Services Ltd., a leader in the arranging of flow through share donations in Canada.
Of particular concern to PearTree, which has been a leading provider of flow through share donation programs since 2007, was the CRA’s published statement that “Starting with the 2012 tax year, the CRA will put on hold the assessment of returns for individuals where a taxpayer is claiming a credit by participating in a gifting tax shelter scheme.”
“The CRA’s clarification that flow through share gifting is specifically excluded from the type of abusive gifting tax shelter schemes it warned about in its press release is welcome news for donors and charities who may have had uncertainty surrounding their involvement in legitimate flow through donation arrangements,” says PearTree vice-president Marilyn Anthony.
A flow through share gifting arrangement allows individuals wishing to give to a registered Canadian charity to do so at a reduced after-tax cost. A donor subscribes to flow through shares issued by Canadian mining companies achieving one set of tax deductions. The shares are then donated to a charity and immediately sold. The charity issues a tax receipt equal to what it actually receives in cash on the closing of the transaction. The charity is in cash at closing at a zero economic cost.
PearTree flow through donation offerings do not defer, circumvent or avoid any tax that is otherwise payable. In fact, the result of this flow through financing activity is of significant social benefit to Canada in the way of a strengthened natural resource sector and better funded charities.
Since 2007, PearTree Financial has obtained numerous Advance Income Tax Rulings from the CRA and Revenu Quebec, confirming that the PearTree flow through share donation structure and deal arrangements are in full compliance with tax legislation. This includes the most recent Advance Income Tax Ruling by CRA on Nov. 19, 2012, which specifically addresses the reformulation of the PearTree flow through share gifting structure following legislative changes that were introduced to implement the 2011 Federal Budget. The ruling is available on the PearTree website at www.peartreefinserv.com.
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