Despite numerous warnings from the Canada Revenue Agency (CRA), some Canadian taxpayers and registered charities continue to participate in tax shelter gifting arrangements. Donors as well as charities should be wary of promoters who encourage donating to a charity through a tax shelter gifting arrangement.

What is a tax shelter gifting arrangement?

A tax shelter gifting arrangement typically promises you tax savings greater than the cost to participate in the scheme. Participants invest a small amount of money and receive a tax receipt for an amount several times higher than what they actually spent.

Don’t these arrangements benefit registered charities?

On average, the CRA finds that the participating charity keeps very little of the funds involved—often as low as 1%. The majority of the money usually finds its way into the hands of the promoters and other related parties. Furthermore, a registered charity that participates in a tax shelter gifting arrangement risks losing its registered status.

Should I participate in a tax shelter gifting arrangement?

You should be aware that the CRA has been reassessing individual donors to disallow or reduce the amount of donations claimed from these arrangements. Every audit of individual donors completed to date has led to a reassessment of their income tax return, which resulted in taxes owing, plus interest.

For more information on tax shelters and how to donate wisely to registered charities in Canada, go to www.cra.gc.ca/donors or call 1-800-267-2384.