Tegemeza Support Society, a charity based in Surrey, B.C., has had its registration revoked after issuing more than $9.6m in receipts connected to a gifting arrangement.
Tegemeza, an organization that supports vulnerable groups in Kenya, officially lost its charitable status on January 24 following an audit of its 2021 and 2022 tax filings.
People who participate in the scheme make a small donation to a charity and then receive “Donation Gift Certificates” (DGCs) worth 100 times the value of the donation. These DGCs are then used by charities to make purchases through a Dubai-based online platform called Justice Trading Ltd. Those who give money receive donation receipts for both the original donation and the DGCs, CRA says.
The CRA letter says it has repeatedly warned charities against participating in what it describes as “abusive” tax shelter gifting arrangements. It states that participating in a gifting arrangement like this does not count as operating for a charitable purpose. The $9,667,246 in donation receipts in 2022 was 99.8% of the income reported by the organization. In 2021, Tegemeza reported $32,791 in revenue.
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“We believe important clarifications and context were not fully considered.” says CEO Sarah Dunn. |
“To date, no gifting tax shelter arrangement has been found to comply with the Income Tax Act” CRA wrote in an email.
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