Intellectual Property Issues In Cross Border Arrangements

It is well-known that a Canadian registered charity ought not to transfer funds to a foreign or domestic entity that is not a qualified donee. However, it is also important to bear in mind the application of the Income Tax Act (the "Act") to transfers of property other than cash. One context where this arises is in transactions involving intellectual property.

The Act provides that a registered charity that makes a gift other than to a qualified donee or in the course of charitable activities may have its registration revoked. The Federal Court of Appeal has upheld a number of revocations of charities that transferred funds to foreign charities.

A gift is defined as a voluntary transfer of property made without consideration or anticipation of benefit. As intangible property is still property; it can be the subject of a gift from a Canadian charity to a non Canadian charity.