What is the meaning of “created exclusively for charitable purposes” in (d)(ii) of the definition of “exempt foreign trust” in s. 94(1)? CRA responded:
As the Act does not provide a definition of “charitable” or “charitable purposes,” we must rely on the definition of the term under the common law principles applicable in Canada… . [Accordingly] a purpose must fall within one or more of the four categories of charitable purposes established in Pemsel…, and must be for the benefit of the community or an appreciably important class of the community… . (footnote 3). …
[W]hen a foreign trust grants funds to other organizations…the recipient organization would have to be considered “charitable” according to Canadian common law. ...
[W]hen the charitable activities are carried out by an intermediary…the activities and the underlying resources provided must be subject to the direction and control of the trust… .
[I]n Guaranty Trust Co. of Canada…the Supreme Court of Canada confirmed that… the organization… must be created “exclusively” for those purposes. ...
[A] purpose of a charitable trust, other than a charitable purpose, that is merely a means to the fulfilment of its charitable purposes would not deprive, in itself, the trust of its exempt status… .
[A]charitable trust may conduct commercial activities to the extent that they remain incidental to and only serve as a means of furthering the exclusive charitable purposes of the organization… .
[A]n exempt foreign trust may accumulate and invest funds, so long as the accumulation and investments are incidental to and serve as a means of furthering the exclusive charitable purposes of the organization, rather than being an end in themselves.