Decision Date: November 17, 2016
Link: Case Summary Document
Citation: 2016 QCCA 1856 (CanLII)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.


This was an appeal from a decision of the Cour du Quebec that donations made by residents of Quebec to United States charities do not qualify for the benefit provided by Article XXI(7) of the Canada-U.S. Tax Convention (the Treaty). Article XXI(7) of the Treaty provides that where a Canadian donor makes a donation to a U.S. charity, the donor is entitled to claim a donation tax credit or deduction against the donor’s income sourced from the U.S.  Although section 488 of the Taxation Act (Quebec) (the Act) permits residents of Quebec to exclude from their income amounts that are exempt by virtue of a tax treaty, the court below concluded that section 488 did not apply to Article XXI(7) of the Treaty because Article XXI(7) provided “relief from taxation” and not “exemption from taxation” (as is required by section 488 of the Act).

On appeal, the appellant contended that the amounts of donations to US charities were expenses incurred to increase sales in the U.S. The latter argument was rejected on the grounds that it was raised at the last minute and without sufficient proof in the court below. Therefore, the Court of Appeal held that the appellant did not meet the burden of proof for a finding that Revenu Québec’s tax assessment was inaccurate (at [18]):

L’appelante ne parvient pas dans les circonstances à satisfaire le fardeau de démontrer prima facie que le montant de sa cotisation fiscale est inexact de manière à ébranler la présomption de sa validité.

This being so, the appeal was dismissed, with costs.

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Implications of this case

The appellant in this case did not appeal the interpretation of section 488 of the Act given by the lower court. Therefore, the benefit of the Treaty, which is available to all other Canadians, is not available to taxpayers in Quebec. This outcome, though technically correct in terms of the Act, may result in legislative intervention.