Tax Incentive

The 2007 federal budget introduced an incentive for corporations to participate in international programs for the distribution of medicines. This tax-incentive measure allows corporations that make donations from their inventory to claim a special additional deduction equal to the lesser of:

• 50 percent of the amount, if any, by which the fair market value of the donated medicine exceeds its cost; and
• the cost of the donated medicine.

Originally the tax credit was only available when the registered charity had received a disbursement under a program of the Canadian International Development Agency (CIDA). Budget 2008 amended the definition of an eligible charity. The new requirement is that donations provided after July 1, 2008, can only receive a tax receipt for the new incentive if the drugs are donated to registered Canadian charities found eligible by the Minister of International Cooperation. The Minister will base his or her decision on the conditions that are outlined in the income tax regulations. The main purpose of these conditions is to ensure that eligible charities:

• act in a manner consistent with the principles and objectives of the interagency Guidelines for Drug Donations (PDF) issued by the WHO;
• demonstrate appropriate expertise in delivering medical donations to the developing world; and
• have implemented appropriate policies and practices with respect to the delivery of international development and humanitarian assistance.

More information about this tax incentive can be found through the following Department of Finance Canada budget documents:

• Budget 2007 news release: Canada's New Government Continues to Reduce Taxes for All Canadians
• Budget 2008 Tax Measures: Supplementary Information

The regulations related to this program received Royal Assent on March 12, 2009.

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PDF Format
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Interagency Guidelines for Drug Donations (PDF - 72 KB, 24 pages)