If you are on the board of a charity, or involved in helping a charity, you should make sure the charity knows about the special complications for charities in complying with the GST/HST.
(A “charity”, for this purpose, means a registered charity for income tax purposes. However, it does not include a university, hospital, school, public college, or a local authority that has been determined by the CRA to be a municipality — these are called “public institutions” under the GST/HST, and are subject to different rules.)
There is a Public Service Body rebate for charities. Charities are entitled to claim a rebate of a portion of the GST/HST they pay on their purchases. For the 5% GST (or 5% federal portion of the HST), the rebate is one-half of the 5%. For the 8% or 10% provincial portion of the HST, the rebate is 82% of the 8% in Ontario; 35% of the 10% in PEI; and 50% of the 10% in the other three Atlantic provinces. The total rebate can be quite substantial. For example, in Ontario a charity gets back 9.06 points of the 13% HST.
Staying out of the GST/HST system
A charity need not register for the GST/HST — or may choose to “de-register” — if its annual taxable sales do not exceed $50,000. (The limit for businesses generally is $30,000.) Below this level, a charity is a “small supplier”, and can choose not to register, so that it does not charge GST/HST on taxable sales.
In addition, there is a “total revenue” threshold, below which a charity or public institution may choose to remain a small supplier and not register (even if it is over $50,000 in taxable sales). This “total revenue” threshold is $250,000. Total revenue for this purpose includes all sources — grants and donations as well as sales.
Due to the above rules, many charities can choose not to register and stay out of the GST/HST system entirely. Effectively, even their supplies that would have been taxable are exempt.
Note that if a charity is GST-registered and chooses to de-register, it may have to repay certain input tax credits it claimed in the past.
Many charges are exempt
The rules above apply only to taxable sales. Most supplies by a charity are exempt. However, certain supplies are taxable: e.g., most admissions, recreational activities, and most sales of goods in a charity’s store.
Examples of a charity’s supplies that are exempt include:
- hall rentals, room rentals, and other short term leases or licences of real property (except where a special election on Form GST 26 makes them taxable)
- almost all services, including catering services.
A church has a hall that it rents out for weddings. It also supplies catering services at the weddings.
The hall rentals and catering charges are exempt. Even if the church is GST registered, it should not collect GST or HST on these charges.
“Simplified accounting” on a charity’s GST/HST returns
For charities that are registered, a special set of rules applies to the calculation of “net tax”, which is what any GST/HST registrant must remit to the CRA.
For businesses generally, net tax is normally:
- GST and HST collected and/or billed (on taxable supplies) minus
- input tax credits (GST or HST paid or payable on inputs to taxable or “zero rated” supplies)
Most charities must use “simplified accounting”. Instead of the above formula, net tax is calculated as:
- 60% of GST/HST collected (or billed), with no input tax credits.
However, all GST/HST paid by the charity becomes eligible for the Public Service Body rebate, rather than only the tax paid on inputs to non-taxable activities.
There are some exceptions to this rule, most notably for purchases of real property (e.g., land and buildings) and capital property, for which input tax credits are allowed. As well, certain charities are permitted to elect out of the simplified-accounting rules and use the regular calculation.
Know whether you’re registered
Note that a charity can have a GST/HST number without being registered! Charities that apply for the Public Service Body rebate, but are not registered, are given a GST/HST number by the CRA, and the number looks exactly like a GST/HST registration number. It’s in the format 123456789 RT 0001, where the first 9 digits are the charity’s Business Number, “RT” is for a GST/HST account, and “0001” is for a charity that has only one branch filing returns.
But such a charity is not “registered”. A charity that is “registered” will normally be asked by the CRA to file a GST/HST return (not a rebate application) at least once a year. If you are not sure whether your charity is registered, call the CRA or check at tinyURL.com/gstregistry (this links to the CRA’s online GST/HST registry, which is actually https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/confirming-a-gst-hst-account-number.html).