Canada: CRA Updates Basic GST/HST Guidelines For Charities

The Canada Revenue Agency ("CRA") released an updated version of GST/HST Info Sheet GI-067 (the "Info Sheet") on May 6, 2015. This version of the Info Sheet, which contains GST/HST guidelines for charities, replaces a previous version issued in June, 2011. Most of the updates to the Info Sheet are cosmetic. However, certain new commentary and new definitions have been added.

The current version of the Info Sheet, much like its predecessor, is drafted in the form of basic questions and answers. The first question is whether charities must follow special GST/HST rules. The Info Sheet confirms that some GST/HST rules applicable to charities are different than those for businesses, including: (1) that most supplies made by charities are exempt, unless excluded from the exemption; (2) many charities are not required to register for GST/HST purposes; (3) charities are restricted in their ability to claim input tax credits ("ITCs"); and (4) charities may be entitled to a public service bodies' rebate ("PSB rebate"). References to the net tax calculation for charities and the availability of the PSB rebate for the provincial part of the HST are new.

The Info Sheet discusses when a charity is required to register for GST/HST purposes and notes that a charity must register if it makes taxable supplies in Canada and is not a "small supplier". It also notes that a charity may register voluntarily, but cannot register if it only makes exempt supplies.

A charity is a "small supplier" if it meets one of two tests based on its activities as a whole: (a) the gross revenue test, or (b) the taxable supplies test.

The gross revenue test considers whether a charity's gross revenue is no more than $250,000 over a certain period of time. A charity need not consider its gross revenue in its first year of existence but must consider its gross revenue from its first fiscal year in determining whether it should register in its second fiscal year. Gross revenue in excess of $250,000 in its first fiscal year will require a charity to register in its second. In its third or later fiscal year, a charity must consider its gross revenue for each of its first two fiscal years. It need not register if its gross fiscal revenue is no more than $250,000 in either of the first two fiscal years.

The taxable supplies test considers whether a charity's total revenue from taxable supplies (which includes supplies of its associates) in the calendar quarter in which the computation is made, and in the previous four calendar quarters, is $50,000 or less per quarter. A charity is a small supplier only if both of these amounts are no more than $50,000. The charity is required to include its worldwide revenues for this purpose but need not include sales of capital property, supplies of financial services, and certain payments received for goodwill.

The Info Sheet also considers the GST/HST obligations of a charity that has branches or divisions and notes that branches or divisions of a single entity cannot register separately for GST/HST purposes. However, a charity may apply to have each branch or division with $50,000 or less in taxable supplies designated as a small supplier division. A charity need not collect GST/HST on taxable supplies made by a branch or division designated as a small supplier (other than on taxable sales of real property and designated municipal property).

The Info Sheet further discusses whether and when a charity can cancel its GST/HST registration. A charity that is registered, but determines that it qualifies as a small supplier, can apply to have its registration cancelled, however such registration can only be cancelled after the charity has been registered for at least one year. A charity does not have to be registered to claim a PSB rebate. Additional information on deregistration (e.g. ITC and PSB rebate issues) is provided in the new version.

The Info Sheet also discusses a charity's collection obligations when registered, noting that it must collect tax on taxable supplies, that special rules apply to taxable sales of real property and designated municipal property, and that a charity in an HST province may be required to self-assess the provincial component of the HST on certain supplies imported into that province.

The final portion of the Info Sheet is dedicated to a discussion of how a charity can recover a portion of the tax that it has paid. A charity that is registered for GST/HST purposes can claim ITCs on certain items only and may claim the PSB rebate for GST/HST on eligible purchases for which it cannot claim credits. The rebate application must be filed with the same frequency as the GST/HST return and a charity has up to four years from the date of its GST/HST return for the claim period to file a rebate application. A charity that is not a registrant can still claim the PSB rebate although ITCs will no longer be available. A non-registrant charity can file two PSB rebate applications per fiscal year and is subject to the same four-year recovery timeline as charities which are registered. The PSB rebate is restricted to 50% of the federal portion of the HST and 82% of the provincial portion of the HST in Ontario.

The Info Sheet also contains discussions on other rebates that may be available (e.g., on printed books or property/services exported from Canada) and the method for completing a GST/HST return.

Info Sheet GI-067 is a helpful summary of the basic GST/HST rules applicable to charities. Its commentary on when a charity must register and timelines for claiming PSB rebates are particularly important. In view of the renewed scrutiny on charitable activities and tax benefits claimed by charities, it is important for charities to be mindful of the obligations and tax benefits available to them. To that extent, the Info Sheet is a helpful starting point and Miller Thomson will be happy to help with your needs in this regard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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