Here are some questions and answers from the CRA relating to the Application of the GST/HST to Canadian Registered Charities
Application of the GST/HST to Charities Questions and answers
A number of questions that were not answered during the webinar are posted below with the answers.
If your question is not posted below it may mean that the CRA needed clarification to answer it, or that the question was too specific to your charity’s situation. If you would still like an answer, or if you would like to ask other questions, contact our Client Service Section at 1-800-267-2384.
•Imports and exports
•HST transitional questions
•Tax status of supplies
Imports and exports
1. What rebates are available for exporting goods and services? We have some export sales and we are a registered charity.
Charities can claim a rebate to recover 100% of the goods and services tax/harmonized sales tax (GST/HST) that they paid to their suppliers on goods and services they exported outside Canada and for which they cannot claim input tax credits (ITCs). For more information, see the section called “Exported property and services” in Guide RC4082, GST/HST Information for Charities, and the section called “Goods and services exported by a registered charity or a public institution” in Guide RC4034, GST/HST Public Service Bodies’ Rebate.
2. We may buy a software program from a U.S.-based company that doesn’t charge GST on the product or on the ongoing maintenance and support fees. Is this a case for self-assessment?
Goods you import into Canada are generally subject to GST or the federal part of HST. The GST/HST on imported goods is generally collected by the Canada Border Services Agency under the authority of the Customs Act at the time of importation.
Although the provincial part of HST is not payable when you import goods that are destined for the participating provinces, you may have to self-assess the provincial part. You have to self-assess the 7%, 8%, or 10% provincial part of HST when you buy taxable (other than zero-rated) goods in a non-participating province and you later bring, or cause someone else to bring, the goods into a participating province if you consume, use, or supply the goods less than 90% in the course of your commercial activities.
If you buy services (such as architectural services for a building in Canada) or intangible personal property (such as the right to use software in Canada) from an unregistered non-resident person outside Canada, you do not pay GST or HST, but you may have to self-assess GST or HST.
For more information on these topics, please see “Imported goods,” “Imported services and intangible personal property,” and “Tax on goods and services brought into a participating province” in Guide RC4022, General Information for GST/HST Registrants.
Top of PageHST transitional questions
3. We have sold tickets and collected funds from May 1 to June 30, 2010, for events that take place after July 1, 2010. When do we remit the HST collected in May for an event in November?
HST would generally apply to any consideration for a taxable supply of an admission to a place of amusement, a seminar, an event, or an activity (hereafter referred to as an event or activity) that becomes due, or is paid without having become due, on or after May 1, 2010, to the extent that the consideration relates to the part of the event or activity that occurs on or after July 1, 2010. However, HST would not apply to the consideration for a supply of an admission if 90% or more of the event or activity to which the admission relates occurs before July 2010.
If the consideration for a taxable supply becomes due or is paid on or after May 1, 2010, and before July 2010 and is subject to HST instead of GST, suppliers account for:
•the 5% federal part of HST in their GST/HST return, according to the applicable rules; and
•the 8% or 7% provincial part of HST in their GST/HST return for the reporting period that includes July 1, 2010.
For a full discussion on the HST transitional rules for admissions, please see Info Sheet GI-058, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Admissions.
Not all supplies of admissions made by charities are taxable. For information on the tax status of admissions made by charities, please see Guide RC4082, GST/HST Information for Charities. If you want to discuss your situation, you can call GST/HST Rulings at 1-800-959-8287.
4. Memberships in our charity are due April 1, 2010. This covers the period of April 1, 2010, to March 31, 2011. If the memberships are not paid before May 1, 2010, should HST be added to the part of the fee that relates to July 2010 – March 2011?
When an amount becomes due or is paid without having become due after October 14, 2009, and before May 2010 for a taxable supply of a membership, the supplier charges the buyer GST, and accounts for the tax in its GST/HST return according to the normal rules.
HST would generally apply to any consideration that becomes due, or is paid without having become due, on or after May 1, 2010, for a taxable supply of a membership in a club, organization, or association to the extent that the consideration is for any part of a membership period on or after July 1, 2010. However, HST would not apply if 90% or more of the membership period is before July 2010.
For a full discussion on HST transitional rules for memberships, please see Info Sheet GI-057, Ontario and British Columbia: Transition to the Harmonized Sales Tax – Memberships.
Not all supplies of memberships made by charities are taxable. For information on the tax status of admissions made by charities, please see Guide RC4082, GST/HST Information for Charities. If you want to discuss your situation, you can call GST/HST Rulings at 1-800-959-8287.
5. On slide 62—what does self-assess mean?
Usually the supplier of a taxable supply collects applicable GST/HST. However, there are some situations where this is not done and the recipient of the supply has to calculate the tax it owes on a supply and send that tax to the Canada Revenue Agency. This is known as self-assessment.
Top of PageOther topics
6. We are a not-for-profit organization, and understand that some of the GST/HST rules that apply to charities do not apply to not-for-profit entities. Where can I find information on GST/HST rules for not-for-profit entities?
Many of the GST/HST rules that apply to charities do not apply to non-profit organizations.
If your organization is not a charity (that is, a registered charity or registered Canadian amateur athletic association for income tax purposes) then you may be a non-profit organization for GST/HST purposes.
A non-profit organization means a person (other than an individual, estate, trust, charity, public institution, municipality, or government) that meets the following conditions:
•It is organized and operated solely for non-profit purposes.
•It does not distribute or make available any of its income for the personal benefit of any proprietor, member, or shareholder, unless the proprietor, member, or shareholder is a club, a society, or an association that has, as its primary purpose and function, the promotion of amateur athletics in Canada.
Information on how GST/HST applies to non-profit organizations is in Guide RC4081, GST/HST Information for Non-Profit Organizations.
7. We are a charity that is registered for GST/HST. When we complete our GST/HST return do we report the GST/HST collected less input tax credits (ITCs) and remit the difference to the Canada Revenue Agency?
Charities that are GST/HST registrants have to use a special net tax calculation to complete their GST/HST return. This calculation is called the “net tax calculation for charities.” When you use this calculation, you generally remit 60% of the GST/HST you collect and generally you may not claim ITCs. In addition, you can claim a public service body rebate for GST/HST you paid or owe and did not claim as ITCs, whether that tax relates to your taxable or exempt activities.
For more information on the net tax calculation for charities, please see Info Sheet GI-066, How a Charity Calculates the Net Tax to be Reported on Its GST/HST Return.
8. I don’t know if we are registered for GST/HST, how can I find out if we are? We have an RT account. Does that mean we are registered?
Having a GST/HST account, also known as an RT account, does not mean that you are registered for GST/HST purposes. If you are only filing for public service body rebates you will be issued a non-registered RT account. To find out if your charity is registered for GST/HST purposes, please call the CRA Business Enquiries line at: 1-800-959-5525.
If you have your charity’s GST/HST account number, you can also use the GST/HST Registry on the CRA’s Web site to determine if your GST/HST account number is registered.
9. If we are already registered for GST, are we automatically registered for HST after this change occurs or do we need to register again?
A charity that is registered for GST will be automatically registered for HST.
10. As a small supplier we don’t have to register for HST. Does that mean we don’t charge HST on property and services we sell?
That is correct. As a non-registrant you would not collect GST/HST on most property and services sold. Generally only GST/HST registrants have to collect GST/HST on taxable (other than zero-rated) supplies of property and services they provide to their customers. However, there are some exceptions for taxable sales of real property.
11. If a charity has more than $250,000 in gross revenues and less than $50,000 in taxable revenues, does it have to register for GST/HST?
No, the charity does not have to register for GST/HST. You only have to meet one of the small supplier tests to be a small supplier. If you qualify as a small supplier, you do not have to register for GST/HST, but you may choose to do so voluntarily.
12. Our charity has over $ 250,000 in gross revenues, but we also have a number of smaller divisions with less than $ 50,000 taxable supplies. We keep separate records for each branch. Based on slide 31, it is my understanding that these branches will not have to charge or collect GST/HST if they are designated as small supplier divisions. Is my understanding correct and do we have to file Form GST31 for each division?
If your charity has branches or divisions that meet certain conditions, you may apply to have each branch or division with $50,000 or less in taxable supplies designated as a small supplier division. If we approve the designation for a small supplier division, the branch or division will no longer collect GST/HST on its taxable supplies (except for taxable sales of real property) and it cannot claim ITCs for its purchases.
Form GST31, Application by a Public Service Body to Have Branches or Divisions Designated as Eligible Small Supplier Divisions, has space to list three divisions. If necessary, you can use a separate sheet of paper to list information about additional branches or divisions that you want to have designated as small supplier divisions.
13. We are registered for GST/HST, but now meet the small supplier tests, can we deregister? If so, are there any negative implications?
If you are registered for GST/HST and you determine, after applying the small supplier tests, that you do not have to be registered, you can ask us to cancel your GST/HST registration. You can only cancel your registration if you have been registered for at least one year.
If your registration is cancelled, you no longer charge GST/HST (other than on a taxable supply of real property by way of sale) and you cannot claim any ITCs. You may also have to pay back some of the ITCs you claimed while you were a registrant. You may still be able to claim rebates, since you do not have to be registered to do so.
To cancel your registration, complete Parts A, B, and E of Form RC145, Request to Close Business Number (BN) Accounts, and send it to us or call 1-800-959-5525. Usually, we have to receive your request within 30 days of your year-end to cancel your registration, which will take effect after the last day of your fiscal year.
Top of PagePSB rebates
14. For public service body (PSB) rebate applications, will we have to enter the PSB rebate for the federal part of HST and the provincial part of HST separately, or can we calculate and report the federal and provincial PSB rebate at a combined rate on the form?
You will have to calculate and report the PSB rebate for the federal and provincial parts of HST separately on the PSB rebate application form. Therefore, you will have to separately track the federal and provincial parts of HST to make a PSB rebate claim.
15. Will charities who claim PSB rebates for the federal and provincial parts of HST have to track the federal and provincial parts of the HST separately?
Yes, you will have to separately track the federal and provincial parts of HST to make a PSB rebate claim.
Charities resident in Ontario can claim a PSB rebate of 50% of GST and the federal part (5%) of HST. With the introduction of HST in Ontario, charities resident in Ontario will also be entitled to a PSB rebate of 82% of the provincial part (8%) of HST.
Charities resident in British Columbia can claim a PSB rebate of 50% of the GST (5%) and the federal part (5%) of HST. With the introduction of HST in British Columbia, charities resident in British Columbia will also be entitled to claim a PSB rebate of 57% of the provincial part (7%) of HST.
There are some purchases where the provincial part of HST is not paid (for example, where the point-of-sale rebate is available). Where this is the case, no PSB rebate of the provincial part of HST will be available.
16. We are a registered charity that operates a thrift store in B.C. We are not registered for GST, since registered charities operating thrift stores do not have to register. However, we charge and remit PST on certain items sold in the thrift store. We receive a 50% public service body rebate on GST we have paid. I assume that we will not have to charge HST and will continue to receive the 50% GST rebate.
Supplies of used or donated goods are exempt when provided by charities. This will not change with the introduction of HST in British Columbia.
If you also sell new goods these could be subject to HST. If you want to discuss your situation, you can call GST/HST Rulings at 1-800-959-8287.
You will continue to claim a public service body (PSB) rebate of 50% of GST. However, this will be called the federal part of HST.
In addition, charities resident in British Columbia will be entitled to a PSB rebate of 57% of the provincial part of HST.
17. Our charity resides in British Columbia and for the PSB rebate, we currently claim 50% of GST paid on all purchases. After HST comes in, do we still claim 50% of GST, or is it 57% of total HST paid?
The HST that has come into effect in British Columbia on July 1, 2010, is at a rate of 12%, consisting of a 5% federal part (equivalent to the existing GST) and a 7% provincial part.
There is a PSB rebate rate for the federal part of HST and a separate PSB rebate rate for the provincial part of HST. You will be entitled to claim a PSB rebate of 50% of the federal part (5%) of HST and a PSB rebate of 57% of the provincial part (7%) of HST. You will not be able to claim a PSB rebate of 57% of the total HST paid.
The HST that has come into effect in Ontario on July 1, 2010, is at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part. If a charity resides in Ontario, it will be entitled to a PSB rebate of 50% of the federal part (5%) of HST and a PSB rebate of 82% of the provincial part (8%) of HST.
18. If our charity has a fiscal year-end that is not December 31, can we complete a PSB rebate application for the nine months ending June 30, 2010, and a second application for the three months ending September 30, 2010?
If your charity is not registered for GST/HST, you can file a PSB rebate application for the first six months of your fiscal year and another PSB rebate application for the last six months of your fiscal year. You cannot file a PSB rebate application that covers a period of nine months and then a period of three months.
If you are a GST/HST registrant, you file your PSB rebate application according to your reporting periods. Reporting periods for GST/HST registrants are either monthly, quarterly (for three months), or annual (for a fiscal year).
19. We lease a building, use part of it for one of our programs, and lease out the rest of the building to other organizations. Do we charge HST on the lease of the rest of the building?
Supplies of real property (such as land or building) made by charities that are currently exempt for GST purposes would also be exempt for HST purposes. Generally, most sales, leases, or other supplies of real property by charities are exempt from GST/HST. However, there are some exceptions, such as real property that you choose to treat as taxable by filing an election with the Canada Revenue Agency.
If you want to confirm that your supplies of real property are exempt or taxable, you can call GST/HST Rulings at 1-800-959-8287.
Top of PageOther rebates
20. In slide 54, you say if your charity operates a public lending library other rebates may be available. Could you give us a definition or link for how the CRA defines a public lending library?
GST/HST Memoranda Series 13.4, Rebates for Printed Books, Audio Recordings of Printed Books, and Printed Versions of Religious Scriptures has information on the rebate for printed books. Paragraph 5 of that memorandum states that, for the federal book rebate, a public lending library means a place where a collection of documents and other items such as films and recordings is kept and maintained and that is open to the public for its use. The definition of public lending library includes libraries from which documents and other items can be borrowed, as well as libraries accessible to the public for research purposes only.
If you want to discuss your situation, you can call GST/HST Rulings at 1-800-959-8287.
21. What rebates are available when a charity provides long-term residential accommodation on a rent-geared-to-income basis and receives government funding to do so?
Where a charity supplies long-term residential accommodation to tenants on a rent-geared-to-income basis and receives government funding to help it in providing this accommodation, the charity may qualify to be a designated municipality for GST/HST purposes.
When the Minister of National Revenue designates a charity to be a municipality, the designation allows the organization to apply for a rebate of GST or the federal part of HST using the municipality rebate factor, but only for the tax paid or payable on purchases used in the course of supplying the exempt municipal services for which the organization was designated. Designated municipalities in Ontario, Nova Scotia, New Brunswick, and British Columbia also qualify for a PSB rebate on the provincial part of HST.
For more information on the designation, please see “Rent-geared-to-income housing” in Guide RC4049, GST/HST Information for Municipalities. For information on the PSB rebate for designated municipalities, please see “Designated municipality” in Guide RC4034, GST/HST Public Service Bodies’ Rebate. If you want to discuss your situation, you can call GST/HST Rulings at 1-800-959-8287.
Tax status of supplies
22. One of the service groups in town hosts an annual fall fair. Businesses, associations, and community programs can rent booth space to do things such as promote their programs. In the past, the service group has not charged us GST or PST on the booth rental. This year they are charging HST. Does HST apply to the booth rental?
The tax status of supplies will not change with the introduction of HST. The tax status of a booth rental will depend on who is making the supply, since there are rules for charities and different rules for organizations that are not charities. Without knowing what type of organization is making the supply, we cannot confirm if it is collecting HST properly.
Some of the factors that could affect the tax status of the supply include a situation where the organization may have recently been informed that the supply of the booth rental is a taxable supply. Perhaps the organization was a small supplier in the past, is now a GST/HST registrant, and therefore has to collect HST on its taxable supplies. Also, if the supply is a supply of real property, perhaps the organization has made an election to now make those supplies taxable.
To discuss the tax status of you charity’s supplies, you can call GST/HST Rulings at 1-800-959-8287.
23. Local businesses sponsor our charity’s annual fair. Should we collect GST on the sponsorships?
Sponsorships may not be subject to GST/HST depending on the nature and the extent of the promotional benefits you give to the sponsor. An example of a sponsorship that is not subject to GST/HST is when a business financially supports your charity and in return you run an event and publish an acknowledgment of the businesses sponsorship in the event’s program.
Another example of a sponsorship that is not subject to GST/HST is when you receive funding in return for allowing a sponsor the right to use your charity’s logo. For example, a corporation uses a national charity’s logo in its advertising campaign.
If the payment by a sponsor is primarily (more than 50%) to obtain advertising on television or radio, or in a newspaper, magazine, or other publication that your charity issues periodically, the payment is not considered to be a sponsorship, but rather is a payment for advertising services. Advertising services are usually subject to GST/HST. However, they are exempt when provided by a charity.
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.