The PSB rebate is available in addition
to other GST/HST rebates which may be applicable to a charity
or NPO, including rebates of the GST/HST paid on printed
books, expenses related to providing rent‑geared‑to‑income housing, and goods and services
exported outside of Canada.
Should you be charging the
A charity’s rights and obligations under
the HST depend on the nature and scope of its activities.
Many charities are not required to register for HST purposes.
A charity that is not registered does not charge tax on
its supplies of goods and services. However, some supplies
of goods and services made by a charity may be taxable,
in which case the charity may be required to register for
HST purposes. A charity that is already registered for GST
will automatically be registered for HST and be required
to charge HST.
A charity cannot register for HST purposes
if it provides only exempt property and services. As a general
rule, most supplies made by charities are exempt. Examples
of goods and services that are exempt when supplied by charities
Most services provided by a
Supplies of used and donated
Short-term residential accommodation
(less than one month of occupancy);
Parking space rentals;
Catering services for private
Fund-raising activities that
are not provided on a regular or continual basis;
Goods and services supplied
for an amount that does not exceed the direct cost;
Certain gambling events;
Recreational programs provided
primarily for children 14 years of age or younger;
Where substantially all (i.e.
90 percent or more) supplies are made free of charge, then
all supplies of that good or service are exempt;
Memberships supplied without
Admissions to places of amusement
if the maximum admission charged is $1 or less, or where
charitable receipts for income tax purposes may be issued,
or where admission is supplied to an athletic event at which
90 percent or more of the athletes or competitors are not
Supplies made for the relief
of poverty, suffering or distress of individuals.
The supply of goods and services that
fall outside of the above-listed exemptions may mean the
charity is providing taxable goods and services. As such,
the charity will be required to register for HST and charge
and remit tax on its supply of goods and services, unless
the charity qualifies as a small supplier. A charity that
qualifies as a small supplier need not register for HST
purposes, but may choose to register voluntarily. Two tests
are available to determine if a charity qualifies as a small
supplier. A charity need only meet one of the two following
tests to qualify as a small supplier: (a) the Gross Revenue
Test, or (b) the $50,000 Annual Taxable Supplies Test.
The annual limit for the gross revenue
test for a charity is $250,000. Basically, a charity will
qualify as a small supplier if gross revenues for the fiscal
year amount to $250,000 or less. If the charity is in its
first fiscal year, it need not register for HST, regardless
of gross revenue. In the charity's second fiscal year, gross
revenue is calculated from the first fiscal year to make
the determination as to small supplier status. In subsequent
years, the charity will calculate the gross revenue in each
of the two previous fiscal years. If the total amount is
$250,000 or less in either year, the charity will continue
to qualify as a small supplier.
Gross revenue includes business income,
donations, grants, gifts, property income, and investment
income, less any amount considered a capital loss for income
tax purposes. In making the calculations, the charity must
include revenues from the organization as a whole, meaning
income generated from branches or divisions must be included.
The annual taxable supplies limit is
$50,000 for charities and other public service bodies (“PSBs”).
The charity must calculate its total revenue from taxable
supplies in the current calendar quarter, and the total
revenue from taxable supplies in the last four calendar
quarters. If both amounts are $50,000 or less, then the
charity qualifies as a small supplier. If the amounts are
more than $50,000, the charity must register for HST and
charge and remit the tax, unless the charity qualifies as
a small supplier under the gross revenue test.
Charities that do not qualify as small
suppliers and provide taxable goods and services in Canada
must register for HST. Once registered, they must collect
and remit GST/HST on taxable supplies of goods and services.
They must file annual returns, or they may elect to change
their reporting periods, and file monthly or quarterly returns.
Charities should note that failure to remit tax can result
in the directors, officers or members being held liable
to remit an amount of the tax owing.
Unlike charities, the HST applies to
most property and services that non-profit organizations
supply. However, certain supplies may be exempt when they
are made under specific conditions. In addition to the
exemptions available to all organizations listed above,
these include certain types of admissions, free supplies,
certain fundraising activities, sales of tangible personal
property and services at direct cost, certain membership
fees and supplies of food, beverages, or short-term accommodation
that are provided in the course of an activity the purpose
of which is to relieve the poverty, suffering, or distress
of individuals. A NPO must register for the HST if it provides
taxable supplies in Canada and it does not qualify as a
small supplier. A NPO is considered a small supplier in
a particular calendar quarter and in the first month immediately
following the particular calendar quarter if its revenues
from worldwide taxable supplies are $50,000 or less in the
previous four consecutive calendar quarters.
How does an organization
calculate its HST remittance or refund?
Pre-harmonization, charities that were
GST registrants had to use a special net tax calculation
for charities to calculate the charity's net GST remittance
or refund. Using this calculation, the charity would generally
remit 60 percent of the GST collected on most taxable supplies,
less input tax credits (“ITCs”) claimed on certain eligible
items. With harmonization, Ontario has adopted the special
net tax calculation that must be used by most charities.
Therefore, HST registrants will generally remit 60 percent
of the HST collected on their taxable supplies and keep
the remaining 40 per cent. In addition, a charity can claim
the PSB rebate for the HST paid or payable on the charity’s
eligible purchases and expenses and for which the charity
cannot claim ITCs, whether the HST relates to the charity’s
taxable or exempt activities. NPOs may also benefit from
the Special Quick Method or the Quick Method of calculating
their net tax, depending upon the circumstances.
Transition rules - self-assessment
Pursuant to Ontario’s
HST transition rules, persons who are not consumers, including
charities, may be required to self-assess the Ontario component
of the HST on consideration paid or payable after October
14, 2009 and before May 1, 2010 for property or services
to be provided on or after July 1, 2010. A charity would
be required to self-assess in the following circumstances:
the consideration is for goods
that are delivered, and for which ownership is transferred,
to the recipient of the supply on or after July 1, 2010,
or the consideration is for a service or a part of a service
that is performed on or after July 1, 2010; and
the property or services are
acquired to make exempt supplies or a combination of taxable/exempt
A charity that
is required to self-assess in these circumstances must remit the Ontario component
of the HST by the earlier of: (1) the
due date of its GST/HST
return for the reporting period that includes July 1, 2010;
and (2) November, 2010.
The foregoing provides an overview of
the implications of the HST for charities and NPOs. While
the elimination of the PST and harmonization may have provided
a small reduction in the administrative burden imposed on
charities and NPOs, the overall complexity in the commodity
tax regime has increased because of the different rates
and changes to the types of exempt supplies, particularly
for organizations that operate across the country. One
questions whether the use of charitable or non-profit resources
to deal with this complexity is appropriate. In any event,
because of the complexity charities, NPOs and their advisors
will have to become familiar with these new rules in order
to ensure compliance.