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Registered Charities Newsletter201112220634

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					Registered Charities Newsletter
No. 18


      Contents                                        From the Director General
                                                      2003 was a year of a great many achievements, and we are looking forward to
From the Director General ........1                   several new developments in 2004.
What’s New .................................2
                                                      One immediately visible change will be in our name. Although Canada Customs
Name change: from CCRA
                                                      and Revenue Agency (CCRA) remains our legal name, the administrative changes
  to CRA ......................................2
                                                      necessary to make the transition to our new name and structure, Canada Revenue
Information sessions in 2004 .......2
                                                      Agency (CRA) are well underway.
Updated pamphlet on gifts and
  income tax ................................2        In the last year, we achieved significant success in producing new policies in draft
List of companies authorized to                       or final form, including policies on business activities and political activities.
  produce a customized Form                           In 2004, we are looking forward to consulting with charities on additional draft
  T3010A now available ..............2                policies, including ones on ethnocultural groups, public benefit, and umbrella
Privacy Act affects some                              organizations.
  charities ....................................2
                                                      Several other initiatives are underway. Over the past two years, as part of the
Other sites of interest...................2
                                                      Voluntary Sector Initiative (VSI), the CRA and the Department of Finance have
Statistics on charities ..................3           worked with representatives of the charitable sector and other departments through
Charitable donation tax shelter                       a Joint Regulatory Table (JRT) to study the current state of charity regulation and
  arrangements............................4           to propose comprehensive reform measures. As we move forward and make
Did you know? ...........................4            changes, we intend to continue to work with the sector. One obvious way in which
What is a gift in kind?...................4           we are beginning this dialogue, is through the establishment of the new charities
How does a charity calculate its                      advisory committee. It is anticipated that the list of appointees will be made public
  disbursement quota if it has                        by the end of March at: www.cra.gc.ca/tax/charities/cac/menu-e.html. As we
  received a gift in kind?..............5             move forward with other changes, additional opportunities will be sought to
How should charitable gifts in                        consult with charities, their advisors and other stakeholders.
  kind be valued? ........................5
Donation of time-shares,                              As well as seeking input from charities through this means, the Charities
  including recreational                              Directorate will continue to make itself available as an information resource for
  property.....................................6      charities. For the eighth consecutive year, we will hold information sessions across
Can businesses receive receipts                       the country. I would like to take this opportunity to thank those people in the
  for donations made out of their                     charitable sector who, by acting as hosts for these sessions, have made them
  inventory? .................................6       possible. I would also like to take this opportunity to encourage your participation
Can shares or stock options be                        in these sessions, when they are held near you. Throughout the course of this year,
  gifts? .........................................6   we will be looking at the RoadShow and thinking about ways to improve it. We
Can a charity issue a charitable                      also want to look at other kinds of outreach. Would videoconferencing be of
  receipt for a court ordered                         interest to charities? What about an on-line, interactive question and answer
  donation? ..................................6
Issues ..........................................7
GST/HST and registered
  charities ....................................7
Policies........................................8
Upcoming policies from the
 Charities Directorate .................8
Contact information ...................9
 2

session on specific topics? Your views        which accompanies this newsletter, will     customized-e.html. Forms from
are needed and welcome.                       be updated periodically.                    companies that have not been
                                                                                          authorized to produce this form may not
One of the requests that we receive on a
regular basis is for additional
                                              Information sessions in 2004                be accepted. The CRA will continue to
                                              News about the information sessions         provide free copies of this form to all
information about government
                                              delivered by the Charities Directorate      charities both by mail, and through its
organizations, other than the Charities
                                              (the RoadShow) is now available on the      Web site.
Directorate, that charities might deal
with. This newsletter includes a link to a    CRA Web site at:
list of Web sites and phone numbers for       www.cra.gc.ca/tax/charities/roadshow/.      Privacy Act affects some
these bodies, as well as general              More information will be added as it        charities
information on their roles. The list will     becomes available. Please keep visiting     The Personal Information Protection
be updated periodically. We are also          our Web site for updated information.       and Electronic Documents Act
pleased to be able to include a guest         If you have any comments or                 (PIPEDA) sets out ground rules for how
piece on GST/HST, and contact                 suggestions regarding the RoadShow,         private sector organizations may collect,
information for any questions relating to     we would appreciate hearing from you.       use, or disclose personal information in
this tax.                                     You can contact the RoadShow                the course of commercial activities. As
                                              Co-ordinator either by e-mail               of January 1, 2004, PIPEDA covers the
In a future edition of the newsletter we
                                              (information.sessions@ccra.gc.ca) or by     collection, use, or disclosure of personal
plan to provide information on contacts
                                              mail at:                                    information in the course of any
that are of particular interest to those
                                                                                          commercial activity by registered
working overseas.                             RoadShow Co-ordinator                       charities. The PIPEDA will apply if the
If you have any suggestions for future        Charities Directorate                       charity conducts any form of
editions of the newsletter, please e-mail     Place de Ville, Tower “A”                   commercial activity, and collects, uses
them to us at: charities-bienfaisance-        13th Floor                                  or discloses any personal information in
bulletin@ccra-adrc.gc.ca.                     Ottawa Ontario K1A 0L5                      the course of the commercial activity.
                                                                                          Information on PIPEDA is available
                                              Updated pamphlet on gifts and               through Industry Canada’s Privacy for
What’s new?                                   income tax                                  Business Web site
                                              The Assessment and Collections Branch       (www.privacyforbusiness.ic.gc.ca) and
Name change: from CCRA to                     of the CRA has recently released a          its Electronic Commerce Branch
                                              revised version of P113, Gifts and          (www.ecom.ic.gc.ca), as well as the
CRA
                                              Income Tax. The pamphlet is directed at     federal Privacy Commissioner’s
On December 12, 2003, the Customs                                                         Web site at: www.privcom.gc.ca.
                                              individuals who are planning to give a
Program of the CCRA was transferred
                                              gift to a charity, but it has information
to the Canada Border Services Agency                                                      Other sites of interest
                                              that is of interest to charities as well.
(CBSA). As of this date, our new name
                                              The revised text includes information on    The Charities Directorate’s jurisdiction
and acronym is the Canada Revenue
                                              proposed changes that have been             over charities is limited to the
Agency (CRA)/Agence du revenu du
                                              announced but are not yet law. You can      application of the Income Tax Act.
Canada (ARC).
                                              get a copy of this pamphlet on the CRA      Accordingly, there are many federal
By virtue of Bill C-43, we have               Web site.                                   government departments outside of the
operated under the legal name “Canada                                                     CRA that have an impact on charities.
Customs and Revenue Agency” since             List of companies authorized to             These include the Department of
November 1, 1999. The new name and            produce a customized                        Finance and the Competition Bureau of
acronym will be phased in. In some                                                        Industry Canada. Even within the CRA,
                                              Form T3010A now available
cases, it will continue to appear on                                                      not all issues related to charities are
publications until the old stock is used      The CRA mails copies of the T3010A to
                                                                                          within the mandate of the Charities
up. It will also affect some Web site         all charities, and also makes this form     Directorate. For example, questions
addresses. For example, the URL               available through its Web site. However,    about GST/HST fall within the mandate
www.cra-arc.gc.ca became active on            some charities choose to use a              of the Excise and GST/HST Rulings
February 26, but clients will still be able   customized version of the form              Directorate. The Income Tax Rulings
to access the site using the old address      produced privately. The list of             Directorate supplies advance income tax
(www.ccra-adrc.gc.ca).                        companies authorized to produce the         rulings and technical interpretations.
                                              customized Form T3010A for 2003 can
To reflect the changes that are occurring     now be found on the Web site at:
across many government departments,           www.cra.gc.ca/tax/charities/
the list of federal government contacts,
                                                                                                                               3

To guide charities more effectively to       The Competition Bureau of Industry          to written requests from taxpayers. An
these and other government                   Canada:                                     advance income tax ruling is a written
departments, this newsletter includes a      The Competition Bureau is responsible       statement to a taxpayer stating how the
description of why charities might want      for administering and enforcing the         CRA will interpret and apply specific
to contact these bodies. In addition, it     Competition Act, the Consumer               provisions of existing Canadian income
provides a link to a table of contact        Packaging and Labelling Act, the            tax law to a definite transaction or
information for these and other Federal      Textile Labelling Act, and the Precious     transactions that a taxpayer is
Government Contacts. This table will         Metals Marking Act. Its role is to          contemplating. An hourly fee is charged
be updated periodically. In a future         promote and maintain fair competition       for advance income tax rulings. The
edition of this newsletter, this contact     so that Canadians can benefit from          Directorate also provides general
information will be expanded to include      lower prices, product choice, and           interpretations of provisions of the
the provincial level.                        quality services. The Bureau promotes       Income Tax Act, which are not binding
                                             fair competition in the marketplace by      on the CRA for any specific transaction.
With this issue, we are also including a
                                             discouraging deceptive business             No fee is charged for general
piece developed by the Excise and
                                             practices and by encouraging provision      interpretations. More information on
GST/HST Rulings Directorate
                                             of sufficient information to enable         these services is found in Information
concerning some of the rules about
                                             informed consumer choice. The               Circular 70-6R5, which is available on
GST/HST that affect charities.
                                             Competition Act includes provisions         the CRA’s Web site.
Department of Finance:                       dealing with false or misleading
                                                                                         While the Charities Directorate provides
While the CRA is responsible for             representations and other deceptive
                                                                                         interpretations of those provisions that
administering and interpreting the           practices. In this capacity, the Bureau
                                                                                         deal primarily with issues of registration
Income Tax Act, tax policy is primarily      may be called to investigate alleged
                                                                                         and revocation, specifically with
the responsibility of the Department of      misleading fundraising promotions.
                                                                                         charities, the Income Tax Rulings
Finance. Accordingly, any changes to
                                             GST/HST and Excise Taxes:                   Directorate provides general
tax policy or amendments to the
                                             All questions related to the                interpretations on provisions that deal
legislation would have to be considered
                                             administration of the GST/HST and           specifically with taxpayers, which
by that department.
                                             Excise taxes can be directed to the         includes charities. Questions on those
The Department of Finance provides the       Business Enquiries line                     provisions of the Act that deal with
Minister of Finance with analysis and        at 1-800-959-5525. RC4082, GST/HST          gifting and donors are better directed to
advice in relation to the Income Tax Act.    Information for Charities,                  the Income Tax Rulings Directorate.
This includes tax incentives for             (www.cra.gc.ca/E/pub/gp/rc4082/) is
charitable giving and certain legal          designed to answer questions that           Statistics on charities
requirements that charities must fulfil to   registered charities may have regarding     The charitable sector continued to grow
be registered at the federal level in        the GST/HST.                                in the last year, and it now comprises
Canada.                                                                                  more than 80,500 organizations.
                                             Income Tax Rulings Directorate:
                                             The Income Tax Rulings Directorate of
                                             the CRA provides two main services to
                                             the public. It provides advance income
                                             tax rulings and technical interpretations
 4

As of January 2, 2004

                             Public              Private               Charitable
                                                                                                 Total                    %
                           Foundations         Foundations            Organizations

           BC                    625                  524                    9,735              10,884                   13,51%
           AB                    326                  435                    7,777                8,538                  10,60%
           SK                    210                  119                    4,254                4,583                   5,69%
           MB                    285                  192                    3,984                4,461                   5,54%
           ON                  1,600                1,867                  24,789               28,256                   35,07%
           QC                    999                  663                  13,731               15,393                   19,11%
           NB                    107                   66                    2,513                2,686                   3,33%
           PE                     23                     9                     527                  559                   0,69%
           NS                    143                   94                    3,518                3,755                   4,66%
           NL                     43                   12                    1,126                1,181                   1,47%
           NT                       5                    2                     116                  123                   0,15%
           YT                       3                    1                     111                  115                   0,14%
           NU                                            1                      28                   29                   0,04%
         TOTAL                 4,369                3,985                  72,209               80,563                     100%

Charitable donation tax shelter               traded securities or ecological gifts that   misrepresentations of tax matters that
arrangements                                  qualify for the 25% capital gains            could result in their clients making false
                                              inclusion rate. The proposed                 statements or omissions on their returns,
In earlier issues, we described
                                              amendments also include amendments           including overstating the fair market
arrangements in which a promoter
                                              relating to the use of limited-recourse      value of a property donated. For more
facilitates the donation of property to a
                                              debt in charitable donation                  information on these penalties, see
registered charity by arranging for a
                                              arrangements. For more information on        Information Circular 01-1, Third-Party
taxpayer to purchase a property and
                                              these proposed amendments, refer to the      Civil Penalties.
then donate it at a higher value than was
                                              News Release issued by the Department
paid. Under these “buy-low, donate-
                                              of Finance on December 5, 2003. You
high” arrangements, the taxpayer was
                                              can find it at:                              Did you know?
intended to receive a tax receipt for an
                                              www.fin.gc.ca/news03/03-061e.html.
amount that was substantially higher
than the actual cost of the property. In      The CRA will continue to review earlier      What is a gift in kind?
response to concerns about these              transactions and may challenge claims        For tax purposes, for something to be a
arrangements, the Department of               where the amounts on receipts seem           gift, there must be a voluntary transfer
Finance, on December 5, 2003, released        inflated. To date, the CRA has               of property. A gift in kind is a gift of
proposed amendments dealing with              reassessed 5,000 individuals involved in     property other than cash. It includes
donation tax shelter arrangements. As of      donation arrangements. In addition,          numerous types of property, in
6 p.m. EST of that date, the value of a       another 5,000 are being audited in           particular inventory, capital property,
property that is the subject of a gift to a   connection with various donation             and depreciable property. ‘Services’ are
qualified donee will generally be limited     arrangements. Some charities that have       not considered gifts in kind because
to the donor’s cost of the property           taken part in these arrangements are         they do not involve a transfer of
where the property is donated within          also being examined.                         property. A charity that receives a gift in
three years of acquisition by the donor                                                    kind can issue a tax receipt for the
                                              The Charities Directorate is actively
or is otherwise acquired through a                                                         eligible amount of the gift.
                                              working with other areas within the
“gifting arrangement” or in                                                                Sometimes the line between what
                                              CRA to identify organizations that are
contemplation of donation. This                                                            constitutes a property and what
                                              taking part in any abusive donation
proposed rule will not apply to gifts of                                                   constitutes a service is quite clear. If an
                                              arrangements. Charities and promoters
inventory, real property situated in                                                       individual or company creates a Web
                                              involved in such arrangements may be
Canada, or certified cultural property. It                                                 site for a charity, develops a computer
                                              subject to civil penalties if they make
will also not apply to gifts of publicly
                                                                                                                               5

program or computer application for a       inheritance and “10 year gifts” are          If the value of the property donated is
charity, or provides the maintenance of     included only in the year they are           anticipated to have a fair market value
a charity’s Web site, including any         expended. With regard to gifts, other        greater than $1,000, it is advisable to
updates or other modifications, the         than specified gifts, received from a        have an independent appraiser or
individual or company is providing a        registered charity, an amount equal          valuator determine the fair market value
service rather than a property.             to 100% and 80% of the gift is added to      of the items donated.
                                            the disbursement quota of a private
However, there are other scenarios that                                                  To determine the fair market value of
                                            foundation and a public foundation,
are less clear, either because it is not                                                 the properties mentioned above, an
                                            respectively. This is the case whether
certain whether the scenario involves a                                                  individual requires a knowledge of the
                                            the gift is made in cash or in kind.
service or property, or because it is                                                    property being appraised or valued and
uncertain whether the donor can be          In meeting a charity’s disbursement          a specialized knowledge of the
considered to have transferred property     quota, for gifts in kind, the CRA is         principles, theories, and procedures of
to a charity. The Income Tax Rulings        prepared to accept that the necessary        real estate appraisal, business equity
Directorate is currently considering        amount has been expended where the           valuation, personal property, machinery
some of these situations. With regard to    property is used directly by the charity     and equipment valuation, or other
a Web site and software, a couple of key    in delivering its charitable programs.       valuation specialties. There are
issues are: Can a Web site be considered    For example, paintings donated to an art     professional appraisers or valuators in
property for the purposes of making a       gallery for use in its display would be      these disciplines. It is important to
gift? Can a licence to use software be      considered to have been expended on          obtain the services of a qualified
the subject of a gift?                      charitable activities. On the other hand,    individual in the appropriate specialty
                                            gifts in kind for a fundraising auction or   area to obtain a supportable, well-
The Income Tax Rulings Directorate is
                                            similar purpose would generally be           reasoned opinion of value.
also looking at the tax implications of
                                            considered to be expended when they
transferring reward points to a charity.                                                 Appraisers or valuators who belong to
                                            are converted to cash and used by the
                                                                                         professional appraisal or valuation
At present, the Income Tax Rulings          charity in carrying on its charitable
                                                                                         organizations have completed a
Directorate is considering such             purposes or activities.
                                                                                         prescribed course of study and several
proposed transactions only on a case-
                                                                                         years of experience before attaining
by-case basis. However, it is interested    How should charitable gifts in               accreditation. An accredited appraiser or
in hearing about particular situations      kind be valued?                              valuator is required to follow the
that involve these or similar items, and
                                            Gifts in kind must be valued on the          Canadian Uniform Standards of
is willing to entertain submissions about
                                            basis of “fair market value”.                Professional Appraisal Practice, or the
whether such items can be the subject of
                                                                                         Practice Standards established by the
a charitable tax receipt. Please send       As mentioned on page 3, in the piece
                                                                                         Canadian Institute of Chartered
your comments by June 30, 2004 to:          entitled “Charitable donation tax shelter
                                                                                         Business Valuators, when completing a
                                            arrangements”, following amendments
Director, Financial Industries Division                                                  valuation of a gift in kind.
                                            proposed on December 5, 2003, the
Income Tax Rulings Directorate
                                            value of a gift in kind may change. It       The factors that influence the value of
Policy and Legislation Branch
                                            will be limited to a donor’s cost of the     property are numerous. Some of the
Canada Revenue Agency
                                            property, where the property is donated      most important of these factors are
Ottawa ON K1A 0L5
                                            within three years of acquisition by the     described briefly below.
The Directorate will not be responding      donor or is otherwise acquired through a
                                                                                         The appraiser or valuator is required to
to individual submissions but plans to      gifting arrangement or in contemplation
                                                                                         research the property and obtain market
respond to these issues in an upcoming      of donation. Generally gifts of
                                                                                         data in the appropriate market place(s).
publication.                                inventory, publicly traded securities,
                                                                                         In the case of personal property, various
                                            certified cultural property, ecological
                                                                                         market levels need to be analyzed to
How does a charity calculate its            gifts, or real property situated in Canada
                                                                                         determine the most relevant market for
disbursement quota if it has                are exceptions to this rule.
                                                                                         the subject property. For example, the
received a gift in kind?                    The courts have defined fair market          appropriate market is not always retail
An amount equal to 80% of all               value as being, “the highest price           or purchases from a dealer if art is being
receipted amounts, other than a gift        obtainable in an open and unrestricted       purchased. The appropriate market for
received from a registered charity, must    market between informed and prudent          the property being appraised may be the
be included in calculating the amount of    parties, acting at arm’s length, under no    wholesale market. In estimating fair
a charity’s disbursement quota. In this     compulsion to act, expressed in terms of     market value, this factor and others are
regard, an amount in respect of gifts of    money, or money’s worth”.
capital received by way of bequests or
 6

considered by the personal property            Where a gift has been made, any capital        Where a transaction results in a material
appraisers as they apply the correct           gains realized at the time of the              benefit to the business, the rules related
principles, theories, and procedures.          donation would be taxable in the               to split receipting may apply, or the
                                               donor’s hands in the usual way.                benefit may be such that no part of the
Another factor is the effective date of
                                               However, the donor may choose to               transaction can be considered a gift. In
the valuation, which for all valuation
                                               reduce the value of the gift and the           cases where there is consideration, a
disciplines is very important because
                                               associated taxable capital gain by             business may claim these costs as
economies, markets, and market levels
                                               applying subsection 110.1(3) or 118.1(6)       promotional expenses, rather than
change frequently and rapidly. For
                                               of the Act. Generally, the annual gifting      seeking a charitable donation. Under
example, a price list for a print
                                               limit is 75% of the donor’s net income         some circumstances, it may be more
established by the publishers eight years
                                               plus 25% of the taxable capital gain and       financially advantageous to claim these
prior to the effective date of valuation
                                               recapture arising from the gift.               costs as a promotional expense. More
may not reflect the value at the date of
                                                                                              information on this topic can be found
donation. The fair market value may be         If the donors were to dispose of the
                                                                                              in the policy commentary Gifts Out of
higher if the demand for the print is          property themselves and then make a
                                                                                              Inventory, CPC-018 at:
high. If the demand for the print has          gift of the proceeds, the charity would
                                                                                              www.cra.gc.ca/tax/charities/policy/cpc
declined, the sale price and value of the      not be required to establish a value for
                                                                                              /cpc-018-e.html.
print will have dropped. The market            the time-share interest. The choice of
activity at the date of donation will          which method to use is a matter for
determine the fair market value of the
                                                                                              Can shares or stock options be
                                               which the donors and the charity may
print, not a price list established a          want to seek independent advice from           gifts?
number of years earlier.                       professionals in the field.                    One of the requirements necessary to
                                                                                              the making of a gift for purposes of the
An accredited appraiser or valuator will       Charities and their donors should be           Income Tax Act is the voluntary transfer
provide you with a professional report         aware that the existence of other express      of property. Where a corporation issues
detailing their opinion of the fair market     or implied arrangements (e.g., where the       shares of its capital stock or grants a
value and the support for their                donation is conditional on or made with        stock option, jurisprudence1 supports
conclusions. The CRA also utilizes the         the expectation that the charity will buy      the view that there is no transfer of
services of professional appraisers and        the property from the donor) may               property by the corporation as the
valuators to ensure the fair market value      disqualify all or part of the donation         corporate assets are not reduced as a
of the property is appropriately stated.       from being considered a gift. In               result of the issuance. As there is no gift
                                               evaluating the arrangement the CRA             in these circumstances, the charity
Information on the tax advantages of
                                               looks to not only the formal written           should not issue a receipt
donating to charity is available in the
                                               arrangement but also any additional            notwithstanding that the shares or
newly revised P113, Gifts and Income
                                               written or verbal agreements and               options will normally have value.
Tax.
                                               assurances to determine whether a gift
                                               at law has been made. The CRA                  On the other hand, if the donor is a
Donation of time-shares,                                                                      person who has acquired shares or stock
                                               reserves the right to investigate
including recreational property                transactions after the fact to ensure their    options, generally the charity may issue
Are there any limitations that might           legitimacy.                                    a receipt for the eligible amount of the
prevent donors from making a gift of                                                          gift.
time-shares? What are the tax                  Can businesses receive receipts
considerations?                                for donations made out of their                Can a charity issue a charitable
It is only possible to receipt the transfer    inventory?                                     receipt for a court ordered
of a time-share if ownership of the deed       Registered charities can issue official        payment made to it?
title is first transferred to the donor then   donation receipts for gifts that a             No. Under charity law, to qualify as a
transferred to the charity. Otherwise,         business makes out of inventory, and the       gift a payment must be voluntary. A
there is no transfer of ownership, and a       taxpayer can use these receipts to claim       payment that results from a court order,
gift has not been made by the donor.           a charitable deduction. However, the           even if the taxpayer was given a choice
Merely loaning property is not                 business has to include in its income,         between making a payment and some
considered a gift for purposes of              the fair market value of any goods out         other penalty, cannot be said to be
sections 110.1 and 118.1 of the Income         of its inventory that it gives to a charity.   voluntary. Therefore, if a company or
Tax Act.                                       The income of a business is increased          individual is ordered by a court to give
                                               because it must include the value of the
                                                                                              1 Algoa Trust 93 DTC 404 (TCC) aff’d
                                               gift. However, this increase is offset by
                                                                                              without reasons Feb. 4, 1998, Doc A-201-93
                                               the charitable deduction or credit.
                                                                                              (Fed CA)
                                                                                                                                 7

money to charity, the charity cannot         please refer to GST/HST Memorandum           Registered charities providing
issue an official donation receipt for the   1.4, Goods and Services Tax Rulings          employment assistance to individuals
amount it receives. If needed, the           (www.cra.gc.ca/E/pub/gm/1-4/), or call       with disabilities
charity can issue an ordinary receipt to     the GST/HST Rulings line noted above.        Certain registered charities that provide
acknowledge such a payment.                                                               employment assistance to individuals
                                             GST/HST and Registered Charities
                                                                                          with disabilities can be given a special
                                             The GST is a 7% tax charged on most
                                                                                          designation under the Excise Tax Act. To
                                             supplies of goods and services made in
Issues                                                                                    be eligible, one of the registered
                                             Canada. For supplies of goods and
                                                                                          charity’s main purposes must be to
                                             services made in Nova Scotia, New
GST/HST and registered                                                                    provide employment, training for
                                             Brunswick, and Newfoundland and
charities                                                                                 employment, or employment placement
                                             Labrador, the supplies are subject to the
                                                                                          services for individuals with disabilities,
The Charities Directorate itself does not    HST, a combined federal and provincial
                                                                                          or to provide instructional services to
deal with issues relating to the Goods       tax, at a rate of 15%.
                                                                                          assist such individuals in securing
and Services Tax (GST)/Harmonized
                                             Registered charities that are small          employment. The registered charity
Sales Tax (HST), but many registered
                                             suppliers are not required to register for   must also supply, on a regular basis,
charities have questions about how it
                                             the GST/HST and do not collect               services that are performed, in whole or
affects their operations. We are therefore
                                             GST/HST on taxable supplies (other           in part, by individuals with disabilities.
pleased to include this article from the
                                             than taxable sales of land or buildings).
Excise and GST/HST Rulings                                                                Once designated, all of the otherwise
                                             A registered charity is considered a
Directorate dealing with some of the                                                      exempt services the registered charity
                                             small supplier if it has either $250,000
issues that face registered charities.                                                    provides to GST/HST registrants will be
                                             or less in annual gross revenue or not
                                                                                          taxable. Some services, such as
GST/HST Enquiries                            more than $50,000 in annual worldwide
                                                                                          childcare and educational services, are
All questions concerning GST/HST             taxable supplies (other than sales of
                                                                                          not affected by the designation and
should be directed to the GST/HST            capital assets, such as a building or a
                                                                                          remain exempt. Furthermore, the
Business Enquiries line at                   computer).
                                                                                          following services, when supplied by a
1-800-959-5525 (English) or
                                             All registered charities are entitled to a   designated charity to a public sector
1-800-959-7775 (French). For general
                                             Public Service Body Rebate of 50% on         body or a board, commission, or other
information about the GST/HST and for
                                             the GST (and in most cases also the          body established by a government or a
further discussion of the subjects
                                             HST) that they have paid, and that           municipality will remain exempt:
covered in this article, please refer to
                                             cannot be claimed as an input tax credit.
GST/HST Guide, GST/HST Information                                                          care, employment, or training for
                                             A registered charity does not have to be
for Charities                                                                               employment of individuals with
                                             registered for GST/HST to claim this
(www.cra.gc.ca/E/pub/gp/rc4082/).                                                           disabilities;
                                             rebate.
For more technical information, please                                                      employment placement services for
call the GST/HST Rulings line at             Net tax calculation method for
                                                                                            such individuals; or
1-800-959-8287 (English) or                  charities
1-800-959-8296 (French). If your group       Since 1997, most registered charities          the provision of instruction to assist
would benefit from a technical seminar       that are GST/HST registrants are               such individuals in securing
on a GST/HST issue, please call the          required to use a special net tax              employment.
GST/HST Rulings line to arrange for          calculation, referred to as the “Net Tax
                                                                                          In addition, the registered charity will
one. Please note that, in the province of    Calculation for Charities”. Under this
                                                                                          not be required to use the Net Tax
Quebec, the Ministère du Revenu du           calculation, registered charities remit
                                                                                          Calculation Method for Charities,
Québec (MRQ) administers GST/HST             60% of the GST/HST they collect, but
                                                                                          thereby requiring the registered charity
on behalf of the federal government.         they cannot claim input tax credits on
                                                                                          to remit the full amount of GST/HST
Quebec-based registered charities may        the GST/HST paid on most items. The
                                                                                          collected or collectable and enabling the
call the MRQ at 1-800-567-4692.              main exception is that they may be able
                                                                                          registered charity to claim input tax
                                             to claim an input tax credit for
GST/HST Rulings and                                                                       credits. Once designated, the registered
                                             GST/HST paid or payable on capital
Interpretations                                                                           charity can use the “Special Quick
                                             assets. However, these rules do not
The CRA provides written GST/HST                                                          Method of Accounting for Public
                                             apply to a registered charity that is a
rulings and interpretations to help                                                       Service Bodies” to calculate its net tax
                                             school authority, public college,
persons determine their GST/HST                                                           remittances.
                                             university, hospital authority, or a local
obligations and entitlements. This
                                             authority determined to be a
service is offered free of charge. For
                                             municipality.
more information about this service,
                                                                                                                         8

Registered charities may request to be       Contact information                 You can find all our publications at:
designated by writing to:                                                        www.cra.gc.ca/tax/charities/
                                             The Charities Directorate
Director, Public Services Bodies                                                 Draft publications for consultation are
 and Governments Division,                   You can call us toll free at        available at:
 Excise and GST/HST Rulings                  1-800-267-2384 (English) or         www.cra.gc.ca/tax/charities/
  Directorate                                1-888-892-5667 (bilingual).         consultation_policy-e.html
14th floor, Tower A, Place de Ville,         You can also write to us at:        For information on new additions about
Ottawa ON K1A 0L5.
                                             Charities Directorate               charities, see the “What’s new” page at:
For further details concerning the           Canada Revenue Agency               www.cra.gc.ca/tax/charities/
designation process, please contact the      Ottawa ON K1A 0L5                   whatsnew/whatsnew-e.html
GST/HST Rulings line 1-800-959-8287
                                             You can contact us by email for     For an e-mail notification of these
(English) or 1-800-959-8296 (French).
                                             comments or suggestions             additions, subscribe to the free
                                                                                 electronic mailing list at:
                                               about the newsletter at:          www.cra.gc.ca/eservices/maillist/
Policies                                       charities-bienfaisance-bulletin   subscribecharities-e.html
                                               @ccra-adrc.gc.ca
Upcoming policies from the                                                       A list of federal government contacts
                                               about the RoadShow at:            outside of the Charities Directorate, that
Charities Directorate                          information.sessions@             may be of interest to charities, is
As part of the policy development              ccra-adrc.gc.ca                   available at:
process, the Charities Directorate is                                            www.cra.gc.ca/tax/charities/
                                               about the Web site at:
making copies of all its draft                                                   related_links/federal-e.html
                                               Charities-Bienfaisance@
publications available on the
                                               ccra-adrc.gc.ca
“Consultation on proposed policy” page
for charities on the CRA Web. The
comments we receive by this means
have, in the past, provided us with a
broader range of experience than we
would otherwise be able to access, and
this helps us identify revisions that are
required prior to finalizing the policies.
The Charities Directorate plans to make
several new draft policies available in
the first half of this year including
policies on public benefit, ethnocultural
organizations, and umbrella
organizations. We look forward to your
input on these policies.

				
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