Information on Events Receipts and Taxes

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David M. Sherman, LLB, LLM
Tax Lawyer & Author
ds@davidsherman.ca
October 2015

[David M. Sherman (www.davidsherman.ca) is one of Canada’s leading authorities on the Goods and Services Tax (GST) and HST Harmonized Sales Tax (HST). He is the author of numerous technical publications used by tax professionals including the 21-volume looseleaf Canada GST Service; the Canada GST Cases; the newsletters GST & HST Times and GST & HST Case Notes; and the books Practitioner’s Goods and Services Tax Annotated and GST Memoranda, Bulletins, Policies and Info Sheets, as well as The Lawyer’s Guide to Income Tax and GST/HST.]

Most charities rely primarily on donations for their revenues. However, charities increasingly run events for fund-raising purposes — everything from dinners to golf tournaments to bike races to flea markets.

In some cases, a charity needs to charge GST or HST on its fees (or “tickets”) to such events.

This article provides a summary as to when charity events or tickets are likely to be taxable. It is only a general summary. A charity that has any uncertainty about this issue should consult a tax lawyer with GST/HST expertise.

In the summary below, “charity” refers to an entity that is a registered charity for income tax purposes (with an “RR” Business Number, entitled to issue receipts for donations that entitle the donor to a tax credit for income tax purposes).

1. Unregistered small supplier

Any person or entity that is a “small supplier” is permitted to remain outside the GST/HST system. They do not register for GST/HST, and they do not need to charge GST/HST on their sales. (They also cannot claim input tax credits to recover the GST or HST they pay on purchases. Effectively they’re like a consumer.)

For businesses generally, a person with no more than $30,000 in annual revenues is normally a small supplier that can choose to remain unregistered. For a charity, the threshold is $50,000. If total GST-taxable revenues in any four consecutive calendar quarters total more then $50,000, the charity is not a “small supplier”.

As an alternative test, any charity whose total revenues (including donations and government support) do not exceed $250,000 is a “small supplier”.

(Note that any “associated” persons are included in the test for a small supplier. This includes persons under common control. If the charity controls a business corporation, for example, that corporation may cause the charity to not be a small supplier.)

A “small supplier” can choose not to register for GST/HST. If it remains unregistered, it does not charge GST/HST on its taxable sales.

Note that a charity can have a GST/HST number without being registered! Charities generally qualify for a “Public Service Body Rebate” of part of the GST/HST they pay on purchases (the percentage varies by province and by the type of charity). The CRA will give the charity an “RT” Business Number (e.g. 12345 6789 RT0001) for purposes of this rebate. That does not mean the charity is “registered” for GST/HST. A charity that is “registered” will normally be asked by the CRA to file a GST/HST return (not a rebate application) at least once a year. If you are not sure whether your charity is registered, call the CRA or check at http://www.cra-arc.gc.ca/gsthstregistry/.

If your charity is a small supplier, and it is not registered, then it does not need to charge GST or HST, even on fees that are taxable under the GST/HST.

2. Fund-raising event exemption
A fund-raising event is exempt if it meets both of the following conditions:
• It is an admission to a fund-raising dinner, ball, concert, show or like fund-raising event.
• Part of the fee may reasonably be regarded as an amount that is donated to the charity, and a donation tax receipt can be issued for that portion (or could be issued if the donor were an individual).

(This exemption is in Excise Tax Act Schedule V, Part V.1, section 2, and in Schedule V, Part VI, section 3, depending on the kind of charity.)

If the above conditions are met, then the charity does not need to charge GST or HST on the admission, even if the charity is GST-registered.

It may not always be clear what constitutes a “like fund-raising event”. A golf tournament or other competitive event is probably not “like” a dinner, ball, concert or show, but this is uncertain. If you are unsure, get professional advice from a tax lawyer with GST/HST expertise.

3. Other exemptions
If neither of the above exemptions applies, there are several other possible exemptions that can apply, depending on the kind of charity and the type of event the charity is running. A “public institution” (university, hospital, school, public college or entity determined by the CRA to be a municipality for GST/HST purposes) has rules that are different from other charities.

If you conclude that neither of the exemptions in 1 or 2 above applies, get professional advice from a tax lawyer with GST/HST expertise as to whether your charity is required to collect GST or HST on fees being charged, and if so, how to determine what rate of GST or HST to charge to each participant.

You may also wish to review CRA Info Sheet GI-067, “Basic GST/HST Guidelines for Charities”, available at:
http://www.cra-arc.gc.ca/E/pub/gi/gi-067/

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Toronto Ontario Canada – M5H 2Y2
416 361 1982 FAX 416 363 8451
http://www.canadiancharitylaw.ca/

CRA Split Receipting Rules and Subtracting Advantages from Donations

By Mark Blumberg (September 4, 2015)

Before 2002, if a donor received anything back (i.e. an advantage or “consideration”) for the donation there was no gift. Now with the “split receipting” rules a donor can receive an advantage of up to 80% of the value of the donation but the amount of the advantage may reduce the eligible amount of the tax receipt.

Split receipting permits a charity to issue tax receipts for the eligible amount of a gift, which is the fair market value (FMV) of the gift minus the FMV of the advantage available to the donor. However, if the donor receives an advantage of over 80% of the value of the donation, then generally it will be considered that there was no “donative intent” and no gift was made. Registered charities cannot issue a tax receipt where the value of the advantage available to the donor is more than 80% of the fair market value of the gift.

CRA provides the following example of split receipting on its website:

Example
An individual donates $100 to a charity and in return receives a ticket to an art exhibit valued at $50.

FMV of gift $100
FMV of advantage (ticket received by donor) $ 50
Intention to make a gift threshold (80% of FMV of gift) $ 80

Since the FMV of the advantage received by the donor ($50) falls within the intention to make a gift threshold ($80) the charity can issue a receipt.

If the FMV of the advantage had been $81 or more, the intention to make a gift threshold would not have been met and the charity could not issue a receipt.

However, if the FMV of the advantage available to the donor is not more than the lesser of $75 or 10% of the FMV of the gift a registered charity does not need to deduct the advantage available to the donor when calculating the eligible amount of a gift. This is referred to as the de minimis rule and where applicable, the FMV of the gift would be the eligible amount of the tax receipt since no deduction is required.

CRA provides the following example of the de minimis rule on its website:

Example
An individual donates $100 to a charity and in return receives a mug valued at $6 and a pen valued at $2.

FMV of gift $100
Combined value of advantages $ 8
De minimis threshold (lesser of $75 or 10% of value of gift) $ 10

Since the combined value of the advantages ($8) is less than the de minimis threshold ($10), the charity does not need to subtract these advantages from the value of the gift when issuing the receipt.

If the FMV of the advantages had been $11 or more, the charity would have to subtract the advantages from the value of the gift when issuing the receipt.

In addition, if the FMV of the advantages had been more than $80 (80% of the FMV of the gift), the intention to make a gift threshold would not have been met and the charity could not issue a receipt.

It is important to note that the de minimis rule does not apply to cash or near-cash equivalents (e.g. gift cards, gift certificates, vouchers, and coupons). A registered charity must always deduct cash and near-cash equivalents from the FMV of the gift to determine the eligible amount of the gift for a tax receipt.

FMV can sometimes be a tricky determination and where a registered charity cannot determine the FMV of the gift or the FMV of the advantage available to the donor, no tax receipt should be issued.

For more information on split receipting, please visit CRA’s website at http://www.cra-arc.gc.ca/chrts-gvng/chrts/prtng/rcpts/splt-eng.html.

You may also wish to visit our Blumbergs’ Receipting Kit, which compiles a large number of CRA policies and guidance on receipting, including those related to split receipting and FMV.

Mark Blumberg is a lawyer at Blumberg Segal LLP in Toronto, Ontario. He can be contacted at mark@blumbergs.ca or at 416-361-1982. To find out more about legal services that Blumbergs provides to Canadian charities and non-profits please visit http://www.canadiancharitylaw.ca/ or http://www.globalphilanthropy.ca/.

This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.