Not for Profit Organizations - Registered Charity Status

What Does It Mean to be a Registered Charity?

Registered charities are organizations that are officially registered as a Charity with the Canada Revenue Agency (CRA).  In order to be eligible to apply for the charity status with the CRA, the organization must be created and operate exclusively for charitable purposes, and all resources should be allocated towards charitable activities.

If organizations are interested in applying for registered charity status, they will apply through the CRA. Once the application is sent, the CRA will review and assess the application. If the organization is approved as a registered charity, it will receive an official register number from the CRA and have the official responsibilities and benefits associated with the status.

Responsibilities or obligations of a registered charity, as designated by the CRA, include:

  • meeting the organization's annual spending requirement (disbursement quota); and
  • keeping reliable and complete books and records.

Please refer to the CRA’s website for more details on obligations. Failure to abide by these obligations may result in sanctions or even revocation of the registered charity status.

Differences between a Registered Charity and a Non-Registered Not-for-Profit Organization

  • Registered charities must exist and operate exclusively for charitable purposes, whereas non-registered not-for-profit organizations (NPO) can exist and operate for other reasons including (but not limited to): social welfare, civic improvement, and recreation.
  • Registered charities are exempt from income tax and generally, their supplies are also exempt from GST/HST. In comparison, non-registered NPOs are generally exempt from income tax. Non-registered NPOs’ supplies are generally not exempt from GST/HST.
  • Registered charities can issue official donation receipts to donors whereas non-registered NPOs cannot. These receipts can be beneficial to recipients for tax purposes, as donors with tax receipts can claim their donations to reduce their income tax.
  • Registered charities must spend a set minimum amount on charitable activities or gifts to qualified donors whereas non-registered NPOs have no spending requirement.
  • Registered Charities must file a T3010 form (Annual Information Return) each year. Other non-registered NPOs may need to file official forms each year as follows: the T2 corporate return (for incorporated organizations) or the T1044 NPO information form. See our series on tax tips here!

What is the Best Direction to Go?

There is no single answer to whether organizations should register as a charity with the CRA. Whether or not an organization should register as a charity depends on the purpose and goals of the organization. The registered charity status is not just a designation with some benefits, but also includes a set of rules and responsibilities. If an NPO would like to consider registering for charity status, careful consideration should be taken to decide whether this status aligns with the organization’s mission and strategy and if this is a suitable endeavor for the team.

Looking for further tax-related discussions on NPO’s? Check back soon for our upcoming Tax Tips Series!

Interested in learning more about how our services can assist your NPO? Reach out to us at npo.consulting@uwaterloo.ca.

Sources: