How are non-profits and charities different from other business organizations? How are they different from each other? I can answer these questions and tell you anything else you’d like to know about the reporting standards, the funding landscape and other issues specific to this sector.
Common questions I’m asked:
What is the difference between a non-profit organization and a charity?
While all charities are non-profits, not all non-profit organizations are charities. Both operate for purposes other than earning a profit and are exempt from tax, but in order to qualify as a charity, an organization must work to alleviate poverty, advance religion, further education or pursue other objectives of benefit to society.
A non-profit’s purposes are unconstrained as long as they exclude profit-making.
Only organizations with charitable status can issue donation receipts.
What annual returns are non-profits and charities required to file?
Although they are tax-exempt, non-profit organizations must file a T2 corporate tax return within six months of their fiscal year end.
Charities must file form T3010-Charity Information Return and all applicable schedules within six months of their fiscal year end.
GST/HST registrants also must complete and submit GST/HST returns according to the filing frequency assigned to them.
What do these terms mean?
Public Service Bodies’ GST/HST Rebate
The GST/HST rules for charities differ significantly from those for other types of businesses. Most supplies made by charities are exempt from GST/HST which means they are not required to register for GST/HST.
Charities can recover 50% of the GST/HST they pay on their purchases by filing a Public Service Bodies’ GST/HST Rebate application.
The word “fund” means something quite specific in non-profit terminology. It refers to money collected for a specific purpose. Grantors and donors can designate how the recipient non-profit or charity can use their contributions and, in some cases, expect a full accounting to document that their restrictions were respected.