One of the most asked questions in the area of GST concerns the rebate available to non-profit organizations (“NPO”). In general, where a GST registrant makes taxable supplies, it is entitled to a full input tax credit on purchases that relate to its commercial activities.
All of an NPO’s activities that are not commercial are in the realm of “non-profit”. All supplies of goods or services that are not for profit are considered exempt supplies under the Excise Tax Act (“the Act”). Exempt supplies are supplies on which the NPO may not charge GST and is not entitled to any ITC on expenses that relate thereto.
In the case of expenses that may relate to both the commercial and exempt operations of the NPO, these expenses must be apportioned on a reasonable basis to determine what percentage of the total is used in commercial activities in order to determine their ITC entitlement. For example, if 40% of the NPO’s activities involves the supply of taxable goods and services, then 40% of its office supplies may be allocated to the commercial activity and an ITC may be claimed for that portion.
The tax on the portion of the NPO’s expenses used in exempt activities may qualify for a special rebate under section 259 of the Act, which provides for a rebate of GST for certain NPO’s.
The rebate is available to the following organizations:
- Qualifying NPO’s; and
- Selected public Service Bodies
Each of the above has its own definition:
Charity: is a registered charity or registered Canadian amateur athletic association as defined in the Income Tax Act;
Qualifying NPO: is an NPO that receives at least 40% government funding;
Selected public service body: is:
(a) a hospital;
(b) a non-profit school authority;
(c) a non-profit university;
(d) a non-profit public college or
(e) a municipality.
The current GST (QST) rebate rates available to these organizations are as follows:
(a) Charities and qualifying NPO’s: 50%
(b) Hospital: 83% (55%)
(c) School authority: 68% (47%)
(d) University or public college: 67% (47%)
(e) Municipality: 100% (0%)
To make the claim in Quebec, separate forms for the federal and Quebec governments must be filed as follows:
- Federal: form FP-66-V
(Guide: form FP-66.G-V)
- Quebec: form VD-387-V
The above forms may be found over at Revenue Quebec.
If an NPO is not registered for GST purposes, there is no requirement to do so to claim a rebate. For current registrants, the claim must be made within four years from the deadline date for the GST/QST return for the period in question. For non-registrants, the claim must be made within four years from the end of the year in question.