Split-Receipting Treatment of GST/HST on Charitable Donations

March 22, 2016

The Budget proposes a new relieving measure related to the application of the sales tax regime (whether GST or HST depending on the province) to charitable donations.  The measure will effectively apply the split-receipting regime that applies to charitable gifts for income tax purposes to the GST/HST regime.

Currently, where a donor makes a gift to a registered charity, the gift is not subject to GST/HST provided that the donor does not receive anything in return for the gift.  If, however, the donor receives property or services (referred to as a “supply”) from the charity in exchange for a donation, the full value of the donation is generally (subject to various exemptions) subject to GST/HST even if the value of the property or services received is less than the value of the gift.  It appears that some charities may not have understood that GST/HST was to apply in this circumstance.

The Budget proposes to revise the GST/HST rules to align them with the split-receipting rules in the Income Tax Act.  Under the split-receipting rules, where a donor makes a gift to a registered charity and receives some property or service in return (referred to as an “advantage”) an official donation receipt may be issued for the value of the gifted property less the amount of the advantage.  This net gift amount is referred to as the “eligible amount of the gift”.  Budget 2016 proposes that where such a gift is made, and provided that an official donation receipt can be issued for an eligible amount of the gift, GST/HST will only apply to the value of the supply received by the donor (assuming the property or service is not otherwise exempt from GST/HST).  The portion of the donation in excess of the supply will no longer be subject to GST/HST.

The Budget confirmed that this new measure will apply to supplies made after March 22, 2016.

There is also a transition provision addressing the application of these new rules to GST/HST which may not have been collected between December 21, 2002 (when the income tax split-receipting rules came into effect) and Budget Day.  Rather than being subject to assessment for GST/HST on the full amount of any donations made in this period, the Budget provides that any such assessment will be calculated as follows:

  • if the value of the supply was less than $500, GST/HST will be considered as paid;
  • if GST/HST was only collected on the value of the supply, no further GST/HST will be assessed; and
  • in other cases, the charity will be required to remit GST/HST on the value of the supply only (i.e., in other words, the new relieving split-receipting rules will apply to determine the amount assessed).

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