HST Special Net Tax Calculation for Charities

May 1, 2010

Ontario Revenue recently released Prepare for Ontario’s HST Tax Tip #5.  In addition to discussing HST for public service bodies, the tip sheet included the following information for charities:

The GST/HST framework provides a separate special net tax calculation for charities that are GST/HST registrants. Charities are generally required to use this method, but they may elect not to use it if they make supplies outside Canada or zero-rated supplies in the ordinary course of their business, or if 90 per cent or more of their supplies are taxable.

Ontario is adopting the 60 per cent special net tax calculation method that must be used by most charities.

Under the charity-specific net tax calculation, charities are not required to track the GST/HST paid or payable on inputs to most taxable supplies. In general, charities remit 60 per cent of the tax collected on their taxable supplies and keep the remaining 40 per cent in lieu of claiming ITCs (there are certain exceptions for real property and capital property, where ITCs may be claimed). A charity may be eligible to claim a PSB rebate of 50 per cent for the federal component of the HST and 82 per cent for the Ontario component of the HST on most purchases where the charity is not entitled to claim ITCs. For more information on the net tax calculation method for charities, see Guide RC4082, GST/HST Information for Charities, available on the CRA website.

Lawyers in Miller Thomson LLP’s Tax group can assist charities, public service bodies and others to understand and comply with the HST.

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