How to Calculate the HST Rebate for Charities in Canada

When our charity buys goods or services in Canada, we often pay Harmonized Sales Tax (HST). We can get money back by claiming an HST rebate, which is a partial refund on the tax paid. This rebate helps us reduce expenses and put more funds towards our programs.

Calculating the rebate means breaking down the total HST into federal and provincial parts, then applying specific rebate rates based on our location and status. Each province may have different rebate percentages, so understanding these details is key to maximizing our claim.

Knowing which form to file and how to report our expenses makes the process smoother. By handling the calculations accurately, we ensure we reclaim the right amount, helping our charity manage its budget more effectively.

Understanding the HST Rebate for Charities

If your charity or nonprofit buys goods or services in Canada, you’ve likely paid the Harmonized Sales Tax (HST). The good news is that many registered charities and some nonprofits can get part of that money back from the government. This is called an HST rebate.

This guide will help you understand how to calculate your rebate, what rate applies, and which form you need to use. We’ve made it simple so anyone can follow along, even if it’s your first time.

What is the HST Rebate for Charities and Nonprofits?

When your organization buys something, you usually pay HST, which is a mix of federal and provincial taxes. The federal part is the GST (Goods and Services Tax), and the provincial part depends on where you are in Canada.

Charities and some nonprofit organizations can claim a rebate on a portion of the HST they pay. This helps them save money and put more funds toward their programs and services.

What Is the HST Rebate Rate for Charities?

Here’s how the rebate usually works:

• 50% rebate on the federal part (GST) of the HST for registered charities
• 82% rebate on the federal part (GST) for qualifying nonprofit organizations that run facilities like hospitals or schools
• The provincial portion rebate varies by province. For example:
  
  • In Ontario, charities can get 82% of the Ontario portion of HST
  • In Prince Edward Island, it’s 50% of the provincial portion

Not all provinces offer a provincial rebate, so it's important to check what applies in your province.

What Is the HST Rebate Form for Nonprofits?

To apply for the rebate, you need to complete Form GST66 – Application for GST/HST Public Service Bodies’ Rebate. You’ll also need Schedule A (or B) depending on your type of organization.

Here’s what you’ll need to prepare:

• Your total eligible expenses
• The amount of HST paid
• The amount of rebate you're claiming
• Your charity’s Business Number (BN)

You can file this form online using the CRA’s My Business Account, or you can mail it in.

When Should You File?

You should file the rebate within four years from the end of the year when you paid the HST. For example, if you paid HST in 2021, you have until the end of 2025 to apply for that rebate.

Eligibility Criteria for Charities

To claim an HST rebate, charities must meet specific rules set by the Canada Revenue Agency (CRA). These rules define who qualifies, the types of charities and public service bodies (PSBs) eligible for rebates, and how designated charities differ from other charities. Understanding these details helps us determine our rebate eligibility and ensures we file correctly.

Who Qualifies as a Charity?

We qualify as a charity if we are a registered charity listed with the CRA. This means we must have obtained official charitable status under the Income Tax Act. Only registered charities can claim the full HST rebate.

Qualifying charities include those involved in religious, educational, charitable, or other recognized purposes. Our activities must match the CRA’s definition of charitable work, and we must comply with reporting and operational rules.

If our organization is not a registered charity, we might still qualify under certain conditions as a public service body or other nonprofit entity, but the rebate rates and rules will differ.

Types of Eligible Charities and Public Service Bodies

Eligible organizations include registered charities, designated charities, and other public service bodies such as hospitals, universities, and Canadian amateur athletic associations.

The CRA allows these groups to claim a rebate on a portion of the HST they pay. The rebate rate varies depending on the type of organization and if they meet certain conditions, including the gross revenue test, which checks the revenue from commercial activities to keep exemption status.

Public service bodies (PSBs) like hospitals and schools often qualify for higher rebate rates than other nonprofits. We must ensure we use the correct rebate form and schedule to match our organization type.

Designated Charities vs Other Charities

Designated charities are a specific category recognized by the CRA with eligibility for a higher rebate rate. They include organizations primarily involved in registered charitable activities but also serve as public service bodies.

These designated charities often have different rebate rates and may be eligible for rebates on both federal and provincial parts of HST at a higher percentage compared to regular charities.

Other charities that do not meet the criteria for being designated may only be eligible for partial rebates or the federal portion of HST. Understanding our classification helps us determine the correct rebate percentage to claim.

Taxable and Exempt Supplies for Charities

When we deal with GST/HST as charities, it's key to understand the differences between taxable, exempt, and zero-rated supplies. Each type affects how much tax we collect or pay, and what rebates we can claim. This knowledge helps us manage our finances while following tax rules.

Taxable Supplies and HST Implications

Taxable supplies are goods or services that are subject to GST/HST. We must charge and collect tax on these supplies when dealing with customers in participating provinces. The tax rate depends on the province, ranging from 5% GST alone to combined HST rates in places like Ontario and Nova Scotia.

When we make taxable sales, we need to register for GST/HST if our gross revenues exceed $250,000 over two previous fiscal years. We must charge GST/HST on sales and report it. Input tax credits (ITCs) can be claimed for GST/HST paid on purchases related to our taxable activities.

Note that some real property sales by charities are also taxable, and tax must be remitted accordingly. Proper accounting of these taxable supplies ensures compliance and accurate rebate claims.

Exempt Supplies and Their Impact on Rebates

Exempt supplies include goods and services that do not attract GST/HST. Charities often provide exempt supplies, such as certain health, educational, or social services. When we supply exempt goods or services, we cannot charge GST/HST or claim ITCs on related purchases.

Because we can’t recover GST/HST on expenses tied to exempt supplies, these costs reduce the amount of rebate we may receive. However, charities using the net tax calculation method can claim a public service bodies (PSB) rebate for GST/HST amounts on eligible expenses, even if these expenses relate to exempt activities.

This rebate helps offset some costs but does not cover GST/HST paid on all exempt-related purchases. Understanding which supplies are exempt lets us plan how we track and claim rebates correctly.

Zero-Rated Supplies for Charities

Zero-rated supplies are taxable but charged at a 0% GST/HST rate. This means we do not collect tax on the sale but can still claim input tax credits for GST/HST paid on purchases related to these sales.

Examples relevant to charities include certain printed books and some food products. Zero-rated supplies are important because they allow us to recover GST/HST costs even though we do not charge tax to clients.

We must carefully identify zero-rated supplies in our accounting to ensure we claim all the ITCs available without charging unnecessary GST/HST. This keeps our tax reporting accurate and helps maximize our rebate claims.

Net Tax Calculation Methods for Charities

We must use specific calculation methods to figure out the net tax for charities. These methods depend on whether our charity is registered for GST/HST or not. Correctly applying the method impacts how we claim input tax credits and rebates, and impacts the amounts we report on our GST/HST return.

Net Tax Calculation for GST/HST Registrant Charities

For charities registered for GST/HST, we usually apply the net tax calculation method as outlined in Guide RC4082 and related CRA forms like GST26. This method helps simplify tracking our input tax credits (ITCs).

We calculate the net tax by subtracting ITCs from the GST/HST collected on taxable supplies. Notably, this method avoids splitting expenses between taxable and exempt supplies, which can reduce administrative burden.

On the GST/HST return, amounts related to the net tax calculation appear at line 103 (tax collected) and line 106 (input tax credits claimed). Using this method ensures compliance while letting us maximize rebates available under the net tax rules.

We must remember that charities designated as public institutions or those choosing to use the regular method instead do not apply this calculation.

Net Tax Calculation for Non-Registrant Charities

For charities not registered for GST/HST, the net tax calculation process is different. Since we do not charge GST/HST, we cannot claim input tax credits like registrants do.

However, non-registrant charities may still be eligible for certain rebates on GST/HST paid on their purchases. We calculate our net tax in relation to rebates claimed, often using Form GST26 for reporting.

Because these charities do not file full GST/HST returns, the focus is on identifying amounts eligible for rebates rather than on tax collected or credits claimed. The net tax calculation here is simpler but requires careful review to ensure expenses qualify under CRA rebate rules.

We must follow CRA instructions carefully to correctly report and receive the rebate allowed for non-registrant charities.

Step-by-Step Process to Calculate the HST Rebate

Calculating the HST rebate involves identifying which expenses qualify, separating non-creditable tax, applying the correct rebate rates, and dealing with capital or real property costs properly. Each step requires careful attention to ensure the amount we claim is accurate and reflects the rules set by the Excise Tax Act.

Calculating Eligible Expenses

We start by determining which expenses are eligible for the HST rebate. Generally, expenses must be for goods or services used directly in our charity’s day-to-day activities. This includes office supplies, utilities, and contracted services.

Not all purchases are eligible. For example, expenses related to fundraising or activities that earn taxable revenue may not qualify fully. We need to keep detailed receipts and invoices that show the HST paid.

If our charity has a billing agent or uses a third party, we must confirm if HST was charged correctly and keep proper documentation. Eligible expenses exclude items like some financial services or goods used for non-charity purposes.

Determining Non-Creditable Tax Charged

Non-creditable tax charged means the portion of HST or GST that we can’t claim back as an input tax credit (ITC) or rebate. We must identify this amount because it affects the rebate total.

The Excise Tax Act helps define when tax is non-creditable. For charities, non-creditable tax usually shows up on goods or services not used directly for charity functions or where the rebate doesn’t apply.

We separate the non-creditable tax from the creditable amounts before applying rebate rates. This ensures we don’t claim taxes that the Canada Revenue Agency (CRA) won’t approve. Keeping accurate records here is essential for audit purposes.

Applying the Correct Rebate Rates

Once we have our eligible expenses and non-creditable tax sorted, we apply the rebate rates determined for our type of organization and province.

For registered charities, the federal GST portion usually has a 50% rebate rate. The provincial portion varies. In Ontario, for example, the rebate on the provincial part is around 82%. Other provinces like Prince Edward Island offer lower provincial rebates, such as 50%.

We calculate the rebate by splitting the total HST paid into its federal and provincial parts, then multiplying each by their respective rebate rates. Using a simple table helps:

Adding these gives us the total HST rebate claim.

How to Calculate the HST Rebate

Let’s walk through an example:

Imagine your charity bought office supplies and paid $113 in total. That includes $100 for the items and $13 HST (which is 13% in Ontario).

Step 1: Break the HST into federal and provincial parts

• Ontario’s HST rate is 13%
• 5% is federal (GST) = $5
• 8% is provincial = $8

Step 2: Apply the rebate rate

• Federal GST rebate (50% of $5) = $2.50
• Ontario portion rebate (82% of $8) = $6.56

Step 3: Add the rebates

$2.50 + $6.56 = $9.06 total rebate

So your charity can claim back $9.06 out of the $13 HST paid.

Accounting for Capital and Real Property

Capital property, including buildings and land, requires special treatment under the rebate rules. We need to track HST paid on these items separately because capital acquisitions have different rebate calculations.

If the property is used for charitable activities, a portion of the HST paid on the purchase or improvement may be refundable as a Public Service Bodies’ Rebate (PSB rebate). The rebate may be spread over several years if the property is capital in nature.

We must also consider whether the property use changes, which affects future rebate claims. Properly accounting ensures we comply with the Excise Tax Act and maximize eligible rebates on capital and real property.

Special Provincial Considerations and Other Rebate Types

We need to consider different tax rules depending on the province where the charity operates. Some provinces have unique tax systems, rebate options, or requirements that affect how much a charity can claim back. Understanding these details will help us maximize the rebates available to our organisation.

Quebec Sales Tax (QST) and Charities

In Quebec, the sales tax system differs because the Quebec Sales Tax (QST) replaces the provincial part of the HST. Registered charities must navigate both the Goods and Services Tax (GST) and the QST systems to claim rebates.

Charities registered for QST can claim a reimbursement of QST paid on eligible purchases. This is done using the Guide RC4022 provided by Revenu Québec. The rebate rate is generally around 87.5% for the QST portion, higher than typical HST provincial rebates in other provinces.

We must file separate claims for GST and QST rebates, following the specific deadlines and procedures set out by both the Canada Revenue Agency (CRA) and Revenu Québec. Charities not registered for QST should not charge it but still may be eligible to claim some rebates.

Point-of-Sale Rebates and Participating Provinces

In some provinces, charities and qualifying nonprofits can receive point-of-sale rebates on certain goods and services. This means the vendor reduces the HST amount charged at the time of purchase, so the organisation pays less upfront.

These provinces include Ontario, Nova Scotia, New Brunswick, and Newfoundland and Labrador. The point-of-sale rebate typically matches the rebate rates charities would claim later through forms.

For purchases in provinces without point-of-sale rebates, like Prince Edward Island and British Columbia, we must pay full HST and claim the rebate later through the CRA using forms such as Form GST66.

Point-of-sale rebates simplify budgeting since we don't have to wait for reimbursement. However, we must provide vendors with proof of our charity status or exemption certificates for the rebate to apply.

Other Rebates for Charities and Public Service Bodies

Besides the standard HST rebate, charities may qualify for other rebates or refunds, such as the Public Service Bodies (PSB) rebate or the Self-Government Refund.

The PSB rebate covers tax paid on goods and services that cannot be recovered through other means. It applies to charities, qualifying nonprofit organisations, and certain public service bodies, often using Form GST66 for claims.

The Self-Government Refund is specific to Indigenous self-governing bodies operating under certain agreements, allowing them to recover GST/HST paid on eligible expenses.

There are also specific rebates available for services provided by auctioneers or agents acting on behalf of charities. These follow detailed rules and usually require additional documentation during claims.

Understanding these different rebates ensures that we capture all possible tax relief options relevant to our organisation’s activities.

Final Tips for Canadian Charities

• Only registered charities and certain nonprofits can apply for the full rebate. If you're not sure about your status, check with the CRA.
• Keep receipts and records for all purchases where HST was charged.
• You don’t need to register for HST to claim the rebate unless you also collect HST on your own services or goods.

By claiming the HST rebate, Canadian charities and nonprofits can reduce their costs and free up more money to help their communities. It's worth taking the time to understand the rules and apply them properly.

If you need help, speak with an accountant or bookkeeper who specializes in charity and nonprofit accounting, tax filing, and bookkeeping or visit the CRA website for more details.

Frequently Asked Questions

We will cover how to figure out the HST rebate for charities, understand tax credits for donations, and explain GST rules for charities in Canada. We will also show the basic HST calculation and limits on tax deductions for donations.

How to calculate HST rebate for charities in Canada?

To calculate the HST rebate, first separate the total HST paid into federal (GST) and provincial parts.

Apply the rebate rates: charities usually get 50% back on the federal part and a percentage (such as 82% in Ontario) on the provincial part.

Add these amounts together to find the total rebate your charity can claim.

How to calculate charitable donation tax credit in Canada?

The tax credit is based on the amount donated.

For federal tax, there is a base rate (15%) on the first $200 donated and a higher rate (29%) on amounts over $200.

Provinces add their own credits, which vary by region.

Multiply your donation by the combined federal and provincial rates to get the total tax credit.

What is the formula for calculating HST?

HST is calculated by multiplying the purchase price by the HST rate of the province.

For example, if the HST rate is 13%, the formula is: Purchase Price × 0.13 = HST amount.

This total HST includes both the federal GST and the provincial portion.

Do Canadian charities pay GST?

Generally, registered charities must charge GST/HST if they provide taxable goods or services.

However, many charities qualify for rebates on the GST/HST they pay when buying goods and services.

Certain supplies made by charities may be exempt, so not all activities require charging GST/HST.

Does GST apply to charities?

GST applies to charities on taxable goods and services, but some charity activities are exempt from GST.

Charities are often eligible for partial rebates to recover some of the GST/HST they pay.

The rules depend on the charity’s registration status and the types of supplies made.

What is the maximum tax deduction for charitable donation?

The maximum tax credit depends on your income and province.

In general, the federal credit rates apply up to annual donation limits based on income.

Any donation amount exceeding these limits may be carried forward for up to five years.