Do Non-Profits Pay Taxes in Canada?

If you’re starting or running a non-profit organization, one of the most common questions is: “Do non-profits pay taxes in Canada?”

It’s a great question—and the answer isn’t just yes or no. It depends on a few things, like what your organization does, whether it's registered as a charity, and how it handles its money.

In this blog post, we’ll break it down in a way that’s simple, clear, and relevant to real Canadian nonprofits and charities. Whether you're helping youth in your community, operating an animal rescue charity, running a church, mosque or temple, or supporting a cultural group, this guide is for you.

What Is a Non-Profit Organization?

Before we talk about taxes, let’s understand what a non-profit organization (NPO) actually is.

A non-profit is a group that exists to support a cause or serve a community, not to make a profit for owners or shareholders. Any money it earns goes back into the organization’s mission.

Examples:

• A soccer club that runs youth leagues in your town.
• A local arts centre that offers free art classes.
• A food bank that supports low-income families.

These organizations aren’t trying to get rich—they’re trying to help.

Types of Non-Profit Organizations in Canada

Not all non-profits are the same. In Canada, you'll typically see:

• Non-Profit Organizations (NPOs): Community groups, sports clubs, social organizations
• Registered Charities: Organizations approved by CRA for charitable purposes
• Non-Profit Corporations: Incorporated entities with legal status
• Charitable Organizations: Must spend funds on charitable activities
• Public Foundations and Private Foundations: Grant-making entities

Understanding which category your organization falls into helps determine your tax obligations.

Do Non-Profits Pay Taxes in Canada?

In general, non-profits do not pay income tax, as long as:

• They operate only for social, educational, religious, or community purposes, and
• None of their profits benefit members, directors, or shareholders.

If your nonprofit sticks to its purpose and uses its money to serve its mission—not individuals—you likely won’t owe federal or provincial income tax.

BUT—and this is important—not all taxes are off the table.‍

GST/HST for Non-Profits: What You Need to Know

Most non-profits in Canada must charge and collect GST/HST on taxable supplies, currently at:

• 5% (GST) in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon
• 13% (HST) in Ontario
• 15% (HST) in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island

However, registered charities can claim a 50% rebate on GST/HST paid, and qualifying non-profits may be eligible for similar rebates.

If your non-profit has revenues under $50,000 annually, you may qualify as a small supplier and not need to register for GST/HST.

Do Nonprofits Pay Local Taxes?

Well, sometimes.

Even if your nonprofit doesn’t pay income tax, you may still be on the hook for other taxes, such as:

• Property Taxes: These are set by local governments. Some cities only offer exemptions to registered charities, not all nonprofits. And some municipalities offer only a partial property tax rebate to nonprofits and charities.
• Payroll Taxes: If you have employees, you’re responsible for things like CPP, EI, and withholding income tax, just like any other employer.
• GST/HST: Most nonprofits still pay sales tax, though most are eligible for partial rebates.

So when people ask, “Do nonprofits pay local taxes?” The answer is: It depends on your location and status.

Provincial Tax Differences for Non-Profits

While federal tax rules are consistent across Canada, provincial taxes vary:

Property Tax: Exemptions differ by province and municipality. For example:

• Ontario offers property tax exemptions for registered charities under the Assessment Act
• British Columbia provides exemptions through permissive tax exemptions
• Alberta has specific charitable organization property tax exemptions

Provincial Sales Tax: Only applies in provinces without HST (currently British Columbia, Saskatchewan, and Manitoba have PST).

Check with your provincial government and local municipality to understand your specific obligations.

‍What About Registered Charities?

A registered charity is a special type of nonprofit that’s been approved by the Canada Revenue Agency (CRA) to carry out certain charitable purposes, like:

        ✅ Helping people in poverty

        ✅ Promoting education

        ✅ Supporting religion

        ✅ Benefiting the community in a legally recognized way

Once approved, registered charities get more tax advantages than regular nonprofits.

‍Tax Benefits for Registered Charities:

       ✅ Can issue official donation receipts (which attract more donations)

       ✅ May qualify for property tax exemptions

       ✅ Eligible for GST/HST rebates

       ✅ Access to more grants and public funding

Becoming a registered charity is a great option for organizations with a public benefit focus, but it comes with more rules, annual filings, and stricter oversight.

Payroll Taxes: Do Non-Profits Pay CPP and EI?

Yes. If your non-profit has employees, you must:

✅ Deduct and remit Canada Pension Plan (CPP) contributions
✅ Deduct and remit Employment Insurance (EI) premiums
✅ Deduct and remit income tax from employee paycheques
✅ Pay the employer's portion of CPP and EI

This applies to both regular non-profits and registered charities. Volunteers are not considered employees and don't trigger payroll tax obligations.

When Do Non-Profits Pay Income Tax in Canada?

While most non-profits don't pay income tax, there are exceptions:

Unrelated Business Income: If your non-profit earns income from activities unrelated to its mission (like running a commercial business), that income may be taxable.

Example: A youth sports league that operates a restaurant open to the public would likely owe tax on restaurant profits.

Investment Income: Certain types of investment income may be taxable for non-profits.

For-Profit Activities: If a non-profit starts operating more like a for-profit business, CRA may revoke its tax-exempt status.

The key is keeping your activities aligned with your stated non-profit purpose.

Real-Life Example

Let’s say there’s a community group in Toronto that offers free tutoring to newcomer students. At first, they’re just a nonprofit—they don’t pay income tax, but they do pay GST and partial property tax on their rented space.

Later, they apply to become a registered charity. Once approved:

• They remain exempt from income tax.
• They can issue tax receipts, which encourages more donations.
• Their municipality may give them a full property tax exemption.
• They qualify for new government grants and CRA rebates.

Their costs go down, their donations go up, and they’re better able to grow their programs.

Common Tax Mistakes Non-Profits Make in Canada

Avoid these costly errors:

❌ Not registering for GST/HST when required (over $50,000 in revenue)
❌ Issuing donation receipts before becoming a registered charity (only registered charities can do this)
❌ Mixing personal and organizational expenses
❌ Failing to file annual returns (charities must file T3010; non-profits may need T1044 or T2)
❌ Not keeping proper receipts and documentation
❌ Paying directors or members from organizational funds inappropriately

Staying compliant protects your tax-exempt status and keeps your organization in good standing with CRA.

What Are the Benefits of a Non-Profit Organization in Canada?

Whether you’re a registered charity or not, there are many advantages to running a nonprofit in Canada:

✅ Tax Relief : Most nonprofits don’t pay income tax, and charities get even more exemptions.

✅ Legal Protection : If you incorporate, your organization becomes a separate legal entity. That means directors and volunteers are usually protected from personal liability.

✅ Public Trust : Nonprofits and charities are seen as more trustworthy, especially when their finances and goals are transparent.

✅ Funding Opportunities : Many funders—especially governments and large foundations—only fund nonprofits or registered charities.

✅ Volunteer and Donor Support : People are more likely to volunteer or donate to causes that are officially structured and recognized.

‍To sum it up:

Do non-profits pay taxes in Canada?
Mostly no—they don’t pay income tax if they operate properly and for public purposes.

Do nonprofits pay local taxes?
Sometimes, they may still owe property tax unless they’re a registered charity with exemptions.

‍Need Help Getting Started?

Starting a nonprofit or applying for charitable status can feel confusing. That’s where we come in.

At B.I.G. Charity Law Group, we help Canadians register nonprofits and charities with clear, fixed-fee legal support—no hidden costs, no confusion. Just a fast, simple, and reliable path to get your organization off the ground and officially registered with the CRA.

🎯 Book a complimentary consultation to find out the best and fastest way to register your nonprofit or charity in Canada.

Contact Us
‍
      ☎️ 416-488-5888

       ✉️ ask@charitylawgroup.ca

       🌍 www.charitylawgroup.ca

Let’s make your mission official.

‍Frequently Asked Questions

Can a non-profit make a profit in Canada?

Yes, non-profits can generate surplus revenue, but it must be used to further the organization's mission, not distributed to members or directors.

Do non-profit board members pay taxes on their involvement?

Board members typically serve as volunteers and don't receive taxable income. If they're paid (which is uncommon), that income is taxable.

How much can a non-profit make before paying taxes?

There's no specific revenue limit. The key is that income must be used for the non-profit's stated purpose, not for private benefit.

Do religious organizations pay taxes in Canada?

Most religious organizations operate as registered charities and are exempt from income tax. They may still pay GST/HST and payroll taxes.

What's the difference between tax-exempt and tax-deductible?

Tax-exempt means the organization doesn't pay tax. Tax-deductible means donors can claim donations on their personal taxes (only possible with registered charities).

Do I need an accountant for my non-profit?

While not legally required, having an accountant familiar with non-profit tax rules is highly recommended to ensure compliance.