How Can Canadian Charities Issue Official Donation Receipts?

When a charity in Canada receives a donation, it can issue an official donation receipt that allows donors to claim tax benefits. However, issuing these receipts comes with strict rules set by the Canada Revenue Agency (CRA). Failure to comply can lead to penalties or even loss of charitable status. This guide explains how Canadian charities can properly issue official donation receipts to ensure compliance with CRA regulations.

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What Is an Official Donation Receipt?

An official donation receipt is a document issued by a registered charity to confirm a donation. Donors can use this receipt to claim a tax credit when filing their income tax returns. Only charities registered with the CRA can issue these receipts—nonprofits that are not registered charities do not have this privilege.

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Who Can Issue Official Donation Receipts?

Only organizations that have been granted registered charity status by the CRA can issue official donation receipts. Other nonprofit organizations, even if they operate for a good cause, are not eligible to provide these receipts. To confirm whether an organization is a registered charity, you can check the CRA's list of registered charities.

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What Donations Qualify for Official Donation Receipts?

Not all donations are eligible for a tax receipt. The CRA defines a qualifying donation as a voluntary transfer of property made without expectation of anything in return. Here are some key points:

• Eligible Donations: Cash, publicly traded securities, real estate, and other physical property.
• Ineligible Donations: Services, gift certificates from the issuer, and loans.
• Partial Contributions: If a donor receives something in return (e.g., event tickets), only the portion exceeding the fair market value of the benefit can be receipted.

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What Information Must Be on an Official Donation Receipt?

A proper donation receipt must contain specific information to be valid. Here is what the CRA requires:

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‍Mandatory Information for Cash Donations

• Name and address of the charity as registered with the CRA
• Charity’s registration number
• Unique serial number for tracking
• Date the donation was received
• Date the receipt was issued (if different from the donation date)
• Full name and address of the donor
• Total amount of the donation
• Signature of an authorized representative of the charity
• Statement: “Official receipt for income tax purposes”
• Website address of the CRA (canada.ca/charities-giving)

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Mandatory Information for Non-Cash Donations

• Description of the donated item or property
• The fair market value of the item at the time of donation
• Name and address of the appraiser (if required)

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How to Determine Fair Market Value (FMV)

If a donor contributes a non-cash gift, the charity must determine its fair market value. The FMV is the price the item would sell for in an open market between a willing buyer and a willing seller. If the value exceeds $1,000, an independent appraiser should assess the item.

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When Should Charities Issue Donation Receipts?

Charities should issue donation receipts promptly, either at the time of the donation or by February 28 of the following year. This ensures donors can use them when filing their tax returns.

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How Should Charities Store Donation Receipts?

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Charities must keep copies of all receipts issued for at least six years in case the CRA requests them for audit purposes. They should also maintain a donation log to track each receipt issued.

Common Mistakes to Avoid

Many charities unknowingly make errors when issuing donation receipts. Some common mistakes include:

• Issuing receipts for ineligible donations, such as services or volunteer time.
• Failing to include the required information making the receipt invalid.
• Overstating the donation amount, which can trigger CRA audits.
• Not keeping proper records, leading to compliance issues.

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What Happens If a Charity Doesn’t Follow CRA Rules?

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If a charity fails to comply with CRA donation receipt rules, it may face penalties, including:

• Fines of 5% to 125% of the amount on the incorrect receipts
• Suspension of the charity’s ability to issue receipts
• Revocation of registered charity status, meaning loss of tax-exempt privileges
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Conclusion

Issuing official donation receipts is a privilege that comes with strict CRA requirements. Canadian charities must ensure they follow the correct procedures, issue receipts only for eligible donations, and include all required details. Keeping accurate records is crucial to maintaining compliance and avoiding penalties. By following these guidelines, charities can support their donors while protecting their charitable status.