What are Typical Penalties & Consequences for Charity Non-Compliance?

TL;DR: Under the Income Tax Act (ITA), the Canada Revenue Agency (CRA) responds to charity non-compliance in four escalating steps: education letters, compliance agreements, sanctions (monetary penalties under s. 188.1 and one-year receipting suspensions under s. 188.2), and revocation of registration under s. 168. Penalties range from 5% of a receipt's value for receipting errors to 125% for false receipts. Repeat breaches within five years cost more and can trigger a mandatory suspension.

If you are a treasurer, executive director or board chair who has just missed a T3010 deadline, opened a CRA audit letter, or found errors in your donation receipts, this guide shows what CRA can do and what each breach costs.

Key terms:

• Compliance agreement: a signed agreement with CRA that lists the problems, the steps your charity will take to fix them, and a deadline.
• Suspension of receipting privileges: a one-year period when your charity cannot issue official donation receipts and is not a qualified donee.
• Mandatory vs. discretionary suspension: CRA must impose a mandatory suspension when certain conditions are met. CRA may impose a discretionary suspension, depending on how serious the breach is.
• Undue benefit: any charity money or property given to a person (such as a director or donor) for something other than the charity's charitable purposes or fair value. See CRA's summary policy on undue benefits.
• Revocation tax: a tax equal to the value of the charity's remaining assets, charged if those assets are not given to eligible donees after revocation. Learn more about revocation tax and the T2046 return.
• Qualifying disbursement: a grant to an organization that is not a qualified donee, made under the accountability rules in ITA s. 149.1(1). See our explainer on CRA's guidance on grants to non-qualified donees.

How Does CRA Respond to Charity Non-Compliance?

CRA uses four tools and generally starts with the least severe one ("Guidelines for applying sanctions"):

1. Education letter: written guidance for minor, unintentional issues. No penalty.
2. Compliance agreement: a signed plan to fix the problem within a set time. If your charity breaks the agreement, CRA can impose harsher sanctions.
3. Sanctions: monetary penalties (s. 188.1), a one-year suspension of receipting privileges (s. 188.2), or both.
4. Revocation: loss of registered status (s. 168). Your charity can no longer issue receipts, loses its income tax exemption, and may owe revocation tax.

CRA does not always start at step 1. For false receipts, CRA skips compliance agreements and goes straight to sanctions or revocation.

What Penalties Apply to Each Type of Non-Compliance?

The ITA sets each penalty amount. A "repeat" means CRA assessed the same penalty within the previous five years.

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Source: CRA, "Penalties and suspensions" (modified February 19, 2025).

What Happens If Our Charity Files Its T3010 Late?

Your charity must file its T3010 within six months of its fiscal year-end (s. 149.1(14)). If CRA does not receive it, CRA issues a Notice of Intention to Revoke (Form T2051A). Your charity then has 90 days to file the return or object in writing. If it does neither, CRA issues a final notice (T2051B), and revocation takes effect when CRA publishes it in the Canada Gazette (CRA: Types of revocation).

A charity revoked for non-filing must pay a $500 penalty, file all missing returns and re-apply for registration. CRA does not guarantee re-registration. Your charity cannot issue receipts until CRA approves the new application.

What Are the Penalties for Errors on Donation Receipts?

Penalties for receipt errors depend on whether the error is careless or false. For missing or incorrect details, such as no CRA website address or a wrong charity name, CRA usually sends an education letter first. A penalty of 5% of the receipted amount applies, rising to 10% for a repeat.

False information is a different matter. Backdating a receipt, inflating the amount, or issuing a receipt when no gift was made all count. The penalty is 125% of the receipted amount. If those penalties exceed $25,000 in one taxation year, a one-year suspension is mandatory. Advisors who help prepare false receipts face separate personal penalties under ITA s. 163.2.

When Does CRA Suspend a Charity's Receipting Privileges?

A suspension is mandatory in two cases: a repeat undue-benefit or unrelated-business penalty within five years, or false-receipt penalties above $25,000 in a year (s. 188.2(1)). CRA may also suspend a charity for one year for poor books and records, an ineligible director, partisan political activity, or false statements (s. 188.2(2)). During a suspension, any gift your charity receives is not receiptable, and you must tell donors so before accepting it.

Can Grants to Non-Qualified Donees Lead to Penalties?

Yes, if the grant does not meet CRA's accountability requirements. Since June 23, 2022, charities can make "qualifying disbursements" to organizations that are not qualified donees. The rules for these grants are accountability requirements set out in CRA guidance CG-032 (issued December 19, 2023), not the older "direction and control" test. A grant that does not meet these requirements can be treated as a gift to a non-qualified donee, which is a ground for revocation. If it gives someone a private benefit, it can also bring an undue-benefit penalty. CRA often reviews granting programs during audits.

How Do We Object to a Penalty or Revocation?

You file a notice of objection within 90 days of the CRA notice. The CRA Appeals Branch reviews the objection, separate from the Charities Directorate. If the objection is not resolved, appeals of penalties and suspensions go to the Tax Court of Canada. Appeals of revocation go to the Federal Court of Appeal (s. 172(3)). Send supporting documents early, because the record you build at objection is the record the court will see. For more, see what recourse charities have after an audit.

Frequently Asked Questions

What happens if our charity files its T3010 late?

CRA sends a T2051A notice, and you have 90 days to file or object. After that, CRA revokes registration and you must pay $500 and re-apply.

Can CRA suspend our ability to issue donation receipts?

Yes. Under ITA s. 188.2, CRA can suspend receipting privileges for one year. Some suspensions are mandatory, others discretionary.

What triggers a mandatory one-year suspension?

A repeat undue-benefit or unrelated-business penalty within five years, or false-receipt penalties over $25,000 in one taxation year.

How long do we have to object to a CRA penalty or revocation?

90 days from the date of the CRA notice. File the objection with the CRA Appeals Branch.

What happens to our charity's assets if registration is revoked?

Your charity owes revocation tax equal to its remaining assets (s. 188(1)). It can reduce that tax by transferring the assets to eligible donees within one year and filing Form T2046.

Can an advisor be personally penalized for helping issue false receipts?

Yes. ITA s. 163.2 imposes separate civil penalties on third parties who help prepare false statements, including false receipts.

Stay Ahead of a CRA Audit

Each penalty above can be avoided with three habits. File the T3010 on time (our sister firm, B.I.G. Charity Accounting Firm, handles T3010 filings for charities), keep receipts and records that match the ITA requirements, and document every grant to a non-qualified donee under CG-032. If your charity has received a T2051A notice, an audit letter or a proposed sanction, book a free call with B.I.G. Charity Law Group. We will review your position before the 90-day window closes.

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