What Is the De Minimis Rule and How Does It Affect Canadian Charities?

If you run a charity or nonprofit in Canada, you may have come across the term “de minimis rule.” It might sound like a fancy legal phrase, but understanding this rule is important, especially when issuing donation receipts or accepting gifts. In this blog, we’ll break it down in a simple way using real examples that apply to your charity’s day-to-day work.

What Is the Meaning of the De Minimis Rule?

Let’s start with the basics.

The term “de minimis” is Latin. It means something so small or minor that it doesn’t need to be considered. In the world of charities, it’s used to describe small benefits that don’t affect whether a donation is eligible for a tax receipt.

For example, if someone donates $100 to your charity and you give them a thank-you mug worth $7, they’re still allowed to receive a donation receipt for almost the full amount. Why? Because the value of the mug is considered de minimis, too small to matter.

How the De Minimis Rule Works in Canada

So, what is the de minimis rule in Canada? According to the Canada Revenue Agency (CRA), the de minimis rule applies when a donor receives something in return for their donation, but that item is of very low value.

Here’s the rule in action:

• If a benefit like a free gift or meal is worth less than 10% of the donation, or $75 or less, and is considered of "nominal value," then your charity doesn’t have to deduct it from the donation amount when issuing a tax receipt.

This is known as the de minimis threshold.

But if the gift is worth more than 10% or over $75, then the value of that benefit must be deducted from the donation when calculating the eligible amount for the donation receipt. This is part of the CRA’s split receipting rules.

Example:

• Donation: $300
• Thank-you gift: A tote bag worth $20
• Is it de minimis? 10% of $300 is $30. The tote bag is under that, so yes.
• Result: You can issue a receipt for the full $300.

But if the tote bag was worth $40, it wouldn’t qualify, and the charity would need to issue a receipt for $260 instead.

Why Does the De Minimis Rule Matter for Charities?

For Canadian charities, following this rule is essential for staying compliant with CRA regulations. Giving incorrect receipts, even by accident, can lead to audits or penalties.

The de minimis rule is helpful because it makes things simpler. You don’t have to worry about subtracting every little thank-you gift from a receipt. It also helps donors feel appreciated without creating extra paperwork.

What Is the De Minimis Exemption Rule?

The de minimis exemption rule is part of the CRA’s guidance on receipting. It allows charities to exempt certain small benefits from being deducted on receipts. In short, if the item is:

• Under $75
• Under 10% of the donation value
• Of nominal value (not a high-end gift)

Then you don’t need to subtract it. That’s the exemption. But if any one of those conditions isn’t met, the exemption doesn’t apply.

Keep It Simple But Stay Compliant

The de minimis rule makes life easier for Canadian charities. It allows you to say thank you to your donors without stressing over every small gift. But make sure you understand the limits and when the exemption applies.

If you’re ever unsure, check the CRA’s guidelines or talk to a charity lawyer or accountant. A simple mistake on a donation receipt can lead to big headaches later.

Key Takeaways:

• The de minimis rule means small benefits don’t reduce the donation receipt.
• It applies when the gift is under $75 and under 10% of the donation.
• Always keep records, and when in doubt, ask for professional help.

Need help with charity compliance in Canada? Our team can help you stay on track with CRA rules and issue proper donation receipts. Reach out anytime. We’re here to support your mission.

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