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.
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.
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.
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.
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.
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:
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)
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)
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.
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.
The issued receipts can be made periodically or in a cumulative receipt for the year for cash donations. For non-cash donations, a separate receipt must be issued when the non-cash donations are made on different dates, as the fair market value of an item is for a particular date.
How Should Charities Store Donation Receipts?
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.
What Happens If a Charity Doesn’t Follow CRA Rules?
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
ITA Requirements for Official Donation Receipts
In regards to the contents of the official donation receipt itself, the CRA outlines guidelines as to what should be included on the receipt which will be outlined below. There are different requirements for official donation receipts for cash gifts and non-cash gifts.
A proper donation receipt must contain specific information to be valid. Here is what the CRA requires:
Mandatory Information for Cash Donations
Official Donation Receipts Cash gifts must include the following:
- A statement that it is an official receipt for income tax purposes
- The name and address of the charity as on file with the Canada Revenue Agency (CRA)
- A unique serial number
- The registration number issued by the CRA
- The location where the receipt was issued (city, town, municipality)
- The date or year the gift was received
- The date the receipt was issued
- The full name, including middle initial, and address of the donor
- The amount of the gift
- The amount and description of any advantage received by the donor
- The eligible amount of the gift
- The signature of an individual authorized by the charity to acknowledge gifts
- The name and website address of the CRA
Mandatory Information for Non-Cash Donations
Official Donation Receipts Non-cash gifts must include the following:
- The date the gift was received (if not already included)
- A brief description of the gift received by the charity
- The name and address of the appraiser (if the gift was appraised)
Important Update: These mandatory elements may change over the next few months if the proposal by the Federal Government in their 2024 Budget is passed. In that case, the place of issuance of the receipt, the name and address of the appraiser and the middle initial of the donor will then not be required.
Looking to understand whether Canadian charities can issue donation receipts for service gifts?
Explore our full guide on official donation receipts for service gifts.
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.
Need Expert Guidance on Donation Receipts?
Navigating charity law and donation receipt requirements can be complex. If you have questions about your organization’s receipting practices or need assistance ensuring CRA compliance, Northfield & Associates is here to help.
Our experienced charity law team can review your current receipting procedures, help you establish compliant policies, and provide ongoing support to protect your charitable status.
Frequently Asked Questions
Common questions about official donation receipts in Canada, with practical answers for charities and donors.
Who can issue donation receipts in Canada?
Only qualified donees registered with the CRA can issue official donation receipts. This includes registered charities, registered journalism organizations, and registered Canadian municipal or public bodies. Regular nonprofits that aren’t registered charities cannot issue tax receipts.
How to generate a donation receipt?
Use the CRA’s sample receipt templates and include all mandatory information: charity name and registration details, donor information, gift amounts, and authorized signature. For non-cash gifts, add gift descriptions and appraiser details if the item was professionally valued.
How do charitable donations work in Canada?
When you donate to a registered charity, you receive an official receipt that allows you to claim a charitable donation tax credit on your tax return. This credit reduces your taxes owed and can be carried forward for up to five years if not fully used.
How to write a receipt in Canada?
Follow CRA requirements by including “Official receipt for income tax purposes,” your charity’s registered name and address, registration number, unique serial number, donation details, and authorized signature. Use the CRA’s official sample templates to ensure compliance.
What legally needs to be on a receipt in Canada?
Cash donations require 13 mandatory elements including charity details, registration number, donor’s full name and address, gift amount, any advantages received, eligible amount, and CRA website. Non-cash gifts need additional description and appraiser information if applicable.
Disclaimer: The information contained in this article is provided for general information purposes only and does not constitute legal or other professional advice. Readers should seek tailored legal advice in relation to their personal circumstances.
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