Donation Receipts – Getting Them Right: A Complete Guide by a Montreal CPA Firm Near You

Introduction

Issuing official donation receipts is one of the most important responsibilities of a registered charity in Canada. These receipts give donors the ability to claim charitable donation tax credits, often reducing their tax bills significantly. However, CRA applies strict rules to what qualifies as a valid receipt. Even minor errors—missing information, incorrect amounts, improper dates, or issuing receipts to someone who did not actually donate—can lead to CRA denying a donor’s claim or imposing penalties on the charity. In serious cases, improper receipting can lead to suspension of receipting privileges or revocation of charitable status. This guide explains exactly how to issue compliant receipts and avoid CRA problems.

Legal and Regulatory Framework

Donation receipting rules are governed by section 118.1 of the Income Tax Act and CRA’s Guidance CG-013: Receipting Practices for Registered Charities. Only registered charities and certain qualified donees can issue official donation receipts. Receipts must include every element required by CRA; otherwise, they are invalid. Receipts may be issued for: cash gifts, gifts in kind (property), marketable securities, and certain bequests. Charities must maintain proper books and records supporting all receipts, including proof of payment and valuation documentation for non-cash gifts.

Key Court Decisions

In Kossow v. Canada, the Tax Court denied donation credits due to improper valuation and failure to meet gift requirements. In Maréchaux v. Canada, the court rejected a donation scheme because no true “gift” occurred—reinforcing that receipts must reflect genuine voluntary transfers. In Prescient Foundation v. Canada, CRA revoked a charity’s status due to improper receipting practices, including inflated receipts. These cases highlight that CRA scrutinizes receipting closely and expects strict compliance.

Information Required on an Official Donation Receipt

CRA requires each receipt to contain: the charity’s name and address, charity registration number (BN/Registration ID), a unique serial number, donor’s full legal name, date of donation, date receipt was issued, amount of the donation (or fair market value of donated property), description of property for gifts in kind, name/signature of authorized representative, statement that it is an official donation receipt for income tax purposes, and website link to CRA’s charities listing. Donations in the form of securities must also show details such as the name of the security, exchange, and fair market value on the date of donation.

When Not to Issue a Receipt

Charities must not issue receipts for: services (volunteer time is not a gift), payments where a benefit is received, sponsorships that are actually advertising or business benefit, gifts directed to specific individuals (unless qualifying under CRA rules), fundraiser ticket purchases where a benefit is received (unless advantage is calculated), and payments for fees, rent, or facility use. CRA’s “advantage” rules require subtracting any benefit a donor receives from the receipted amount.

Split-Receipting Rules

If a donor receives a benefit—such as a dinner, event ticket, or merchandise—CRA requires “split receipting.” The eligible amount is: Fair market value of donation minus fair market value of advantage received. If the advantage exceeds 80% of the donation, no receipt can be issued.

Gifts in Kind

For non-cash gifts, the charity must establish and document the fair market value. For items valued over $1,000, an independent appraisal is strongly recommended (and often required). Common gifts in kind include artwork, equipment, real estate, collectibles, and donated inventory. Importantly, gifts of services do not qualify as gifts in kind.

Record-Keeping Requirements

Charities must: retain copies of all receipts, maintain proof of payment, maintain appraisal reports for gifts in kind, track voided or spoiled receipts, ensure sequential numbering of receipts, and securely store electronic receipting systems. CRA can audit charities at any time and request full supporting documentation, often going back many years.

Penalties for Improper Receipts

CRA may impose: penalties equal to 5%–10% of receipted amounts, suspensions of receipting privileges for repeated issues, and revocation of charitable status in extreme cases such as issuing false receipts or participating in donation schemes. Failure to maintain proper books and records can also lead to deregistration.

Mackisen Strategy

At Mackisen CPA Montreal, we help charities strengthen their compliance by reviewing receipting procedures, training staff and boards on CRA rules, establishing internal controls, verifying gift eligibility, calculating split receipting, reviewing fair market value documentation, and preparing for CRA audits. We also support registrants in correcting past receipting errors and building long-term compliance systems that meet CRA’s strict expectations.

Real Client Experience

A charity that issued receipts without complete donor names faced CRA audit; we helped them reconstruct records and avoid penalties. A cultural organization improperly receipting donated services corrected its practices after our compliance review. A charity hosting a gala event avoided CRA issues by implementing split-receipting rules and receiving our support in calculating advantages. A foundation that issued receipts for directed gifts to individuals faced CRA sanctions; we restructured their giving process and restored compliance.

Common Questions

Can a charity issue receipts for volunteer work? No—services are not eligible. Can receipts be electronic? Yes—provided all CRA-required information is included. Are receipts required for donations under $20? No, but they must be issued if the donor requests one. Can a charity receipt a payment for which the donor receives a benefit? Only under split-receipting rules.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps charities protect their status by implementing rigorous receipting practices. We ensure that your receipts are compliant, your records complete, and your organization fully prepared for CRA review.