How to Manage GST/QST for Non-Profit Organizations and Charities

Introduction
Managing GST (Goods and Services Tax) and QST (Quebec Sales Tax) can be complex for non-profit organizations (NPOs) and charities in Quebec. While these organizations often enjoy special exemptions or rebates, they are still subject to strict rules on registration, collection, and recovery. Understanding when to charge GST/QST, when to claim rebates, and how to file correctly is critical to staying compliant with both the Canada Revenue Agency (CRA) and Revenu Québec (ARQ).

At Mackisen CPA Montreal, we have over 35 years of combined CPA and legal experience guiding non-profits and registered charities through the nuances of tax law. This guide explains how GST/QST applies to NPOs and charities, what rebates are available, and how to manage your compliance with confidence.

Legal and Regulatory Framework
The GST/QST rules for charities and NPOs are established under both federal and provincial legislation:

• Excise Tax Act (Canada) s.123(1) — defines “charity” and “non-profit organization.”

• Excise Tax Act s.225(1) — outlines GST/HST filing and reporting obligations.

• Taxation Act (Quebec) s.407 — governs QST collection and filing obligations for Quebec entities.

• Tax Administration Act (Quebec) s.59(3) — imposes interest and penalties for late filings.

• Public Service Bodies’ Rebate (PSB Rebate) — allows charities and NPOs to recover a portion of GST and QST paid on purchases.

Charities and NPOs are treated differently from businesses: instead of claiming Input Tax Credits (ITCs) or Input Tax Refunds (ITRs), they usually recover GST/QST through the Public Service Bodies’ Rebate (Form GST66 / VD-403).

Step-by-Step: How to Manage GST/QST for Non-Profits and Charities

1. Determine Your Organization Type

   • Charity: Registered under the Income Tax Act (Canada) with a charitable registration number.

   • Non-Profit Organization (NPO): Operates exclusively for social welfare, civic improvement, or cultural purposes but is not registered as a charity.
     The classification determines your rebate rate and filing obligations.

2. Determine Whether You Must Register for GST/QST

   • Charities and NPOs are not automatically exempt from registration.

   • If your taxable revenues from commercial activities exceed $50,000 annually, you must register and collect GST/QST.

   • Even below that threshold, voluntary registration may be advantageous if you regularly charge fees or sell goods/services.

3. File for GST/QST Registration (If Applicable)

   • Register with CRA’s Business Registration Online for GST/HST.

   • Register with Revenu Québec’s Mon Dossier for QST.

   • Keep registration confirmations and include your numbers on all invoices where taxes apply.

4. Charge GST/QST on Taxable Activities

   • Most fundraising, membership fees, and grants are exempt from GST/QST.

   • However, commercial activities such as sales, rentals, or service fees may require tax collection.

   • Determine taxable vs. exempt supplies before billing.

5. Claim the Public Service Bodies’ (PSB) Rebate

   • Instead of ITCs or ITRs, charities and NPOs claim a rebate on GST and QST paid on eligible expenses.

   • File:

     • CRA Form GST66 for the federal portion.

     • Revenu Québec Form VD-403 for the provincial portion.

   • Rebate rates:

     • Charities: 50% of GST and 50% of QST paid.

     • Qualifying NPOs: 50% of GST and 50% of QST, if they receive significant government funding (more than 40% of total revenue).

   • File quarterly or annually, depending on activity level.

6. Maintain Proper Documentation

   • Keep all invoices, receipts, and bank proofs for purchases.

   • Ensure suppliers’ invoices display valid GST and QST numbers.

   • Retain all rebate claim forms and confirmations for at least six years under Tax Administration Act s.34.

Jurisprudence and CRA/ARQ Interpretations
Several legal precedents define how non-profits and charities must manage GST/QST:

• Canderel Ltd. v. Canada (SCC 1998) — reinforces that reported figures must reflect economic and commercial reality.

• Hickman Motors Ltd. v. Canada (SCC 1997) — taxpayers carry the burden of proof for compliance.

• Canadian Red Cross Society (CRA Ruling, 2016) — clarified that donations, grants, and membership fees do not constitute taxable supplies.

• Lac d’Amiante du Québec Ltée (SCC 2001) — confirms Revenu Québec’s right to audit records and documentation.

The message is clear: even when exempt, charities and NPOs must maintain meticulous records to defend rebate claims and demonstrate compliance.

Documentation: What to Keep for Compliance and Rebate Claims
To support GST/QST rebate or registration filings, maintain:

• CRA and Revenu Québec registration confirmations.

• Copies of GST66 and VD-403 rebate forms.

• Receipts and invoices showing QST/GST paid.

• Supplier registration verification (GST and QST numbers).

• Funding agreements, donation records, and membership fee breakdowns.

• Accounting ledgers and reconciliations.

At Mackisen CPA Montreal, we build an Audit-Ready Rebate Binder for every charity and NPO client organizing receipts, claims, and financial reports to withstand CRA or Revenu Québec review.

How CRA and Revenu Québec Review Charities and NPOs
Auditors typically examine:

• Rebate claims (GST66 / VD-403) for proper calculation.

• Classification of taxable vs. exempt activities.

• Supporting invoices for proof of taxes paid.

• Consistency between grant funding, revenues, and expense records.

• Evidence that claimed rebates correspond only to organizational (not personal) expenses.

If inconsistencies or missing documents are found, rebates can be denied or reduced.

Winning With CRA and Revenu Québec
At Mackisen CPA Montreal, we help NPOs and charities maintain compliance and maximize rebates through a proven five-step process:

1. Eligibility Review – We confirm your status and determine whether registration or exemption applies.

2. Rebate Optimization – We calculate the maximum PSB rebate your organization qualifies for.

3. Documentation Setup – We organize receipts and create a digital filing system for rebate claims.

4. Audit Representation – Our tax lawyers and CPA auditors respond to CRA and ARQ verification requests.

5. Funding Integration – We align your accounting with grant reporting to ensure compliance across all funding sources.

Mackisen Service Hub: Expert GST/QST Management for Charities and Non-Profits
Our Mackisen Service Hub provides full GST/QST support tailored to the non-profit and charitable sectors, including:

• Registration, exemption, and rebate filing.

• CRA and Revenu Québec representation.

• Audit preparation and compliance training.

• Bookkeeping and grant accounting integration.

Our bilingual professionals CPA auditors, tax lawyers, and compliance specialists are graduates of McGill, Université de Montréal, and Concordia University, bringing unmatched expertise to Quebec’s charitable sector.

Real Client Example
A Montreal-based youth charity failed to file PSB rebates for three years, losing over $42,000 in recoverable GST/QST. Mackisen CPA reconstructed their records, filed retroactive rebate claims under CRA Policy P-148 and Tax Administration Act s.94.1, and successfully recovered 100% of the missed rebates plus interest.

Why Mackisen
With more than 35 years of combined CPA and legal experience, Mackisen CPA Montreal ensures that non-profits and charities remain fully compliant while recovering every dollar of eligible GST and QST. We simplify tax administration so you can focus on your mission not the paperwork.

When you partner with Mackisen, you gain more than accountants you gain trusted advisors who safeguard your organization’s funding, credibility, and financial future.