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Registered charity vs. non-profit organization

Registered charities are often referred to as non-profit organizations (NPOs). However, while both types of organizations operate on a non-profit basis, the two types are defined differently under the Income Tax Act.

Topics Registered charity NPO
Purposes
  • must be established and operate exclusively for charitable purposes
  • can operate for social welfare, civic improvement, pleasure, sport, recreation, or any other purpose except profit
  • cannot operate exclusively for charitable purposes
Registration
  • must apply to the Canada Revenue Agency (CRA) and be approved for registration as a charity
  • no registration process for income tax purposes
Charitable registration number
  • is not issued a charitable registration number
Tax receipts
  • can issue official donation receipts for income tax purposes
  • cannot issue official donation receipts for income tax purposes
Spending requirement (disbursement quota)
  • must spend a minimum amount on its own charitable activities or as gifts to qualified donees
  • not applicable
Designation
  • is designated by the CRA as a charitable organization, a public foundation, or a private foundation
  • does not receive a designation
Returns
  • must file an annual information return (Form T3010) within six months of its fiscal period end
  • may have to file a T2 return (if incorporated), and/or an information return (Form T1044) within six months of its fiscal period end
Personal benefits to members
  • cannot use its income to personally benefit its members
  • cannot use its income to personally benefit its members
Tax exempt status
  • is exempt from paying income tax
  • is generally exempt from paying income tax
  • may be taxable on property income or on capital gains

Examples of registered charities

Examples under the four categories of charity generally include:

  • relief of poverty (food banks, soup kitchens, low-cost housing units)
  • advancement of education (colleges, universities, research institutes)
  • advancement of religion (places of worship, missionary organizations) 
  • purposes beneficial to the community (animal shelters, libraries, volunteer fire departments)

Note
A charity must apply for charitable registration with the CRA if the charity wants to become exempt from paying income tax and/or to issue official donation receipts. Meeting the definition of a ‘charity' (without registration) does not qualify an organization for these advantages.

Examples of non-profit organizations

Generally these include:

  • social, recreational or hobby groups (bridge clubs, curling clubs, golf clubs)
  • certain amateur sports organizations (hockey associations, baseball leagues, soccer leagues)
  • certain festival organizations (parades, seasonal celebrations)

Note
If an organization meets the definition of a ‘charity', it cannot be considered a non-profit organization under the Income Tax Act, even if the organization is not registered or cannot be registered as a charity. An organization may meet one definition or the other, but not both.

The CRA tax services offices are responsible for determining if an organization qualifies for tax-exempt status as a non-profit organization.

References

IT-496R, Non-profit organizations

 

Date Modified: 2009-04-22

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