Misunderstandings of Charitable Receipting for Canadian Registered Charities

Did you know that, according to the Canada Revenue Agency (CRA), 89% of charities are not issuing receipts properly? Receipting is likely to be the top reason why Canadian registered charities get their charitable status withdrawn after their audits. The ability to issue “official donation receipts” is the most important benefit to Canadian registered charities and donees, therefore it is important that qualified donees are compliant with the Income Tax Act and CRA.

There are a few misconceptions amongst charities about receipting, and they are as follows:

  1. If a gift is made to the charity, then the charity has to issue a tax receipt. FALSE! It is not mandatory to issue charitable receipts.
  2. If someone makes a donation to the charity and you do not issue a receipt, you can spend the money as you like. This is also FALSE! Regardless of whether a receipt has been issued, charities can only spend funds in accordance with their objects, subject to the legislation, common law, and CRA’s guidance.

The following are useful tips on how to ensure you are on the right track when it comes to charitable receipting:


Understand the Income Tax Act’s definition of a ‘gift’

In order for funds or gifts in kind to be defined as a ‘gift’ to a registered charity, and be receiptable, it must be:

  1. Voluntary
  2. A complete transfer
  3. Property
  4. Have donative intent on the part of the donor

If one of these elements is missing, there is no gift, therefore no receipt should be issued.


Know the types of payments that do not qualify as gifts

These are a few examples of payments that typically do not qualify as gifts:

  • Payment of basic fees for events or programs
  • Membership fees that convey material value to the donor
  • Any payment for lottery tickets
  • Payment of tuition fees (there are a few exceptions to this)
  • Business sponsorship


Ensure all required information is on your official donation receipts

If any information is missing that is required on your receipts, then these receipts are not issued properly. This is the most common mistake, but it is the easiest to fix so make sure to double, triple check your receipts!


Understand the ‘split receipting’ rules

Charities need to confirm that the eligible amount of the gift on the receipt is correct. If the donor receives an advantage, the amount of the advantage needs to be deducted from the value of the gift. This is commonly known as ‘split receipting.


Services do not = gifts

Donations of time, skills, and effort are considered ‘services’, therefore they do not qualify as ‘gifts.’ Examples of donations of services include:

  • A professional advice by a lawyer, accountant, or other volunteers
  • A local contractor building a shed for the charity
  • Lending a piece of equipment to a charity


Find out who the donor is

You need to know who made the donation in order to give the receipt to the correct donor. If you cannot establish who the real donor is, then it is safer to not issue a receipt.


Keep copies of official donation receipts and any other records

It is required by the CRA that charities retain their copies of tax receipts for a minimum of two years from when the donations were made, while most other records are needed to be kept for seven years.


We hope this helped clarify some of the common misunderstandings with charitable receipts. Keep these tips in mind to avoid running into any issues during your audits! More information can be found at Charity Village, or you can contact us at 1-866-822-9992.