Penalties and suspensions

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Penalties and suspensions


Important notice

On June 23, 2022, Budget Implementation Act, 2022, No. 1, received Royal Assent. This change in legislation includes new rules that allow charities to make grants to non-qualified donees. As a result, some of the information on this page could change.

On December 19, 2023, following a public feedback period, the Canada Revenue Agency (CRA) posted the guidance document CG-032, Registered charities making grants to non-qualified donees. This document explains how the CRA will administer the recent changes to the Income Tax Act.

The CRA is in the process of reviewing and updating all related guidance products and web pages to ensure they are consistent with the new rules.


On this page

We may impose intermediate sanctions (financial penalties or suspensions) or proceed to revocation if a registered charity, registered Canadian amateur athletic association (RCAAA) or registered journalism organization (RJO) is involved in:

  • serious non-compliance
  • repeat or multiple infractions
  • other breaches of the Income Tax Act that cannot appropriately be addressed through other corrective measures

You can find these sanctions in Part V of the Income Tax Act.


Note


If a registered charity, RCAAA or RJO fails to file its annual information return, we will proceed directly to revocation.

If you want to find the names of registered charities, RCAAAs, or registered national arts service organizations that have received a sanction, go to List of charities and certain other qualified donees - advanced search. Then, select either “Penalized” or “Suspended” from the “Sanction” dropdown list.

If you want to find RJOs that have received a sanction, go to List of registered journalism organizations.

Intermediate sanctions by qualified donee

Infraction Charitable organization Public foundation Private foundation RCAAAs RJOs Other QDs
Carrying on any business No No Yes No No No
Carrying on an unrelated business Yes Yes No Yes No No
Control of a corporation by a charitable foundation No Yes Yes No No No
Excess corporate holdings No No Yes No No No
Conferring undue benefits Yes Yes Yes Yes No No
Failing to file an annual information return on time Yes Yes Yes Yes Yes No
Issuing official donation receipts with incorrect information Yes Yes Yes Yes Yes No
Issuing official donation receipts with false information or without receiving a gift Yes Yes Yes Yes Yes Yes
Delaying expenditures on charitable activities by starting a transaction, including making a gift to another registered charity Yes Yes Yes No No No
Receiving gifts from a non-arm’s length charity Yes Yes Yes No No No
Keeping inadequate books and records Yes Yes Yes Yes Yes Yes
Accepting a gift on behalf of a suspended qualified donee Yes Yes Yes Yes Yes Yes
Issuing an official donation receipt not in accordance with the Income Tax Act No No No No No Yes
Ineligible individual as a director, trustee, officer, or like official, or who controls or manages, directly or indirectly, the organization Yes Yes Yes Yes No No
Using resources to directly or indirectly support or oppose any political party or candidate for public office Yes Yes Yes Yes No No
Making false statements amounting to culpable conduct to maintain charitable registration Yes Yes Yes No No No
Failing to report information that is required on the annual information return Yes Yes Yes Yes Yes No

List of financial penalties

Carry on any business (private foundations only)
    Penalty for first assessment
    • 5 % of the business’ gross revenue during the fiscal period in question

      • Paragraph 188.1(1)(a)

    Penalty for subsequent assessment
    • 100% of the business’ gross revenue during the fiscal period in question.

      • Paragraph 188.1(2)(a)

    • Mandatory suspension

      • Paragraph 188.2(1)(a)

    SuspensionFootnote 1
    • Suspension triggered after penalty for subsequent assessment
    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Private foundations are not permitted to carry on any business activity.

Carry on an unrelated business
    Penalty for first assessment
    • 5 % of the unrelated business’ gross revenue during the fiscal period in question

      • Paragraph 188.1(1)(b) or Paragraph 188.1(1)(c)

    Penalty for subsequent assessment
    • 100% of the unrelated business’ gross revenue during the fiscal period in question.

      • Paragraph 188.1(2)(b) or Paragraph 188.1(2)(c)

    • Mandatory suspension

      • Paragraph 188.2(1)(a)

    SuspensionFootnote 1
    • Suspension triggered after penalty for subsequent assessment
    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Public foundations and charitable organizations are permitted to conduct business activity only if it is related to the activities the charity conducts to further its charitable purposes. Similarly, RCAAAs may conduct business activity only if it is related to their purpose.

Control of a corporation by a charitable foundation (private or public)
    Penalty for first assessment
    • 5% of the dividends received by the foundation from the controlled corporation

      • Paragraph 188.1(3)(a)

    Penalty for subsequent assessment
    • 100% of the dividends received by the foundation from the controlled corporation

      • Paragraph 188.1(3)(b)

We will only impose this sanction on charitable foundations.

Excess corporate holdings (ECH) (private foundations only)
    Penalty for first assessment
    • 5% of the result of multiplying the private foundation’s divestment obligation percentage for the fiscal period by the fair market value of all issued and outstanding shares in that class, except when there is a repeat infraction or another penalty for not disclosing, as indicated below, that applies for the fiscal period

      • Paragraph 188.1(3.1)(a)

    • If a private foundation does not report its ECH information (if applicable) as required, then the penalty rate will be 10% instead.

      • Paragraph 188.1(3.1)(b)

    Penalty for subsequent assessment
    • 10% of the result of multiplying the private foundation’s divestment obligation percentage for the fiscal period by the fair market value of all issued and outstanding shares in that class at the end of the fiscal period

      • Paragraph 188.1(3.1)(b)

We will impose this sanction on private foundations if they fail to divest specified types of shareholdings as required by the Act. For more information regarding ECH, see T2082 – Excess Corporate Holdings Regime for Private Foundations.

Information regarding the calculation of the divestment obligation percentage is provided in subsections 188.1(3.2), (3.3), (3.4) and (3.5).

Confer undue benefits
    Penalty for first assessment
    • 105% of the amount of the undue benefit conferred, unless the assessment of the penalty is a subsequent assessment

      • Paragraph 188.1(4)(a)

    Penalty for subsequent assessment
    • 110% of the unrelated business’ gross revenue during the fiscal period in question

      • Paragraph 188.1(4)(b)

    • Mandatory suspension

      • Paragraph 188.2(1)(b)

    SuspensionFootnote 1
    • Suspension triggered after penalty for subsequent assessment
    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

We cannot impose the undue benefit penalty if any of these three exclusions apply to the benefit in question. For example, if a payment is a qualifying disbursement, then it cannot be an undue benefit even if the payment was a gift to a non-qualified donee.

Failing to file an annual information return on time
    Penalty for first assessment
    • $500 penalty (assessed when an application for re-registration is made)

      • Subsection 188.1(6)

    Penalty for subsequent assessment
    • $500 penalty (assessed when an application for re-registration is made)

      • Subsection 188.1(6)

If your charity does not file an annual T3010 information return on time as required under the Act, your charity’s registration will be automatically revoked. It is our practice to limit the assessment of this sanction to qualified donees that file an application for re-registration.

Issuing official donation receipts with incorrect information
    Penalty for first assessment
    • 5% of the eligible donation amount stated on the official donation receipt

      • Subsection 188.1(7)

    Penalty for subsequent assessment
    • 10% of the eligible donation amount stated on the official donation receipt

      • Subsection 188.1(8)

The penalty described under subsection 188.1(7) cannot be applied to the same official donation receipt if either subsection 188.1(8) or 188.1(9) has been applied. Similarly, subsection 188.1(8) cannot be applied to the same official donation receipt if subsection 188.1(9) has been applied. However, we can impose an incorrect information penalty on one receipt and a false information penalty on another receipt.

Issuing official donation receipts with false information or without receiving a gift
    Penalty for first assessment
    • 125% of the eligible donation amount stated on the official donation receipt

      • Subsection 188.1(9)

    • Mandatory suspension if total false information penalties assessed exceeds $25,000 in a single taxation year

      • Subsection 188.2(1)(c)

    Penalty for subsequent assessment
    • 125% of the eligible donation amount stated on the official donation receipt

      • Subsection 188.1(9)

    • Mandatory suspension if total false information penalties assessed exceeds $25,000 in a single taxation year

      • Subsection 188.2(1)(c)

    SuspensionFootnote 1
    • Suspension triggered after penalty for subsequent assessment
    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

The penalty for providing false information is much harsher than for providing incorrect information. This is because a false information penalty applies if there is evidence of culpable conduct leading to an official donation receipt containing false information. “Culpable conduct” is defined in the Act as conduct that is intentional, shows indifference to compliance, or demonstrates a willful, reckless or wanton disregard of the law.

Additionally, the penalty for providing false information can be imposed on any person or entity involved, including non-qualified donees. For example, an authorized representative who advises a charity to issue a receipt with false information can face this penalty under subsection 188.1(9) of the Act. In such a case, the representative could also face a “third party penalty” under section 163.2 for advising the charity to issue the false receipt. Per subsection 188.1(10), the representative would be subject to whichever penalty is greater.

Delaying expenditures on charitable activities by starting a transaction, including making a gift to another registered charity
    Penalty for first assessment
    • 110% penalty on the amount of the expenditure avoided or delayed for the charities involved

      • Subsection 188.1(11)

    Penalty for subsequent assessment
    • 110% penalty on the amount of the expenditure avoided or delayed for the charities involved

      • Subsection 188.1(11)

We impose this penalty on the charity that delays expenditure on charitable activities. However, if a registered charity knowingly accepts a gift from another charity that was intended to help the donor charity avoid or delay expenditures on charitable activities, then both charities will be held jointly, severally or solidarily liable for the penalty. In other words, if the donor charity cannot pay the penalty in full or in part, the recipient charity will be liable to pay the outstanding balance of the penalty.

Receiving gifts (other than designated gifts) from a non-arm's length charity and not spending them on the charity’s own charitable activities or making qualifying disbursement through gifts to qualified donees or grants to grantee organizations
    Penalty for first assessment
    • a penalty of 110% of the amount not expended or gifted for the recipient charity

      • Subsection 188.1(12)

    Penalty for subsequent assessment
    • a penalty of 110% of the amount not expended or gifted for the recipient charity

      • Subsection 188.1(12)

To meet their disbursement quota requirements, charities that receive gifts from related charities cannot include the value of those gifts in their expenditures when calculating their disbursement quota. For example, if a charity receives $100,000 from a related charity and has a disbursement quota of $300,000, it must spend $400,000 ($300,000 + $100,000 = $400,000) on charitable activities, not just $300,000, to meet its disbursement quota.

Additionally, charities involved in transactions that trigger a penalty under subsection 188.1(12) for not using received funds appropriately could also be liable for a penalty under subsection 188.1(11) for delaying expenditures on charitable activities. For example, if Charity A gave $100,000 in cash to a non-arm’s length charity (Charity B), and then Charity B gives the $100,000 to another non-arm’s length charity (Charity C), then Charity B would be liable for penalties under both subsection 188.1(11) and 188.1(12) for its involvement in the gifting scheme.

Keeping inadequate books and records
    SuspensionFootnote 2
    • Discretionary suspension

      • Paragraph 188.2(2)(a)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Accepting a gift on behalf of a suspended qualified donee

A qualified donee cannot help a suspended qualified donee to circumvent the terms of its suspension.

    SuspensionFootnote 2
    • Discretionary suspension

      • Subsection 188.2(2)(b)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Issuing an official donation receipt not in accordance with the Income Tax Act

A suspension for this infraction can only be imposed on:

  • low-cost housing corporations for the aged
  • municipalities in Canada
  • municipal or public bodies performing a function of government in Canada
  • universities outside Canada
  • foreign charities that have received a gift from His Majesty in right of Canada
    SuspensionFootnote 2
    • Discretionary suspension

      • Paragraph 188.2(2)(c)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Ineligible individual as a director, trustee, officer, or like official, or who controls or manages, directly or indirectly, the organization

A suspension for this infraction can only be imposed on registered charities and RCAAAs.

    SuspensionFootnote 2
    • Discretionary suspension

      • Paragraph 188.2(2)(d)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Using resources to directly or indirectly support or oppose any political party or candidate for public office

A suspension for this infraction can only be imposed on registered charities and RCAAAs.

    SuspensionFootnote 2
    • Discretionary suspension

      • Paragraph 188.2(2)(e)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Making false statements amounting to culpable conduct to maintain charitable registration

A suspension for this infraction can only be imposed on registered charities.

    SuspensionFootnote 2
    • Discretionary suspension

      • Paragraph 188.2(2)(f)

    • Duration: 1 year, starting 7 days after the notice of suspension is mailed

Failing to report information that is required in the information return

A suspension for this infraction can only be imposed on registered charities, RCAAAs, and RJOs.

    SuspensionFootnote 3
    • Discretionary suspension

      • Subsection 188.2(2.1)

    • Duration: indefinite, starting 7 days after the notice of suspension is mailed

We will lift this suspension only after the charity has provided us with the required information.


Note


Financial penalties for subsequent assessments are often more severe and may include suspensions. These penalties and suspensions are imposed only if the CRA has assessed the same type of penalty multiple times within a five-year period due to multiple compliance actions such as audits. In other words, only the assessments, and not the infractions themselves, have to occur within a five-year period.

For example, if we assessed an undue benefit penalty against a registered charity under paragraph 188.1(4)(a) or 188.1(4)(b) of the Act in 2018 and again in 2022, regardless of the years involved, the CRA would assess the 2022 penalty at the rate for subsequent assessments as prescribed in paragraph 188.1(4)(b) in 2022. Additionally, as a result of assessing a penalty under paragraph 188.1(4)(b), the registered charity would also be suspended under paragraph 188.2(1)(b) of the Act.


Footnote 1

Under subsection 188.2(1) of the Income Tax Act, three mandatory suspensions must be imposed if certain conditions are met. For example, if we impose an undue benefit penalty on a charity for the second time in a five-year period, then the charity is penalized under paragraph 188.1(4)(b) of the Act. Consequently, we are required to suspend the charity for one year according to paragraph 188.2(1)(b).

Return to footnote1 referrer

Footnote 2

Some of the suspensions listed above apply only to certain types of qualified donees. For example, only registered charities can be suspended under paragraph 188.2(2)(f). Also, if we suspend a qualified donee for multiple reasons, such as both under paragraphs 188.2(2)(a) and 188.2(2)(c) of the Act, the suspensions are not cumulative. This means that if two one-year suspensions are imposed simultaneously on a single qualified donee, the total suspension period remains one year.

Suspension for these infractions is at our discretion. As we use a risk-based approach to promote and address compliance, we aim to rectify non-compliance using interventions such as education letters and telephone calls to charities.

Return to footnote2 referrer

Footnote 3

Suspension for this infraction remains at our discretion. We can impose a suspension if a registered charity, RCAAA, or RJO fails to include mandatory information in its annual information return. This suspension is indefinite and will only be lifted once we receive the mandatory information. However, if a charity is suspended under both subsection 188.2(2.1) and another provision of the Act, such as paragraph 188.2(1)(c) (which entails a one-year suspension), the charity will remain suspended for the full year, even if it provides the mandatory information to resolve the subsection 188.2(2.1) suspension before the end of the one-year period.

Return to footnote3 referrer


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Date modified:
2025-02-19