Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 11th floor
320 Queen Street
Ottawa ON K1A 0L5
[Addressee]
Case Number: 183321
Business Number: […]
Dear [Client]:
Subject: GST/HST INTERPRETATION
[Charity] Volunteer reimbursements and allowances
Thank you for your fax of March 30, 2017, concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to reimbursements and allowances paid by a charity to its volunteers. We apologize for our delay in responding.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
We understand
1. […] (the Charity) is a registered charity for income tax purposes and is also a charity for GST/HST purposes.
2. The Charity is not registered for GST/HST purposes.
3. The Charity claims PSB rebates using account number […].
4. The Charity is resident only in New Brunswick.
5. The Charity is not a municipality, a hospital authority, a university, a public college, a school authority, a facility operator, or an external supplier.
6. Volunteers of the Charity incur expenses in relation to the activities of the Charity. The volunteers submit expense reports with receipts attached for mileage travelled and purchases made to carry out the Charity’s charitable purposes.
7. Some volunteers prefer to be reimbursed by cheque, while others prefer to donate these expenses to the Charity and receive an official donation receipt at year end for income tax purposes.
INTERPRETATION REQUESTED
You would like to know whether the Charity can claim a public service bodies’ (PSB) rebate in the following circumstances:
1. When the Charity reimburses a volunteer for their expenses;
2. When the Charity pays an allowance to a volunteer, such as an allowance for mileage travelled;
3. When the Charity pays a reimbursement or an allowance to a volunteer, but the volunteer later returns the payment to the Charity (for example, by an exchange of cheques); and
4. When a volunteer donates their expenses to the Charity (that is, as a gift-in-kind), rather than receiving a reimbursement and the Charity issues an official donation receipt.
INTERPRETATION GIVEN
PSB rebate
The Charity is entitled to a 50% PSB rebate of the GST and the federal part of the HST paid or payable on eligible purchases and expenses. As a charity resident only in New Brunswick, the Charity is also entitled to a 50% PSB rebate of the provincial part of the HST. For more information, see Guide RC4034, GST/HST Public Service Bodies Rebate, and GST/HST Info Sheet GI-173, Public Service Bodies' Rebate for Charities Resident Only in New Brunswick.
The PSB rebate is calculated based on the “non-creditable tax charged” in respect of property or a service for a claim period. For more information, see GST/HST Memorandum 13.5, Non-creditable Tax Charged.
Interpretation #1 – Can the Charity claim a PSB rebate when the Charity reimburses a volunteer for their expenses?
A reimbursement is a payment made by one person to repay another person for amounts spent. An amount constitutes a reimbursement where the amount is fully accounted for by the person receiving the payment (that is, evidenced by supporting vouchers or records).
Section 175 enables a charity to claim a PSB rebate in respect of an amount reimbursed to a volunteer for the acquisition, importation or bringing into a participating province of property or services for consumption or use in relation to the activities of the charity. When the conditions under section 175 are met, the charity is deemed to have received a supply of the property or service and to have paid the GST/HST in respect of the supply at the time the reimbursement is paid.
Section 175 will apply in this situation where the following conditions are met:
- the Charity pays an amount as a reimbursement to a volunteer who gives services to the Charity;
- the property or service acquired, imported or brought into a participating province by the volunteer must be for consumption or use in relation to the Charity’s activities; and
- the volunteer must have paid the GST/HST payable on the acquisition, importation or bringing into a participating province of the property or services.
For more information on how to calculate the tax deemed to have paid under section 175, see GST/HST Memorandum 9.4, Reimbursements.
The GST/HST deemed to have been paid under section 175 is included when calculating the non-creditable tax charged in respect of the property of service for the claim period. Therefore, if all the conditions of section 175 are met, the Charity would be able to claim a PSB rebate in respect of the reimbursed expense.
If the volunteer was acting as an agent for the Charity at the time the volunteer acquired, imported or brought into a participating province property or services, section 175 does not apply to the reimbursement. Instead, as the Charity would be considered to be the recipient of the supply, the usual rules for determining whether the Charity was eligible to claim PSB rebates would apply. For more information on when a person is an agent of another person, see GST/HST Info Sheet GI-012, Agents.
Interpretation #2 – Can the Charity claim a PSB rebate when it pays an allowance to a volunteer?
Section 174 may apply to an allowance paid by a charity to a volunteer, such as a reasonable per-kilometre allowance paid for the use of a motor vehicle. Section 174 enables a charity to claim a PSB rebate in respect of allowances paid for certain expenses to the same extent as would have been the case had the charity incurred the expense directly. When the conditions under section 174 are met, the charity is deemed to have paid the GST/HST in respect of the supply acquired by the volunteer and any consumption or use of the property or services is deemed to be consumption or use by the charity and not by the volunteer.
Section 174 will apply in this situation where the following conditions are met:
- The Charity pays an allowance to a volunteer who gives services to the Charity;
- The allowance is paid to the volunteer for:
- supplies of property or services all or substantially all (90% or more) of which are taxable supplies (other than zero-rated supplies) acquired in Canada by the volunteer in relation to the Charity’s activities; or
- the use of a motor vehicle in Canada in relation to the Charity’s activities;
- An amount in respect of the allowance is deductible by the Charity for income tax purposes, or would be deductible if the Charity were a taxpayer under the Income Tax Act and the activity were a business; and
- In the case of certain travel and motor vehicle allowances, the Charity must ensure that
- the allowance is reasonable for income tax purposes; and
- at the time the allowance was paid, the person considered it to be a reasonable allowance, and it was reasonable for the person to have considered it to be a reasonable allowance for income tax purposes.
For more information on how to calculate the tax deemed to have paid under section 174, see GST/HST Memorandum 9.3, Allowances.
The GST/HST deemed to have been paid under section 174 is included when calculating the non-creditable tax charged in respect of the property of service for the claim period. Therefore, if all the conditions of section 174 are met, the Charity would be able to claim a PSB rebate in respect of the allowance.
Interpretation #3 – Can the Charity claim a PSB rebate when the Charity pays a reimbursement or an allowance to a volunteer, but the volunteer later returns the payment to the Charity (for example, by an exchange of cheques)?
The payment of the reimbursement or the allowance by the Charity and the later donation of all or part of this amount back to the Charity are two separate transactions for GST/HST purposes. If all the conditions of section 175 or section 174 are met, the tax deemed to have been paid is included in the calculation of the non-creditable tax charged in respect of the property or service for the claim period. Therefore, the Charity would be able to claim a PSB rebate in respect of the reimbursed expense or allowance. The fact that the volunteer later donates all or a part of the payment back to the Charity does not impact the Charity’s PSB rebate entitlement.
Interpretation #4 – Can the Charity claim a PSB rebate when a volunteer donates their expenses to the Charity (that is, as a gift-in kind), rather than receiving a reimbursement and the Charity issues an official donation receipt?
For section 175 to apply, the Charity must pay an amount to the volunteer as a reimbursement. In this situation, the Charity does not actually pay an amount to the volunteer. Rather, the volunteer donates their right to reimbursement to the Charity as a gift-in-kind. Therefore, section 175 does not apply and the Charity cannot claim a PSB rebate in respect of the expense in this situation.
If the volunteer acquired a taxable supply as the Charity’s agent, the Charity is considered to be the recipient of the supply. Therefore, the Charity may be able to claim a PSB rebate of the GST/HST paid or payable on that supply in accordance with the usual rules.
Whether a registered charity can issue an official donation receipt for income tax purposes is the responsibility of the Charities Directorate. The telephone number to reach a client services representative at the Charities Directorate is 1-800-267-2384.
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the Canada Revenue Agency (CRA) with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-670-7942. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Yours truly,
Heather Reardon
Charities and Non-Profit Organizations Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Email this Content