What is the difference between a charity, a designated municipality and qualifying non-profit organization?

For GST purposes, you have charity status only if you are a registered charity, with a registration number issued by the Canada Revenue Agency, and can issue official income tax receipts for donations. Charities are eligible to claim a 50% rebate of the GST paid on purchases, regardless of whether you are registered or not, when the GST cannot be recovered through input tax credits or a larger municipal rebate (see next section below).

Under GST legislation, the Canada Revenue Agency may grant municipal status to a housing provider who provides rent-geared-to-income (RGI) housing. This status allows you to claim a rebate of 100% of the GST paid on expenses incurred in providing this housing, if an input tax credit cannot be claimed. (Purchases made prior to February 2004 are eligible for a rebate of 57.14%.) You must apply for municipality status, and the CRA will determine whether your organization meets the criteria for municipal designation.

To be a qualifying non-profit organization, you must receive at least 40% of total revenues from government funding. You can then claim a rebate of 50% of the GST paid on purchases, if input tax credits or a larger municipal rebate cannot be claimed.

Refer to chapter two of the GST Guide for Social Housing Providers for more information.