Non-Profit Organizations

A non-profit organization, as defined by the Income Tax Act is "a club, society, or association that is organized and operated solely for: social welfare; civic improvement; pleasure or recreation; or any other purpose except profit."

A non-profit organization is similar to a charitable organization in that it is exempt from paying tax on most types of income. However, it differs from a charity in several respects:

• It cannot issue receipts for income tax purposes
  
  
• It is not required to disburse a certain percentage of its revenues
  
  
• It does not have to register either federally or provincially to maintain its privileged tax status.
  
  

A non-profit is generally required to submit a Non-Profit Organization Information Return (T1044) to Canada Customs and Revenue Agency (CCRA) within six months of its fiscal year end. Failure to do so may result in penalties and interest. A non-profit may be audited by CCRA, so financial records and returns should always be kept for at least six years from the end of the fiscal year to which they relate.

For detailed information on non-profit organizations, link to Canada Customs and Revenue Agency.

Test your understanding of registered charities and non-profit organizations.

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