Municipality status for non-profit organizations and charities under the GST system
Under the GST system, non-profit organizations and charities may be designated to be a municipality for certain municipal services they provide, but only for the activities specified in the designation.
Such activities may include the supply of long-term rental housing (where the housing units include a kitchen and a bathroom) on a rent-geared-to-income basis, provided the non-profit organization or charity carrying out this activity receives assistance from a government or a municipality to subsidize such housing. This activity must also be undertaken within a program to provide housing to low-to-moderate-income households.
To qualify for the designation, housing must be the only service included in the supply of long-term rental housing. If other services, such as meals, personal care, psychologists, laundry and cleaning are included, the non-profit organization or charity cannot be designated to be a municipality.
Over the past few years, certain organizations have been designated to be municipalities by Revenu Québec even though they supplied long-term rental housing that included meals or other services. These organizations do not meet municipal designation requirements. Therefore, they do not qualify for the 100% rebate of the GST paid on their purchases related to long-term rental housing.
Non-profit organizations and charities that have been designated to be a municipality and that supply long-term rental housing that includes meals or other services may apply to cancel their designation with Revenu Québec. Even if a charity does not apply for cancellation, it is still only entitled to a 50% rebate of the GST paid on purchases related to such an activity. In the case of a non-profit organization that does not apply for cancellation, the 50% rebate of the GST paid on purchases related to such an activity is granted only if its public funding is at least 40%.
An organization that claims the 100% rebate of the GST paid or payable after December 31, 2009, but does not meet the requirements to be designated to be a municipality may have to remit the GST rebates granted by Revenu Québec.
Under the QST system, non-profit organizations and charities that supply long-term rental housing do not need to be designated to be a municipality, as the municipal rebate has been eliminated. However, such organizations are entitled to a 50% rebate of the QST paid on purchases related to this activity. In the case of a non-profit organization, its public funding must be at least 40%.