What is the Difference Between a Charity and a Not-for-Profit Corporation?
While most charities are incorporated as Not-for-Profits, most NFPs are not necessarily registered charities.
The two are defined differently under the Income Tax Act, as follows:
Tax Receipts: Charities may issue official donation receipts for income tax purposes; Not-for-Profits may not issue tax receipts.
Tax Exempt: Registered charities are tax exempt. Non-profits are exempt from paying income tax, but may be taxable on property income and capital gains.
Tax Return: Charities must file form t3010 with 6 months of their fiscal period end. Not-for-Profits however must file a T2 return, also within 6 months of their fiscal year end.
Registration: Charities must apply to the CRA-Charities Directorate, by filing a form t2050, to be approved for registration as a charity. There is no registration process for Income Tax purposes for Not-for-Profits.
Purposes: Charities must be established exclusively for charitable purposes (i.e., relief of poverty, advancement of education, religion, or other purposes beneficial to the community. Not-for-Profits however can operate for civic improvement, recreation, sport, social welfare, or any other purpose except for profit.