Some types of organizations may be able to claim a public service bodies’ (PSB) rebate on the Goods and Services Tax (GST) or the federal portion of the Harmonized Sales Tax (HST) paid on eligible purchases. To claim the PSB rebate, the organization will need to be a charity, qualifying non-profit organization, or “selected” public service body that meets the definitional criteria established by the Canada Revenue Agency (CRA). Not all GST/HST payments will be recoverable, and organizations will need to complete and submit their PSB rebate applications within the CRA’s specified timeframe. To learn more, or to seek assistance determining your organization’s PSB rebate eligibility or calculating the GST/HST paid on qualifying purchases, schedule a consultation with an experienced tax lawyer with Jeremy Scott Law. Call (902) 402-7201 today to get started.
What Is a Public Service Body in Canada?
The Canadian government recognizes that the primary purpose of many organizations is not profit, but service. Government agencies are of course one important example, but a wide variety of charitable concerns also form associations in order to further their respective missions. Falling outside these two familiar categories are still more organizations, with diverse functions, that exist primarily to serve their communities, their environment, or – taking a longer view – future generations. Because the activities carried out by these organizations are generally understood to be aimed at promoting the “greater good,” the organizations themselves are frequently eligible for rebates, exemptions, and other incentives that are not similarly available to commercial enterprises whose sole or primary function is making money for their owners.
Who Qualifies for GST/HST Rebate in Canada?
The CRA defines a “public service body” as a:
- Charity
- Non-profit organization
- Municipality
- University
- Public college
- School authority
- Hospital authority
For further clarification, the CRA also provides more detailed definitions of some of the types of organizations that it considers to be public service bodies.
Public Service Body Rebate for Non-Profit Organizations
For the purposes of determining eligibility for the PSB rebate on GST (or, when applicable, the federal portion of HST), a non-profit organization must pass a two-part test. The CRA considers an organization to be a non-profit organization for the purposes of determining PSB rebate eligibility if it both:
- Is a “person” that is not an individual, a trust, or another type of entity otherwise described on the list of types of organizations considered to be public service bodies that exists solely for purposes other than generating profit
- Does not provide financial benefits to any members, shareholders, or owner/operators that is not itself a society, a club, or an athletic association
The distinction between a legal “person” and a natural person is important to keep in mind here, as it helps to clarify how a non-profit organization cannot be an individual but must be a person. An organization that consists of many natural persons can function as a single legal person or entity.
Public Service Body Rebate for Municipalities
The Minister of National Revenue has delegated authority for defining a municipality for purposes of calculating GST or HST, as well as the corresponding PSB rebate, to the Canada Revenue Agency, which may grant “total” municipal status to a legal entity, or may restrict the application of GST/HST calculations to only those activities in which the entity in question functions as a municipality. Otherwise, in respect of GST or HST the CRA considers a municipality to be any incorporated:
- City
- Town
- Village
- Township
- District
- Metropolitan authority
- Rural or county municipality
- Other incorporated municipal body, regardless of designation
The “other” category serves to cover contingencies for designations found only rarely, or exclusive to certain geographical regions.
Public Service Body Rebate for Public Colleges
In order to meet the CRA’s definition of a public college, an post-secondary educational institution must meet two distinct conditions:
- The primary purpose of the organization must be the provision of instructional programming in at least one vocational, technical, or general field of education.
- The organization must receive government or municipal funding delivered specifically to support the organization in continuing to provide the general public with such educational services.
If you have questions about whether your educational organization or association may qualify as a public college under the CRA’s definition, consider scheduling a consultation with Jeremy Scott Law to discuss your situation.
How Much Is the GST Payment in Canada?
Sales tax in Canada is calculated based on the province in which the “supply” (the provision of the goods or services) is made. In most circumstances, this is the province in which the recipient (the customer) is located. Nationally, the GST on taxable non-zero-rated supplies is 5%. However, for public services bodies that are legally resident in provinces that have “harmonized” their sales tax with the nationwide GST, then the sales tax paid at time of supply will depend on the tax rate the organization’s province of residence charges as its portion of HST.
HST Rates by Province
Ontario adds 8% sales tax to the GST, making for a total sales tax rate of 13% in that province. The following provinces add 10% provincial sales tax to form a 15% HST on taxable supplies that are not zero-rated:
- New Brunswick
- Newfoundland and Labrador
- Prince Edward Island
- Nova Scotia
PSB Rebates for HST
Partial sales tax rebates on the federal GST on eligible purchases are available to organizations throughout Canada that meet the CRA’s criteria for public service bodies. In provinces that have adopted HST, the rebate applies only to the federal portion of the total sales tax charged unless the province has separately established its own sales tax rebate for public service bodies.
Currently, the provinces of Newfoundland, Labrador, and Prince Edward Island all allow for some form of public service body rebate. The criteria for qualification, as well as the application forms to be filed, vary by province, so you may wish to speak with a tax lawyer experienced in working with Canada’s intricate network of sales tax regulations to determine your organization’s eligibility.
Work With a Canadian Tax Lawyer
Navigating GST/HST can be complex. While a majority of Canadian organizations are concerned with ensuring that they maintain sales tax compliance by collecting and remitting the appropriate federal and provincial taxes on their sales, public service bodies may benefit from claiming PSB rebates on GST/HST paid on eligible purchases. If you have questions about whether your organization might qualify for a PST rebate, or how to determine whether HST as well as GST rebates may be available for some of your organization’s purchases, consider calling Jeremy Scott Law at (902) 402-7201 to book a personalized consultation.