Do Canadian Charities and Nonprofits Need a Business Number?
If you're running or starting a charity in Canada, you may wonder if a Business Number (BN) is necessary. The short answer is yes. A BN is crucial for charities and nonprofits to interact with the Canada Revenue Agency (CRA) and other government programs.
What is a Business Number for Charities?
A Business Number (BN) is a unique nine-digit identifier assigned to a charity or nonprofit for easy interactions with the CRA and other governmental agencies. For registered charities, the BN is essential for tasks such as issuing donation receipts, filing tax returns, and applying for grants.
When Does a Charity or Nonprofit Need a Business Number?
Most Canadian charities and nonprofits will need a BN in the following situations:
- Applying for Charitable Status: When registering with the CRA to obtain charitable status, a charity is automatically assigned a BN. This number will be used for all future tax-related matters.
- Issuing Official Donation Receipts: A registered charity needs a BN to issue official donation receipts to donors, which they can use to claim tax credits.
- CRA Program Accounts: Charities may also need additional CRA program accounts linked to their BN, such as:
- GST/HST Account: If a charity makes taxable supplies over $50,000 in a fiscal year, it must register for a GST/HST account.
- Payroll Deductions Account: If your charity or nonprofit has paid staff, you will need to set up a payroll deductions account to remit employee taxes and contributions (like CPP and EI) to the CRA.
How to Register a Charity or Nonprofit for a Business Number
To get a BN, you can apply through the CRA's Business Registration Online (BRO) portal. When applying for charitable status, the CRA will automatically assign a BN upon approval. Once your organization has a BN, it can also register for other CRA program accounts based on its activities.
When to Update or Obtain a New Business Number
- Changes in Structure: If your organization changes its legal structure (e.g., from a nonprofit to a registered charity), you may need to obtain a new BN.
- New Activities: If your charity starts new activities requiring CRA program accounts (like hiring employees or making taxable supplies), you must update your BN to include these accounts.
Key Program Accounts for Charities and Nonprofits
Charities and nonprofits often need to register for CRA program accounts, which are linked to the BN:
- GST/HST Account: If your organization sells taxable goods or services and meets the income threshold, you'll need to collect and remit GST/HST to the CRA.
- Payroll Deductions Account: Nonprofits and charities with employees must register for this account to remit employee payroll taxes, including income tax, CPP contributions, and EI premiums.
- T3010 Information Returns Account: Charities must file annual returns (Form T3010) with the CRA, and this is managed under the BN.
Benefits of Having a Business Number for Your Charity or Nonprofit
- Simplifies Government Interactions: A BN consolidates all your interactions with federal, provincial, and municipal governments under one identifier.
- Access to Grants and Funding: Many government programs and funding sources require that your organization have a BN.
- Donor Confidence: Registered charities with a BN can issue donation receipts, which donors may use for tax purposes, increasing donor confidence and trust in your organization.
In Canada, charities and nonprofits need a Business Number to legally operate and meet their tax obligations. When registering for charitable status, hiring staff, or collecting GST/HST, having a Business Number (BN) can simplify your interactions with the CRA. Ensuring that your charity or nonprofit is linked to the appropriate CRA program accounts through your BN can help streamline operations and ensure compliance with all regulatory requirements.
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