Do non-for-profit (NPO) organizations have to file tax returns? What are the consequences?

I was asked this question by people who represent churches or different associations to which I will refer them in this article as NPOs.

See below what Canada Revenue Agency is saying about the obligation of filing the tax returns for NPOs.

All corporations — including non-profit organizations, tax-exempt corporations, and inactive corporations — have to file a T2 return for every tax year, even if there is no tax payable. The only exceptions to this rule are provincial Crown corporations, Hutterite colonies, and corporations that were registered charities throughout the year.[1]

So the answer is YES. All NPOs has to file the tax returns.

Now do they have to pay taxes?

An NPO is exempt from tax under Part I of the Act on all or  part of its taxable income for a fiscal period it  is organized and operated solely for:[2]

■ social welfare;

■ civic improvement;

■ pleasure or recreation; or

■ any other purpose except profit

If the above conditions are met there is NO TAX payment required for NPOs.


[1] Extract from T4012 T2 Corporation – Income Tax Guide – 2012

[2] Income Tax Guide to the Non-Profit Organization (NPO) Information Return