Corporate Charitable Donations

1. CRA Rules for Corporate Charitable Donations

A. Donate to Registered Charities

Only donations made to organizations that are registered charities under the Income Tax Act qualify for tax benefits. You can verify an organization’s registration status by searching the CRA’s List of Charities.

A corporate donation receipt must include the charity’s registration number, donation amount, and date, among other details. The CRA will not allow a tax credit without proper documentation.

B. Claiming Corporate Donation Deductions

Corporations in Canada can deduct charitable donations from their taxable income, subject to limits:

  • Businesses can generally claim donations up to 75% of their net income for the tax year.

  • This limit may be increased in certain cases, such as gifts of certified cultural property or ecologically sensitive land.

If your donation exceeds the annual limit, the unused portion can be carried forward for up to five years, allowing flexibility in tax planning

2. Different Types of Corporate Gifts

Under Canadian tax law, different donation types are treated differently. Understanding how to value these properly ensures your corporation gets the full tax benefit it deserves.

A. Cash Donations

These are the simplest types of charitable gifts. The amount donated is generally equal to the amount claimed as a deduction. You’ll need an official donation receipt issued by the charity.

B. Donations of Property (In-Kind Gifts)

Donating physical goods or assets, such as office equipment, vehicles, or inventory, requires special valuation procedures:

  • The value of the gift is typically based on its fair market value (FMV) at the time of donation.

  • If the donated property has appreciated, the corporation may be subject to a capital gain, depending on the type of property.

For example, if a business donates used furniture with an FMV of $5,000 but originally purchased for $3,000, the business may need to account for the gain in value.

C. Donations of Publicly Traded Securities

Gifting publicly traded shares is one of the most tax-efficient ways for Canadian corporations to give:

  • The corporation can deduct the full FMV of the donated shares.

  • Any capital gain on the securities is exempt from tax, meaning the business avoids both the tax on the capital gain and still gets the full donation credit.

This makes securities a popular choice for tax-savvy corporate donors.

D. Donations of Services or Time

The CRA does not allow deductions for the donation of services or volunteer time. However, corporations may be able to deduct expenses incurred in providing those services, such as wages paid to employees while volunteering or the cost of supplies used in a charitable project.

Jane Zhao