With the gift-giving season upon us, we thought it would be helpful to remind our readers of the CRA's policy regarding donations of gift cards or gift certificates.

The general rule is that registered charities can issue donation receipts for gift cards and gift certificates, but only under specific circumstances.  The factors that must be considered by a registered charity when deciding whether to issue a donation receipt for a donated gift card or gift certificate are:

  • whether the terms of the gift card or gift certificate permit its assignment;
  • whether the gift card or gift certificate has been issued for consideration (i.e., payment); and 
  • if the gift card or gift certificate has not been issued for consideration, whether the gift card or gift certificate has been redeemed.

Applying the foregoing factors, a registered charity can issue a donation receipt for a gift card or gift certificate donated to it in the following circumstances:

  1. the donor purchased the gift certificate or gift card and the terms of the gift certificate or gift card permit assignment; or 
  2. the vendor issuing the gift certificate or gift card has donated the gift certificate or gift card to the registered charity, the terms of the gift certificate or gift card permit assignment AND the registered charity has redeemed the gift certificate or gift card for property.

A registered charity cannot issue a donation receipt for a gift card or gift certificate received by it in any of the following circumstances:

  1. the terms of the gift card or gift certificate received by the charity do not permit assignment; 
  2. the vendor issuing the gift certificate or gift card has donated the gift certificate or gift card to the registered charity and the registered charity has NOT redeemed the gift certificate or gift card for property; or 
  3. the vendor issuing the gift certificate or gift card has donated the gift certificate or gift card to the registered charity and the registered charity has redeemed the gift certificate or gift card for services.

Further, note that where the vendor issuing the gift certificate or gift card has donated the gift certificate or gift card to the registered charity and the registered charity transfers the certificate or card to a third party (e.g., at an auction or raffle), the registered charity cannot issue a donation receipt to the vendor, though a business expense deduction may be available to the vendor when the gift certificate is redeemed.

When applying the CRA's policy, as described above, don't forget to about the split-receipting rules, under which, very generally, a receipt can only be issued for the amount by which the fair market value of a donation exceeds the amount of any advantage obtained by the donor.

To see the CRA's full policy on donations of gift certificates and gift cards, please see: http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/cgd/gftcrt-eng.html.

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