Can I issue a tax receipt for a gift of service?

No. A donation of services is not a gift, according to the Canada Revenue Agency (CRA) which states: “At law, a gift is a voluntary transfer of property without consideration. Contributions of services (for example, time, skills, effort) are not property”. However, a charity can issue a tax receipt if the service provider participates in a ‘cheque exchange’ with the charity. In this case, the service provider does the work and invoices the charity, the charity pays the service provider for the work, and then the service provider voluntarily donates the money back to the charity.

Why does a cheque exchange make the transaction acceptable? Because the service provider has been paid for their work. It’s now taxable income for them, and they have made a gift of property (the cash) from their after-tax income. That’s the scenario that charitable donation receipts are designed to serve.

Make sure to keep a copy of the invoice issued by the service provider, but remember, you can only issue the tax receipt once you’ve paid the service provider and they donate the money back to your charity.

Read this page on the CRA website for more information.

An editorial note on the term “gift”:  “Gift” is frequently used colloquially to describe any kind of donation (be it of cash, goods, or services).  Even Young Associates uses it – see our glossary entry for “donation”.  The varied and widespread use of “gift” and “donation” to cover all kinds of charitable contributions (whether they are eligible to receive a tax receipt or not) is a source of confusion. Make sure you are up to date with the CRA (or other appropriate body, depending on your location) regulations and wording to be absolutely sure you are operating within the law.