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Unrelated business taxable income, or UBTI, is a United States term. It comes from US tax law for exempt organizations, and Canada doesn’t use it. The Canada Revenue Agency has no line or form by that name. Canadian charities and non-profits face a similar question under different rules, and that’s what most Canadians searching this phrase actually need.
What does UBTI mean in the US?
The IRS says income counts as unrelated business income when an activity meets three tests. It has to be a trade or business, it has to be regularly carried on, and it has to be not substantially related to the organization’s exempt purpose. The IRS adds that there are many modifications, exclusions and exceptions, and organizations generally report it on Form 990-T.
That’s all that was confirmed about the US system. Filing thresholds, the rate of tax and state rules weren’t checked, so no figures are given for them. Anyone with US exposure should read the IRS publication on the subject, not a Canadian page.
Does Canada have an unrelated business income tax?
Not under that name.
You won’t find a tax on that income as such. For a registered charity the question is whether a business is “related”. The CRA’s policy statement CPS-019, What is a related business? says a related business is either linked and subordinate to the charity’s purpose, or run substantially by volunteers (the rule of thumb is about 90% of the people employed).
The policy names four kinds of linked business. They’re a usual and necessary supplement to a program, such as a hospital cafeteria, a by-product of charitable activity, use of spare capacity, like renting a campus in summer, and sales that promote the charity itself.
Anything else? That’s an unrelated business. The CRA states that a registered charity running one is in breach of the law and could have its registration revoked. Before that, it says charities are typically invited to wind the business down or move it into a separate taxable corporation.
What does that look like in real life?
Picture a food bank in Regina that runs a thrift shop staffed almost entirely by volunteers. That’s the volunteer-run route. Now picture the same food bank buying a coffee roaster and selling beans to grocery stores with paid staff. Nothing about the beans connects to feeding people, so that looks like an unrelated business, and the usual advice is to put it in its own taxable company rather than inside the charity.
The grey cases are the ones that cause headaches: a church renting its hall on weekends, a school selling uniforms. Spare capacity can qualify, but only when the use is occasional and modest, so check the policy before you assume.
How do the two systems compare?
| Question | United States (UBTI) | Canada |
|---|---|---|
| Main test | Regularly carried on trade or business, not substantially related to exempt purpose | Related business: linked and subordinate, or substantially run by volunteers |
| Where does it show up? | Form 990-T, per the IRS | CRA review of a charity’s activities |
| Main risk from too much unrelated activity | Tax on that income | Registration could be revoked, per CRA policy |
| Common fix | Not confirmed here | Wind down, or move it into a taxable corporation |
What about a non-profit organization?
If you sit on the board of a club or association, you may wonder which rules apply to you. A Canadian NPO is a different thing from a charity. The CRA says it’s an association organized and operated for social welfare, civic improvement, pleasure, recreation or any purpose other than profit. It’s generally exempt from tax if no part of its income is payable to or available for the personal benefit of a member or owner. It can’t issue donation receipts, and an organization can’t be both a charity and an NPO.
An NPO may have to file Form T1044 if it received taxable dividends, interest, rentals or royalties totalling more than $10,000, or if its assets passed $200,000 at the end of the previous year. How much profit an NPO can make before it loses its exempt status wasn’t confirmed, and the CRA’s summary points to detailed guides on that.
What happens to income in a separate corporation?
A taxable corporation pays corporate tax like any other. Suppose it earns $100,000 of active business income in Ontario and qualifies for the small business rate. The corporate tax calculator gives $11,696 for calendar 2026, an average of 11.7%, with $9,000 federal and $2,696 provincial.
Treat that as an estimate. Ontario cut its small business rate on July 1, 2026, and the 2026 figure is a blend derived by days, not a published rate. A corporation with a different year end will get a different result, and associated corporations share one limit.
If the money is then paid out or an owner is paid, other tax follows. See the dividend tax calculator for the personal side, and the income tax calculator for salary.
Where this leaves you
If you run an exempt organization and are unsure whether an activity counts, read CPS-019 and talk to the CRA’s charities directorate, or a lawyer who works with charities. That’s the one case where a professional is worth the fee. If you were only curious about the US term, you can stop here: Canada simply doesn’t have it.
Where this information comes from
The US description is from the IRS page on unrelated business income. The Canadian rules are from the CRA‘s policy statement CPS-019 and its pages on non-profit organizations, T1044 and the T4117 guide. Corporate rates come from the CRA’s corporation tax rates page and our 2026 data. This site isn’t linked to the CRA or the IRS.
Frequently asked questions
Does Canada use the term UBTI?
No. UBTI is a US term. Canadian registered charities are tested on whether a business is related to their purposes.
What is a related business for a Canadian charity?
The CRA says it is linked and subordinate to the charity's purpose, or run substantially by volunteers, roughly 90% of those employed.
What happens if a charity runs an unrelated business?
The CRA says it breaches the law and could lose its registration. Charities are typically invited to wind it down or move it to a taxable corporation first.
Do non-profit organizations pay tax in Canada?
Generally not, if no income is payable to or available for a member's personal benefit. We haven't confirmed the limits on profit.
Do I need Form T1044?
An NPO may, if it received taxable dividends, interest, rentals or royalties over $10,000, or its assets topped $200,000 the year before.
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