The statement of Investment Income, also known as the T5 form, is a slip issued by financial institutions to Canadian residents that receive investment income. If you make payments of investment income to a resident of Canada, you will need to fill out a T5 slip.
The following sections of this article will take you through the T5 slip in Canada, how to complete it and distribute it, amending or canceling it, and more.
What is a T5 Slip?
Canadian residents use the T5 slip to report the various types of investment income they receive on their Income Tax and Benefit Return. Investment income includes interests, dividends, and some foreign income.
The amount on the T5 tax slip might be displayed in the Canadian dollar or a foreign currency. Note that you will have to convert any amount indicated in a foreign currency to a Canadian dollar on your tax return.
Investment income paid to non-residents of Canada cannot be reported on a T5 slip. A financial institution or bank issues a T5 slip to the investment income recipients and the CRA. The slip has three individual slips printed on each of its sheets.
Residents in Quebec do not receive a T5 slip but rather a Relève 3, which will be reported in their provincial TPI together with the T5 slip. They are to report it in the federal section of their tax return. Although you will not receive a T5 slip for interest earned – less than CA$50.00, it is compulsory to report it on your tax return.
If the T5 is in your name and your spouse’s name, you can both contribute an equal amount to the investment and share the money. You are both entitled to claim 50% of the amount available on the T5.
When is a T5 Slip Prepared?
The CRA expects you to prepare a T5 slip if you make certain types of payment to a Canadian resident or you receive certain types of revenue as a nominee or agent for a resident of Canada. These payments include;
- Eligible dividends and other dividends [including most deemed dividends]
Interest from any of the following:
- A fully registered bond or debenture
- Any funds loaned to/on deposit with/or property of any kind placed with a corporation, institution, partnership, or trust
- An account with an investment dealer
- An insurance policy or annuity contract (where an insurer pays interest)
- Any amount owed as compensation for expropriated property (personal property converted to public use)
- Some certain amount distributed from an eligible funeral arrangement
- Any amount included in a policy holder’s income section12 (2)
- Any royalties from the use of a work, an invention, or right to take natural resources
- Blended payment of income and capital made by a corporation association, trust, or partnership
- Interests accrued in agreement with subsection 20 of the Income Tax Act due to the assignment on the transfer of linked notes.
Usually, you only need to send a T5 slip to clients who earn more than CA$50 in investment income during the year. If you have any of these income types, you do not have to prepare a T5 slip.
How to Complete the T5 Slip
You can file your return by paper or electronically. Online filing has been made available as of January 11, 2021. It is advisable to file your information returns online if you are filing more than 50 information slips for a calendar year.
It is highly recommended that you file using the internet file transfer or web forms. If you choose to file on paper, you should mail it to the Canada Revenue Agency [CRA].
In completing the T5 slip, you will need to provide the identity information of the recipient. You will provide their name or the name of the corporation, association, organization, institution, or trust.
There are lines for the first and second recipients [if there is more than one recipient]. You will also enter the recipient’s full address, including their city and province or territory [using the two-letter abbreviations]. You are also to provide the payer’s full name and address.
There is a section where you will enter the four digits of the calendar year during which the recipient earned the investment income. The other boxes to be filled include:
- Dividends from Canadian corporations.
- Interest from Canadian sources.
- Royalties from Canadian sources.
- Foreign income.
- Various investment income types.
You can find more detailed instructions here.
Distributing the T5 Slips
You are to send copies of the T5 slips after completion to the recipients and the CRA. You can send the documents electronically or by mail. The due date for sending the documents to both parties is on the last day of February, according to the calendar year the information return applies to.
To send electronic copies of the slips to the recipients, they must have agreed by email or in writing to receive the slips electronically. You are to send two copies of the slips to the recipients.
You cannot send the paper copy to the CRA if you filed the slip online. If you filed the slips on paper, you are to send each T5 slip along with the T5 summary by the due date and send them to either of the following mail addresses;
Jonquière Tax Centre
P.O Box 1300 LCD Jonquiere
Jonquière QC G7S 0L5.”
The second address is the courier address for delivery only.
2551 Renè-Lèvesque Boulevard
Jonquière QC G7S 5J2.”
The CRA issues the T5 slip to you for information purposes. It is to give details on the income shown on the T5 slip. You don’t have to file it with your tax return since the CRA already has a copy of it in your CRA account.
If a business or activity ends, you are required to send appropriate copies of the T5 slips to the CRA and the recipients no later than 30 days after the business or activity ends.
T5 Summary [T5 Sum]
T5 sum records the total of the amounts you report on all related T5 slips. If you prepare one or more T5 slips, you are to complete a T5 SUM. If you file multiple slips for a business account, only one summary is required for the entire account. You must not send a summary without T5 slips or amounts to report.
Amending the T5 Slip
If you notice an error after filing the slips, you will need to prepare new slips. You can make the corrections electronically by changing only the incorrect information. If you want to amend the paper, you will prepare a recent slip and identify it clearly by writing “AMENDED” at the top of each slip.
You will fill out the necessary boxes, including the correct information on the original slip. You will then send two copies of the amended slips to the recipient and one document with a letter explaining why you amended your tax center. You are not to file an amended summary.
Adding a T5 Slip
You may need to send additional slips if you have original slips that were not filed with your information return. The original slips are accepted in electronic formats or paper forms.
If you file additional slips on paper, you should clearly state that they are additional by writing “ADDITIONAL” on top of each slip. You will then send a copy of the other slips to your tax center. If you file other slips after the due date, it may result in a penalty.
Canceling a T5 Slip
A canceled T5 slip is considered to be the same as an amended slip. To cancel a T5 slip, you will need to prepare a new one. If you want to cancel over the Internet, don’t change any information on the original slip.
To cancel on paper, you will identify the new slips as “CANCELLED” on top of each slip, fill the necessary boxes including correct information on the original slip and send two copies to the recipient.
You will also send a copy of the canceled slip along with a letter stating the reason for cancellation to your tax center. You are not to file a canceled summary.
Replacing a T5 Slip
If your issue slips to replace lost or destroyed copies of T5 slips, you cannot send a copy to the CRA. However, you should identify them as “DUPLICATE” copies for your clients and keep a copy for your records.
Penalties for not Filing the T5 return
Failure to file the T5 slip before the due date can attract the minimum penalty of CA$100 and the maximum of CA$7500. If you fail to provide the required information, you are also liable to pay a penalty of CA$100 for each failure to comply with the requirements.
Also, suppose you file more than 50 returns on paper and do not switch to the internet file transfer method or web forms. In that case, you can be penalized by paying a minimum fee of CA$250 and a maximum fee of CA$2500 depending on the number of returns you file on paper. Find out more on the penalties here.
For more information on the T5 slip, check this guide.
Financial institutions and banks issue the T5 slip to report their clients’ investment income [individuals, corporations, institutions, associations, trusts, or partnerships].
They are required to prepare, complete and distribute the slips. They are also responsible for anything that has to be done on the slips. The slips recipients will then use the slips’ information to file their Income Tax and Benefits Return.