If you own a business involved in Canada’s construction activities as your main income source and pay subcontractors for construction, you must report any amount paid or credited to the Canada Revenue Agency through the T5018 Statement of Contract Payments.
So as a construction subcontractor in Canada, you might get a T5018: Statement of Contract Payments slip. You’ll use this slip to report every contract payments made to you by a contractor during the year.
Regardless of the channel, the amounts were paid either by cheque, cash, barter, offset, etc.; as a subcontractor, you must report the payment, which might include any Goods-and-Services-Tax/Harmonized-Sales-Tax (GST/HST) paid to you.
Understanding the T5018
Also known as a Statement of Contract Payments slip, a T5018 is a T-Slip issued to subcontractors in the construction industry showing the amount they have been paid for services rendered. A T5018 is similar to a T4 Slip that reports the amount of employment income a taxpayer receives.
Also, every individual, trust, corporation, and partnership that receives their primary source of income from construction must report every amount paid or credited to subcontractors for construction services. You must report these payments on a Contract Payment Information Return, including either a T5018 return or a T4A-NR summary and slip. This is filed depending on the subcontractor’s residency in Canada.
If, as the sub-contractor, you are a resident of any province in Canada, the taxpayer is required to complete and submit a T5018 return, which must include a T5018 summary and slip.
Who files a T5028?
A T5018 is to be filled by any individual or body with construction as the primary business income source. A contractor is recognized as any business that makes payment to subcontractors. A subcontractor in this light can be:
- An individual
Any of the above mentioned provides construction services to the contractor. On the other hand, subcontractors are individuals registered under GST/HST and non-GST/HST registrant beneath the $30,000 mark.
So, if your business makes payment to subcontractors for their construction services, the CRA identifies you as a contractor. Still, over 50% of your business income should come from construction before you’d be obligated to file the T5018.
Since construction is a broad term, the construction activities include but are not limited to:
- Removal of a building, structure, surface or sub-surface construction
The T5018 form should be completed and submitted by authorized persons representing the construction company paying out subcontractors. This slip can be completed and submitted online. You can download, print, fill and mail the slips to the right tax centers if you fill over 50 T5018 slips.
How to Complete a T5018 Slip
To complete a T5018 Slip, you’ll require general information from your subcontractors, listing and all printout of payments you have made to them. You must enter all information in the appropriate box on the T5018 slip. Below is the information required to complete a T5018 form:
- Box 20
Box 20 is designed for the period ending; that is the last day of the taxpayer’s reporting period.
- Box 22
This box is for inputting the construction subcontractor payment. Enter the amount of payment you’ve made to the subcontractor during the period, including any GST/HST or provincial/territorial sales tax. If the total amount of payment is less than $500, you don’t have to complete a T5018 slip for that contractor.
If you paid the subcontractor via bartering of goods and services, you would need to determine the bartered goods or services’ market value before filling it.
- Box 24
This is where you input the subcontractor’s program account number or the SIN. You can also check if the subcontractor is registered with GST/HST. GST/HST is a body for subcontractors and other professionals that offer taxable supplies worth over $30,000.
- Payer’s name
This is where you input the name of the contractor who made the payment to the subcontractor.
- Payer’s Program Account Number
Enter the payer’s program account on copies sent to the CRA and those you retain. You do not have to include your business number on any documents issued to the subcontractor.
Submitting a T5018
There are currently two ways to complete and submit your T5018 Statement of Contract Payments tax slip. The methods include:
This involves logging in to your CRA My Business Account and navigating to the tax return section. By clicking on the tax return, you’ll have access to various taxpayer slips. Click on the T5018 and commence by adding the necessary details as required by the CRA. This method is one of the simplest and safest ways to complete the T5018 form.
The online platform allows you to input all required information, and the slips and summary would be generated for you and submitted to the CRA. Remember to download your copies to issue out to the subcontractors.
If you’re unable to complete the online form submission, you can submit your T5018 the traditional way by mailing it. This process involves downloading a saveable/fillable form, inputting the required details and sending the hard copies to a specified tax center.
Payments to Report in your T5018 Form
Below are some of the fees to report in your T5018 form:
- All payments made to subcontractors for rendering construction services
- GST/HST and provincial or territorial sales taxes
- Fee for service components above $500 for mixed services and goods
You should not report any payment below $500 made to subcontractors for services rendered in the reporting year. Likewise, employee’s salaries should be excluded from the T5018 slip as they are meant for the T4 slips. Good-only payments are not to be reported.
And if the total annual service component is $500 or more as payments to the sub-contractor are for mixed goods and service payments, the amount paid is required to be reported under a T5018 slip and summary.
Any income over $500 for services must have a T5018 form filed, except if the amount is less than $500; hence a T5018 slip is not required.
For non-residents, a T5018 return is not required to be submitted by a taxpayer on the amount paid or credited. Instead, you are required to submit a T4A-NR return.
Issuing a T5018
A contractor can issue a T5018 slip and summary to a sub-contractor. Generally, the slip includes information such as:
- Reporting period
- Name of the subcontractor
- Subcontractor’s CRA business or social insurance number
- The total amount paid to each subcontract
- The subcontractor’s address.
As mentioned above, the employees’ wages are not reported on the T5018 return since it is included on the T4 slip. However, if an employee renders any construction services as a subcontractor, you must report the subcontracting amounts paid on a T5018 return.
T5018 Concerning Business Income
Any business that generates more than 50% of its business income from construction activities must report any payment made to subcontractors on a T5018 Statement of Contract Payments. You can choose to report these payments on a calendar year or a fiscal-year basis – due six months after the end of the reporting period.
In the same light, businesses that generate less than 50% of their business income from construction activities are not obligated to report under the T5018 Statement of Contract Payments made to subcontractors. If they decide to report their payment, it will be accepted by the CRA.
T5018 Concerning Contractors and Sub-Contractors
Contractors are required to report on subcontractors who they deal with directly. Each T5018 return must be completed and filed for each subcontractor. Subcontractors are responsible for reporting amounts paid to the sub-trade in the case of sub-trades, even if the contractor’s cheque is in the name of the sub-trade.
The contractor must report the payment to the sub-trade to be included as payment to the subcontractors. Hence, the contractor and sub-contractor must file the party’s right amounts to the party they hold their respective contracts.
T5018 Evasion Penalties
A T5018 return aids the Canada Revenue Agency (CRA) merge reported or non-reported income from the subcontractor and identifies subcontractors required to register for and remit GST/HST. With a T5018, the CRA can identify subcontractors who don’t:
- File return/Report their full income.
- Register for GST/HST
- Report total sales and GST/HST remittances
There are penalties from the CRA attached to failure to submit the T5018 summary and related slips. Failure to complete and file a T5018 return will end in penalties and interest depending on the quantity of outstanding T5018 slip or filed late and the number of days filed late.
Note that interest on late filing penalties continues to grow until full payment is made. The CRA can review the accuracy of reported information during audits.
The fine of $25 per day is billed to each slip, while the minimum is $100, and the maximum is $2,500. Also, plotting with contractors to evade filling the T5018 via underground activities can end in criminal prosecution with fine penalties of about 200% of the tax amount you were trying to escape.