The Canada Revenue Agency (CRA) requires subcontractors, only in the construction industry, to complete a T5018 form and be submitted with their annual income tax receipts. The form details the total amount paid to the subcontractor(s) from a privately owned business for construction contract services completed during the entire year. Payment amounts may also include purchases for products, expenses, and reimbursements.
Who receives a T5018 slip?
The T5018 slip only applies to subcontractors that have more than 50% of their business income coming from construction activities. Slips need to be completed for subcontractors that receive payments for contract work over $500; payments less than $500 a T5018 slip is not necessary.
A T5018 slip must be filed for each sub-contractor along with a summary slip report that is required to be submitted to Canada Revenue Agency (CRA). All T5018 slips include;
- Report period
- Name of subcontractor
- CRA identification number which could be either the corporation business number or sole-proprietor social insurance number
- Total amount paid to subcontractor within the calendar or fiscal year including any GST/HST and provincial/territorial sales tax
- Subcontractors address (if available)
When does a T5018 slip need to be submitted?
T5018 payment slips can be reported on a calendar-year or fiscal year basis and due six months after the reporting period ends. Failure to report within these timeframes will result in penalties. CRA will issue late filing penalties based on the number of slips filed along with number of days late. These late filing penalties will continue to accrue interest until payment is completed in full.
Why CRA requires T5018 slips?
The construction industry has a reputation to be heavy in the underground economy taking cash payments for services. CRA recognizes this practice and the intention is to ensure all earnings and taxes are paid by subcontractors. T5018 slips are used by CRA as a reference guide to keep track that employers and subcontractors are reporting on time and the correct earnings. The slips also act as a cross-reference towards penalties for late filings or failure to report earnings from employers or subcontractors.
In summary, T5018 slips and CRA summary reports are to help the construction industry conduct business legally, ethically, and avoid operating underground. As well, T5018 slips help CRA keep track of identifying subcontractors that do not;
- File returns or report their full income
- Register for GST
- Report total sales and GST remittance
Where can you learn more about T5018?
Contact Banka & Company, CPA if you own a construction business and require CRA T5018 slips and summary done for your subcontractors. If you are a contractor or a sub-contractor and have questions, contact us today.