All businesses involved in construction activities as their main income source, and that pay subcontractors for construction services, need to report those amounts paid to the Canada Revenue Agency via the T5018 Information Return and Slips.
Primary or main source of income means that more than 50% of your businesses revenue is earned through construction services, such as excavation, repairs, demolition, etc., of a building, structure, or surface.
When Do I Need to Complete a T5018 Information Return and T5018 Slips
You need to complete this return, and these slips, if you have paid your subcontractors, for constructions services, more than $500 for the calendar tax year, not your fiscal year.
Like other slips you might have to generate, such as T4s for employees, or a T4A for a self-employed commissioned contractor, you have to provide a copy of the slips to them, before February 28th, as they require them for their income tax returns.
How Do I Complete Form T5018 Form Statement of Contract Payments?
You will require information from your subcontractor, such as their business number and/or social insurance number (place this in Box24); you will also need to tally up everything you have paid them in the last year to include on the slip (place this in Box 22), including any GST/HST paid on their services.
One of the simplest ways to complete these forms is using the CRA’s Web Forms online application. You input all required information and the slips and summary are generated for you and submitted to the CRA. Don’t forget to download your own copies to hand out to the subcontractors.
What if My Subcontractor is a Non-Resident?
If your subcontractor is a non-resident of Canada, then you need to complete a different form instead of the T5018. This form is called a T4A-NR and it is somewhat more complicated than the T5018 slip. All of the money you report on this slip must be in Canadian dollars, even if you paid it in another currency.
Why Have I Received a T5018 Slip?
If you are a subcontractor in the construction industry or another industry, you may be surprised to receive a form T5018. While this company is not your employer and therefore is not providing you with a T4, they are still required to provide you with a T5018.
The T5018 should help you when it comes time to prepare your tax return, as it is a record of at least some of the income that you will need to report. If you have not met your tax obligations, the completion of a T5018 form may alert the CRA that you have these unfulfilled obligations. You should attempt to get them in order as soon as possible.
Also, remember that the CRA requires you to keep this form, and all others, for six years post tax filing.
What If I’m a Subcontractor and Didn’t Receive a T5018 slip?
If you believe that you should have received at form T5018 but did not, it is still your responsibility to report any income that would have been on this slip to the Canada Revenue Agency. If your client refuses to complete a form or does not believe it is necessary, you are still not relieved of your tax responsibility for that income.