Your Business and the Contract Payment Reporting System
The Contract Payment Reporting System (CPRS) requires construction companies to record their payments for construction services and to report these payments to the Canada Revenue Agency.
If the subcontractor is a resident of Canada, payment information is provided on a Contract Payment Information Return, which consists of a T5018 Information Slip, Statement of Contract Payments and a T5018 Summary, Summary of Contract Payments.
If the subcontractor is a non-resident of Canada (for services provided inside Canada), the payment information should be provided on a T4A-NR information return, which consists of a T4A-NR summary and slip.
Who has to file?
Any corporation, trust, individual or partnership with construction as their primary source of business income that makes payments to subcontractors has to file T5018 slips and a summary under Section 238 of the Income Tax Act.
Your primary activity is deemed construction if more than 50% of your income comes from construction.
How is construction defined? What constitutes construction activities?
Construction is defined in the Income Tax Act as: “the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling, or removal of any part of a building, structure, surface or sub-surface construction.”
Which subcontractors have to receive the form?
A form should be completed for each subcontractor that provided construction services, totaling at least $500 in the reporting period.
Mixed service and goods payments must be reported if the total service component is $500 or more per year.
A form does not have to be provided to suppliers who provide goods only, or subcontractors providing non-construction related services such as sales, marketing or administration.
For what period do you report these payments?
The “reporting period” can either be on a calendar-year basis, or based on your fiscal year end.
What is the filing deadline for the T5018 forms?
You must file within 6 months of the end of the reporting period you have chosen.
If your business stops operating, you must file the information return within 50 days of the day your business ceased.
Are there penalties for late or non-filing?
Yes, there are penalties for late or non-filing as follows:
If you fail to file Form T5018 by the filing deadline, you are a liable for a penalty of up to a maximum of $7,500. The “per day” and “maximum” penalties vary, depending on the number of forms you are required to file.
The late filing penalty for a company that is required to file 50 or less forms is $10 per day to a maximum of $1,000.
If you fail to file Form T5018, the penalty for each failure is $25 a day, with a minimum penalty of $100 up to a maximum of $2,500.
Completing the T5018 forms
1. T5018 Information Slip
a. Complete one slip for each construction contractor
b. Include your Federal Business Number on the copy sent to the Canada Revenue Agency (“CRA”)
c. The “Amount Paid” is the total amount including goods and service tax/harmonized sales tax (GST/HST) and provincial sales tax
d. You must enter the subcontractor’s identification number (either Social Insurance Number or Federal Business Number, if registered) on each form
e. You are not required to provide a copy of the slip to the subcontractor, but it is recommended. You should leave your business number off of the copy you provide to the subcontractor
2. T5018 Summary:
a. Indicate total number of slips and amount paid; and
b. File electronically if over 50 slips.
Where to file the T5018
If you file on paper, send your completed T5018 information slips and summary return to:
Ottawa Technology Centre
875 Heron Road
Ottawa, ON K1A 1A2
Need some help navigating the contract reporting system? Hogg, Shain and Scheck specializes in accounting for the construction industry. Call us today at 647-557-7591.