What is a T5018?
The T5018 (also known as a ‘Statement of Contract Payments’) is a tax form required from those working in the construction industry.
A copy of the latest version of this form can be found here.
Who Needs to File a T5018?
The T5018 needs to be filed by people and entities operating within the construction industry, including:
The exact stipulation states that “any business or person whose primary source of income comes from construction services and who makes payments to subcontractors for construction services” must complete a T5018.
The person/entity meeting these criteria must fill in the T5018, but subcontractors themselves do not have to complete this form.
They can, however, use it as a way to verify their income when completing their tax returns.
What’s a T5018 Summary Form?
Now here’s a super important point: construction companies must file a T5018 for every single subcontractor they work with.
For this reason, the CRA also requires a T5018 Summary.
This Summary is another official tax document which is required whether you have one or several T5018s, and summarizes the information for the CRA’s convenience.
Why Does the T5018 Exist?
The T5018 is part of the Contract Payment Reporting System (CPRS), which was put in place to help collect taxes from around $15 billion of unreported construction income every year.
By requiring T5018s from construction entities, the CRA can track down subcontractors who do not properly report their income more easily.
Canada’s construction industry employs about 1.4 million people.
When is the T5018 Required?
The intricacies of T5018s can be complicated.
Let’s look at some of the important details:
When does the T5018 need to be filed?
Construction entities may choose to report to the CRA on either a fiscal year or calendar year basis.
But whichever methodology chosen, T5018 submissions must be made to the CRA within six months of the end of the entity’s reporting period.
What must be included in the T5018?
When completing a T5018, all payments made to subcontractors for construction services that cost $500 or above (including GST, HST and any other sales taxes) must be included.
If subcontractors were hired for mixed services (i.e. goods and work combined), reporting has to be completed if the services component of the contract exceeded $500 across the year.
What Counts as Construction Activities?
A crucial detail here is exactly what the CRA counts as construction services.
Their definition includes:
This definition pertains to any part of a building or any other structure or surface, in both surface and subsurface construction.
What Counts as Payment?
Another important definition is what the CRA deems ‘payment’ of a subcontractor.
- Payment-in-kind (PIK)
- Account offsets
What Shouldn’t Be Included in the T5018
You do not have to include details on your T5018 for:
- Services costing less than $500
- Wages for employees
- Payments for bookkeeping, legal work and janitorial services
- Payments for goods
How Do I File the T5018?
The CRA allows for mail-in and online reporting, but if you have more than 50 T5018 slips to include in your return, it must be submitted online.
What is the Definition of Contractor For The T5018?
The next tricky definition you need to know is what exactly the CRA considers as a subcontractor.
A subcontractor can be any individual, partnership, trust or corporation, but it must be registered for GST/HST if earning above $30,000 a year.
Non-registration is only permitted in the event that the subcontractor earns below that threshold.
As mentioned above, the T5018 only concerns the subcontractors you hire for construction services.
Another important note is residency.
A lot of Canada’s subcontractors are non-resident.
In that scnario, a T5018 is actually the wrong form.
Instead, a T4A-NR would have to be completed.
Why Did I Receive a T5018?
If you’re a worker in the construction industry and you received a T5018 from an employer, don’t be surprised.
This is standard practice; construction employers must provide T5018s to their subcontractors, in the same way that they must provide T4s to their employees.
You can use this form to help fill in your tax return.
If you should have received a T5018, but have not prior to tax season, get in touch with the employer immediately, and remember that you still have to report the income to the CRA.
Frequently asked questions
- Who needs to file T5018?
Any business or person whose primary source of income (50%+) comes from construction services, and who makes payments to subcontractors for construction services.
- What’s the difference between T4A and T5018?
A T4A is for employees, and a T5018 is for subcontractors performing construction services.
- Who can fill in the T5018?
An authorized person representing the construction entity hiring the subcontractors must fill in the T5018s.
- What happens if I don’t submit any T5018s?
The CRA will fine you. The penalty is $25 per day per unfiled T5018, with a minimum fine of $100 and a maximum of $2,500.
- What happens if I issue payment to subcontractors, who then use it to pay subtrades?
You only need to complete T5018s for subcontractors you hire directly. Subs who hire their own sub trades must manage that on their own.