8 July 2008 External T.I. 2007-0256561E5 - Requirement to file T5018.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Is a corporation required to file an information return pursuant to subsection 238(2) of the Income Tax Regulations where the corporation pays amounts to sub contractors in respect of irrigation installations, landscaping and hydroseeding.

Position: Question of fact, dependent on whether the corporation's business income was primarily derived from construction activities.

Reasons: Legislation.

								2007-025656
XXXXXXXXXX 							Mike Thomson
(613) 957-3496
July 8, 2008

Dear XXXXXXXXXX :

Re: Requirement to file T5018

We are writing in response to your email message dated November 19, 2007, wherein you requested our comments with respect to whether your employer is required to file the T5018 information return, including the statement of contract payments (T5018 slips) and the summary of contract payments (T5018 summary). You have also inquired as to which costs, if any, are required to be reported on the T5018 information return.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Ruling", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office, a list of which is available on the "Contact Us" page of the CRA website. We cannot comment on your specific situation. However, we are prepared to provide the following general comments.

Pursuant to subsection 238(2) of the Income Tax Regulations (the "Regulations"): "every person or partnership that pays or credits, in a reporting period, an amount in respect of goods or services rendered on their behalf in the course of construction activities shall make an information return in the prescribed form in respect of that amount, if the person's or partnership's business income for that reporting period is derived primarily from those activities." In these circumstances a person or partnership would include an individual, partnership, trust or corporation. "Construction activities" are defined in section 238(1) of the Regulations to include, but not be limited to activities relating to the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction, or any similar property.

Accordingly, where your business income was derived primarily from construction activities and you pay an amount in respect of goods and services rendered in the course of construction, you will be required to make an information return (form T5018) pursuant to subsection 238(2) of the Regulations.

Guidance with respect to completing the T5018 form can be located on the CRA website at: http://www.cra-arc.gc.ca/E/pbg/tf/t5018sum/t5018sum-05b.pdf, as part of the T5018 summary.

We trust that our comments will be of assistance to you.

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch