Fact sheet

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Contract Payment Reporting System

Revenue Canada is committed to maintaining public confidence in the fairness and integrity of Canada's revenue system. As part of its efforts to combat underground economic activity, the Department has actively worked with both the provinces and the private sector to encourage compliance with Canada's tax laws and to ensure that honest taxpayers are not disadvantaged by those who do not comply with the law. The Contract Payment Reporting System is a key element in these efforts to promote compliance in the construction industry.

The reporting system was originally introduced in 1996 on a voluntary participation basis. High levels of participation are critical to the effectiveness of any reporting system. Unfortunately, the levels of voluntary participation were too low to be effective. It became mandatory when it was announced in the February 24, 1998, federal budget. At that time, Revenue Canada made a commitment to consult with the industry to determine the most effective approach for reporting payments to subcontractors.

Consultations have concluded and the reporting system has been revised to reflect concerns that were originally raised about its implementation. Particular attention was paid to minimizing the administrative costs of compliance. Ongoing monitoring will ensure the system's effectiveness.

Beginning January 1, 1999, construction businesses have to record payments they make to subcontractors who provide construction services, and report these payments to the Department. The due date for the first reporting period is March 31, 2000.

In general terms, the reporting system will work as follows:

Who will have to report?

All individuals, partnerships, and corporations whose principal business activity is construction will have to report payments made to subcontractors. For these purposes, construction is defined as erecting, installing, altering, modifying, repairing, improving, demolishing, dismantling, or removing any structure or part, including but not limited to buildings, roads, and bridges. Based on construction industry recommendations, Revenue Canada will immediately begin discussions to extend the system to other sectors that provide home renovation services.

What type of payments have to be reported?

Payments to subcontractors for construction services have to be reported. Goods-only payments do not have to be reported. Mixed service and goods payments have to be reported if there is a service component of $500 or more. Wages paid to employees do not have to be included since they are reported on T4 slips.

Who is a subcontractor?

A subcontractor is an individual, partnership, or corporation that provides construction services.

Subcontractors include businesses that are below the $30,000 limit for goods and services tax (GST) registration purposes. Payments to contractors who provide other services, such as bookkeepers, janitors, and lawyers, do not have to be reported.

What information will be reported? Subcontractor's name - The name or style under which the subcontractor carried on business (i.e., the subcontractor's business name as it appears on invoices, or the subcontractor's name as it appears on the cheques the payer made to the subcontractor).

Address - The business address of the subcontractor.

Subcontractor's identification number - One of Revenue Canada's identifiers - either the subcontractor's business number, which is the same as the GST registration number, or the social insurance number of those who do not have a business or a GST number.

Contract payments - The total amount paid, or credited, to the subcontractor for the reporting period including goods and service tax/harmonized sales tax (GST/HST) and provincial sales tax. If the total amount paid for the year is less than $500 to a particular subcontractor, the payer does not have to report payments made to this subcontractor.

Reporting period - Businesses can report payments on either a calendar or fiscal year basis. Payments made after December 31, 1998 have to be reported.

When is the information due?

Construction businesses have to record all necessary information beginning January 1, 1999, to prepare the Contract Payment Reporting information return. The first return is due March 31, 2000.

For more information

For more information, contact the Client Services section of any tax services office or visit Revenue Canada's Internet site at: contract

December 1998

Date modified:

1998-12-01