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Contract Payment Reporting System

The Canada Revenue Agency (CRA) is committed to maintaining public confidence in the fairness and integrity of Canada's tax system. As part of its efforts to combat underground economic activity, the CRA has actively worked with the provinces and the private sector to encourage compliance with Canada's tax laws. This will help 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 system became mandatory when it was announced in the February 24, 1998, Federal Budget. At that time, the CRA made a commitment to consult with the industry to determine the most effective approach for reporting payments to subcontractors.

The reporting system has been modified to address concerns that were originally raised before its implementation. Particular attention has been paid to minimizing the administrative costs of compliance. Ongoing monitoring will ensure the system's effectiveness.

Who has to report?

All individuals, partnerships, and corporations whose primary business activity is construction must report payments made to subcontractors. For a definition of primary business activity and a description of various construction activities, please refer to this page: http://www.cra-arc.gc.ca/tx/bsnss/cntrct/frmt5018/pyr/prmry-eng.html

What type of payments must be reported?

Payments to subcontractors for construction services must be reported. Goods-only payments should not be reported. Mixed service and goods payments must be reported if the total service component is $500 or more per year.

Who is a subcontractor?

A subcontractor is an individual, partnership, or corporation that provides construction services. Subcontractors include businesses which are below the $30,000 limit for goods and services tax/harmonized sales tax (GST/HST) registration purposes. Payments to recipients who provide other services, such as bookkeepers, janitors, and lawyers, do not have to be reported.

What information must be reported?

Subcontractor's name - The name under which a subcontractor carries on business (i.e., the subcontractor's business name as it appears on invoices or the cheques that a payer makes out to the subcontractor).

Address - Although the address of the sub-contractor is not mandatory, contractors are encouraged to provide the address whenever possible.

Subcontractor's identification number - One of the CRA's identifiers. This is either the subcontractor's Business Number (BN), which is the same as the GST registration number, or the social insurance number of those who do not have a BN. Beginning in January 2010, all contractors will be given a new identifier, using the RZ extension. For example, the new BN would look like this: 123456789RZ0001. For more information on this topic, please click on this link:

http://www.cra-arc.gc.ca/E/pub/tg/09-115/09-115-e.html

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 services to a particular subcontractor for the year is less than $500, the payer does not have to report the payment.

Reporting period – Filers may report payments on either a calendar or fiscal-year basis. Payments made on a fiscal-year basis do not have to be segregated into the calendar year in which they are paid.

When is the information due?

Information returns must be filed within 6 months from the end of the elected reporting period. That is, no later than June 30 for those filers with a December 31 year-end and within six months for those with a year-end other than December 31.

How is information submitted?

The payment information may be provided in a T5018 Information Return, which consists of a T5018 Information Slip, Statement of Contract Payments and a T5018 Summary, Summary of Contract Payments. The summary states the total number of subcontractors and the total amount paid to them. Contractors are encouraged to use the slips and summary that are now available to ensure that all the required information is received. Beginning in January 2011, it will be mandatory to use the appropriate forms when filing these returns. Here are the links for each form:

http://www.cra-arc.gc.ca/E/pbg/tf/t5018/README.html

http://www.cra-arc.gc.ca/E/pbg/tf/t5018sum/README.html

For more information

For more information, contact the Client Services section of any tax services office, or visit the CRA's Web site at: http://www.cra-arc.gc.ca/contract/

This document is also available for download in PDF format.

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Date modified:

2010-02-11