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: Can a parent corporation issue T5 slips on behalf of a subsidiary?
Position: Person paying interest is responsible for T5 slip.
Reasons: Wording of Regulation 201.
2005-011350
XXXXXXXXXX G. Moore
(613) 957-8982
February 14, 2005
Dear XXXXXXXXXX:
Re: Subsection 201(1) of the Income Tax Regulations (the "Regulations")
This is in response to your letter of January 27, 2005, inquiring about the T5 reporting requirements for investment income.
You are asking for our views on the T5 reporting requirements in the following fact situation. Shareholders enter into subordinated loans with an employee-owned brokerage firm, upon which the brokerage firm pays interest. The interest is credited to the shareholders' personal trading accounts at the firm and is captured and reported on T5 slips each year. To ensure that the loans qualify as regulatory capital, they must be executed in a prescribed format, which creates a significant amount of paperwork. To reduce paperwork, a numbered company or intermediary would be used to enter into an agreement with the brokerage firm. Loan agreements would be entered into between the shareholders and the intermediary. Interest payments would be made by the brokerage firm to the intermediary, which in turn, would pay interest to the individual shareholders. The brokerage firm would continue to report interest paid to shareholders on T5 slips. The intermediary could make interest payments to its lenders back through the brokerage firm so that the brokerage firm is paying interest to the shareholders.
The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Regulation 201(1) provides in part:
201(1) Every person who makes a payment to a resident of Canada as or on account of
...
b) interest ...
ii) in respect of
(A) money on loan to,
(B) money on deposit with, or
(C) property of any kind deposited or placed with, a corporation, association, organization or institution,
...
shall make an information return in prescribed form.
Thus an information return (T5) is required to be filed by the person making the payment to the extent that the payment is described in any of subparagraphs 201(1)(b)(i) to (v) of the Regulations.
We trust that these comments will be of assistance.
Yours truly,
Steve Tevlin
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
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