Regulation 201

Subsection 201(1)

Administrative Policy

15 August 2014 External T.I. 2014-0532941E5 - T5 reporting obligations

T5s issued to brokers in whom debentures are registered

Opco has issued the "Debentures" in fully registered form to the resident "Brokers," who then sold them to their resident "Clients" for whom they act as agents. Interest payments are made from Opco to its paying agent (the "Bank"), from it to the Brokers, and then from the Brokers to their Clients. What are the T5 reporting obligations?

After noting that Opco is not required to issue a T5 to the Bank as it is acting as Opco's agent (so that the Bank is not receiving the interest for a beneficial owner), CRA stated:

When interest amounts are paid by the Bank to the Brokers, there has been a payment of interest on the Debentures. Accordingly, a T5 slip…[is] required [although] it is not necessary for both Opco and the Bank to file a T5… . The name of the payee recorded on the T5 slip should be the relevant Broker. … T5 slips will also have to be issued when interest is paid by the Brokers to their Clients.

T4015(E) "T5 Guide - Return of Investment Income 2013"

If the payment is made to the registered holder of an investment (for example, broker or trustee of an RRSP), enter the name of the registered holder, not the name of the individual. ...

For investment contracts acquired after 1989, you have to report accrued interest every year. Base this calculation on the date the investment contract was issued. We will consider an investment contract acquired before 1990 to be a new contract acquired after 1989 if certain material changes were made after 1989. For details, see Interpretation Bulletin IT-448, Dispositions - Changes in Terms of Securities, and its Special Release.

Paragraph 201(1)(a)

Administrative Policy

3 March 2011 External T.I. 2010-0381851E5 F - Ajustements salariaux rétroactifs

interest on retroactive pay awards “is” reported on T5s

After finding that retroactive salary adjustments paid for a nine-year period were not eligible for treatment under the averaging rules in ss. 110.2 and 120.31, CRA stated, regarding at the legal rate of 5% paid on the retroactive adjustments:

[I]nterest paid on a payment as a retroactive salary adjustment is reported on T5 slips for the year it is received to allow employees to be better informed of the amounts they have received, since they must be included in computing their taxable income.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.2 - Subsection 110.2(1) - Qualifying Amount - Paragraph (a) - Subparagraph (a)(i) retroactive pay adjustments negotiated to comply with the Quebec Pay Equity Act but not paid pursuant to it were not qualifying amounts 203

24 October 2017 External T.I. 2016-0653441E5 - U.S. Dividend Equivalent Amounts

the U.S. (s. 871(m)) characterization, as a dividend, of a principal or derivative payment by a Canadian issuer to a Canadian investor, is irrelevant to T5 reporting

What are the Canadian tax reporting requirements respecting a payment made under a Canadian financial contract (i.e. a contract between an entity resident in Canada and a Canadian-resident investor) that is considered “dividend equivalent amount” under new Code s. 871(m)? CRA responded: of the Internal Revenue Code (the “Code”).

After noting that the final regulations under s. 871(m) imposed withholding on payments under certain notional principal contracts, derivatives and other equity-linked instruments that referenced dividends on U.S. equity securities, CRA stated:

In our view, for the purposes of Canadian income tax reporting, in particular [Regs.] 201(1) and (2) … the characterization of payments received by a taxpayer should be based on the legal nature of the contract under which the payment is made, irrespective of the tax treatment in a foreign jurisdiction … . Thus, amounts received by Canadian residents under such contracts should be reported for Canadian tax purposes the same way they were before the enactment of section 871(m) of the Code.

Subsection 201(4.1)

Administrative Policy

22 December 2003 External T.I. 2003-0000125 F - TITRE DE CREANCE INDEXE

reporting of inflation adjustments on indexed bonds
Also released under document number 2003-00001250.

CCRA noted that statements in the T5 Guide - Return of Investment Income to the effect that:

  • It will treat as interest any increase or decrease (based on the change in the buying power of money) in the amount owing under an indexed debt obligation.
  • When the buying power of money decreases, the debtor should treat the additional amount that the holder received or was entitled to receive during the year as interest.
  • Where the buying power of money increases, the debtor must treat the reduction in the amount due under an indexed debt instrument as interest that the debtor received or was entitled to receive in the year – and the holder of the bond will be able to deduct the amount paid to the debtor.
Locations of other summaries Wordcount
Tax Topics - Income Tax Regulations - Regulation 7001 - Subsection 7001(1) detailed illustration 15
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Indexed Debt Obligation stripped indexed coupons were indexed debt obligations but would not give rise to excluded payments 34
Tax Topics - Income Tax Regulations - Regulation 7001 - Subsection 7001(7) - Excluded Payment stripped indexed coupons did not give rise to excluded payments because no single fixed rate 52
Tax Topics - Income Tax Act - Section 20 - Subsection 20(14) application of s. 20(14) to indexed debt obligation 143

Subsection 201(2)

Administrative Policy

90 C.R. - Q23

Regulation 201(2) is considered to apply in the situation where a law firm holds funds received from its client in trust pending application of those funds for disbursements or against fees for services rendered, on the basis that s. 75(2) of the Act deems the investment income to be income of the client rather than of the trust. Where the client is a non-resident (so that s. 75(2) does not apply) RC is prepared to waive the requirement under s. 204(1) of the Regulations to file a T3 return where the appropriate Part XIII tax is remitted to RC.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2) 59

Subsection 201(4)

Administrative Policy

19 June 2014 External T.I. 2014-0519881E5 - T5 reporting requirements

debenture with interest payable on 1-year maturity not an investment contract

In Year 1, Canco issued unsecured convertible Debentures bearing interest that is payable only on maturity one year later in Year 2. In finding that the Debentures are "investment contracts" so that a T5 only needs to be issued for Year 2, CRA stated:

[A] debt obligation will not be an investment contract… if the taxpayer has (otherwise than because of the interest accrual rules in subsection 12(4) of the Act), at periodic intervals of not more than one year, included in computing the taxpayer's income throughout the period in which the taxpayer held an interest…in the obligation the income accrued on it for those intervals. If a Debenture matures exactly in one year or less after issuance and the interest on the Debenture is payable on maturity, then the taxpayer will include in income all the interest accrued on the Debenture within the requisite one year period, and therefore the Debenture will not be an investment contract.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(11) - Investment Contract debenture with interest payable on 1-year maturity not an investment contract 161

12 October 2010 External T.I. 2010-0371931E5 F - T5 Information Returns

T5 slip should report Reg. 7000 interest and interest coupon payments net of previous accruals thereof

As a result of some of the coupons on a bond having been detached from a bond that was acquired on January 1, 20X0 by a resident of Canada, the first interest coupon (not detached) was paid to the bondholder until December 31, 20X3 and, in the meantime, the taxpayer had been required to accrue deemed interest under Reg. 7000. It would appear that there is no requirement for the issuer to report the deemed interest under Reg. 201(1), and conversely there would be a requirement to so report the full amount of the first interest coupon that was paid, even though the taxpayer had already been required to recognize a portion of such interest under s. 12(9) and Regs. 7000(1) and (2).

Would CRA remove the requirement to issue T5 slips where the interest is actually paid and deemed interest has already been recognized? In finding that the required T5 reporting corresponded to the timing of income recognition under ss. 12(4) and (9) and Reg. 7000, CRA stated:

The issuer of debt obligations from which a portion of the coupons have been detached can be required to file T5 slips by virtue of I.T.R. subsection 201(4) in respect of amounts required to be included in computing the income of taxpayers by virtue of subsection 12(4). …

The presumption in subsection 12(9) with respect to deemed interest is applicable for the purposes of subsection 12(4). …

The T5 Guide …states that the interest to be included in Box 13 is interest that has not previously been reported. Where there has been an interest payment, the amount of interest to be included in Box 13 does not include the portion of the payment for which T5 slips have already been filed by virtue of I.T.R.section 201 for a taxpayer's previous taxation years.

28 July 1994 940615 (C.T.O. "T-5 Reporting")

In response to a query as to whether T-5 reporting was required for a stock-index linked obligation on which a contingent payment was based on the TSE 100 stock index, RC indicated that "where the maximum amount that could be payable in respect of the year cannot reasonably be calculated, the interest amount is only included in income pursuant to paragraph 12(1)(c) of the Act in the year received or receivable.


Subsection 201(6)

Administrative Policy

Handbook on Securities Transactions, 94-110(E)

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 87 - Subsection 87(4) 26