The Canada Customs and Revenue Agency (CCRA) 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 CCRA 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 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. As a result, the system became mandatory when it was announced in the February 24, 1998, Federal Budget. At that time, the CCRA made a commitment to consult with the industry to determine the most effective approach for reporting payments to subcontractors.
The reporting system has now been modified to reflect concerns that were originally raised about its implementation. Particular attention has been 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. The businesses have to report these payments to the CCRA. The due date for the first reporting period was extended from March 31, 2000, to June 30, 2000. However, to facilitate transition to the new reporting system information returns for all reporting periods beginning and ending in 1999 will not be required until June 30, 2000. Note that reporting of payments made before 1999 or for periods beginning before 1999are not required.
Who will have to report?
All individuals, partnerships, and corporations whose primary business activity is construction will have to report payments made to subcontractors. For these purposes, construction has been defined as erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling, or removal of any structure or part, including but not limited to buildings, roads, and bridges. The construction industry has made recommendations that the CPRS be extended to cover businesses in other industry sectors that are also involved with home renovations. The CCRA, in an effort to level the playing field has begun discussions with these businesses to include them in the reporting process.
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 per year. 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 on the cheques a payer made to the subcontractor).
Address - Although the address of the sub-contractor is no longer mandatory, contractors are encouraged to provide the address whenever possible.
Subcontractor's identification number - One of the CCRA's identifiers. This is either the subcontractor's Business Number, that 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 services to a particular subcontractor for the year is less than $500, 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. 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 have to be filed 6 months from the end of the reporting period. To facilitate transition to the new reporting system, information returns for all reporting periods beginning and ending in 1999 will not be required until June 30, 2000. Note that reporting of payments made before 1999 or for periods beginning before 1999 is not required.
How will information be submitted?
The payment information can 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. In order to make it easier for contractors to send the required information we will accept other forms of reporting. Although the use of a specific for is not required, the information should be reported in a column format with one line for each contractor. A summary must be included that states the number of contractors and the total amount paid to them. We continue to encourage contractors to use the return and slips that are now available to ensure that all the required information is received.
The T5018 Information Return was mailed out to all GST registrants who had indicated that they were in the construction industry. The T5018 Information Return will also be available from your local TSO.
For more information
For more information, contact the Client Services section of any tax services office or visit the CCRA's Internet site at: http://www.cra-arc.gc.ca/contract/
