T5018 slips: who has to file one, and when it's due

Summary

A T5018, formally the Statement of Contract Payments, is a one-page form filed with the Canada Revenue Agency (the CRA). A construction business uses the form to report how much it paid each of its subcontractors. No tax is calculated on the form and none is paid with it. The form exists so the CRA can check that your subcontractors declared the money.

1. Work out whether more than half your business income comes from construction work. Business income here means what your own business takes in, counted in dollars before you deduct any costs, rather than hours worked or jobs done. What your subcontractors do for a living is beside the point.
2. Choose a reporting period, meaning the twelve months your filing covers. The choice is your own fiscal year, the twelve-month accounting year your books run on (e.g. April 1 to March 31), or the calendar year.
3. Prepare one slip, one page per subcontractor, for every subcontractor resident in Canada you paid more than $500 over that period, tested before GST/HST.
4. Report on each slip what actually left your bank account, sales tax included.
5. File the slips with a summary form called the T5018SUM, within six months of the end of your reporting period. For a period ending December 31 the deadline is June 30.
6. File electronically once you have more than five slips, because filing that many on paper carries a penalty of its own.

We recommend choosing your corporation’s own fiscal year, which lands the T5018 on the same day as your corporate income tax return. That recommendation flips where most of the subcontractors you hire are individuals rather than companies, because individuals file on a calendar year and expect your figures to match theirs. Filing a slip is a separate duty from deciding whether the person was ever a subcontractor, and our employee or contractor checker runs the CRA’s factor questions over one worker and prices what a reclassification would cost you.

Who has to file one

The obligation sits in section 238 of the Income Tax Regulations, the detailed rules made under Canada’s federal tax legislation. The regulation catches any person or partnership paying for construction work whose own business income comes primarily from construction. Measure the mix over the same twelve months the slips will cover, and in your first year over the period you’re about to report on. Two things about that test surprise owners. The first is that the test runs on your business rather than on the businesses you hire. Paying a plumber doesn’t make a dental practice a T5018 filer, though that practice may still have a T4A slip to file for the fees. The second is that the CRA reads “primarily” as more than 50%, measured the way step 1 above describes.¹

The regulation’s definition of “construction activities” is wide. The definition reaches everything from erecting and excavating to modifying, dismantling and removing all or any part of a building, a structure, surface or sub-surface construction, or any similar property. The CRA publishes examples and says outright that they aren’t a complete list. Its examples of structures include highways, bridges, gas and oil pipelines and sewage systems, so roadbuilding and pipeline work sit inside the regime rather than outside it.¹

Which payments go on a slip

Report payments to subcontractors resident in Canada, meaning someone who lives here or a company incorporated here, for construction services performed here or abroad. A slip is required where you paid one subcontractor more than $500 in total, before GST/HST. GST/HST is the federal Goods and Services Tax, plus the Harmonized Sales Tax that replaces it in several provinces.² Note the wording, because a subcontractor paid exactly $500.00 sits outside it. The Regulations set no dollar floor at all, so the $500 is a concession the CRA could lower or withdraw. As such we record every subcontractor payment, not only the ones over $500.

One pair of rules is the easiest thing to get wrong here. The $500 test excludes GST/HST, while box 22 includes it, along with provincial sales tax. Box 22 is the field on the slip carrying the amount you report.³ To provide an example, a $520 invoice plus 13% Ontario HST is $587.60a $520 invoice plus 5% British Columbia GST is $546.00a $520 invoice plus 5% Alberta GST is $546.00a $520 invoice plus 5% Saskatchewan GST is $546.00a $520 invoice plus 5% Manitoba GST is $546.00a $520 invoice plus 15% New Brunswick HST is $598.00a $520 invoice plus 14% Nova Scotia HST is $592.80a $520 invoice plus 15% Prince Edward Island HST is $598.00a $520 invoice plus 15% Newfoundland and Labrador HST is $598.00 out of your account. The test looks at the $520, which clears $500, and the slip then reports the full tax-included amount. The CRA also measures the $500 against the calendar year in one place on its page and against your reporting period in another. Where those two disagree, we issue the slip if either of them clears $500.

Each slip also carries the subcontractor’s business name and address, plus one number. Box 24 takes their fifteen-character CRA account number (e.g. 123456789RT0001), or their Social Insurance Number where the trade has none.⁴ Collect it when you hire them, because chasing it later is the usual reason a filing goes in late.

The slip is cash-based, so you report what you paid inside the period rather than what was billed. A stage payment invoiced in November but paid in January belongs to January. A holdback is the part of each payment you keep back until the job is signed off, and it lands on the slip for the period you release it in. Most trade invoices mix labour and materials on one page, and we report those in full rather than stripping the materials out. The regulation drops an amount out of the return only where all of it was for goods.⁵ Payments to a non-resident subcontractor need a separate reporting check. Services performed in Canada normally go on a T4A-NR and can require withholding, so confirm where the work is done and ask us before paying.⁶

Reporting period, deadlines and penalties

Your reporting period is a choice between the calendar year and your own fiscal year. Once you’ve made it, you can’t switch without the CRA’s authorization.⁷ The regulation doesn’t say how the choice is made or recorded, so in practice your first filed return fixes it. It’s worth deciding deliberately rather than inheriting whatever your bookkeeping software assumes (e.g. most packages default to the calendar year and never ask you the question). We recommend your own fiscal year, because the figures then come out of books already finalised for your corporate income tax return, and both filings fall on one date. The cost is slip totals that won’t match the calendar year individual subcontractors file on. Where most of the trades you hire are individuals, that mismatch outweighs the saving. The calendar year then wins, at the price of a second annual close your bookkeeper will bill you for.

The return, meaning your slips plus the T5018SUM summary that counts them and adds up their totals, is due six months after your reporting period ends. For a period ending December 31 the deadline is June 30, and for a March 31 fiscal year end it’s September 30.⁸ Where the due date falls on a Saturday, a Sunday or a public holiday the CRA recognizes, the return is on time if the CRA receives it, or it’s postmarked, on the next business day. The T5018 doesn’t share the end-of-February deadline that T4 employment slips use, and owners who assume it does lose money every year.

Before you can file anything you need an information returns program account. The CRA calls it an RZ account and writes it as 123456789RZ0001. Your payroll account (ending RP) and your GST/HST account (ending RT) won’t do. You add an RZ to your existing business number through Business Registration Online, signed in to your CRA account, and the CRA asks you to make every effort to have it before you file.⁹ Filing electronically stopped being optional above five slips for returns filed on or after January 1, 2024. Six slips, meaning six subcontractors you each paid more than $500, is enough to force you online, and the CRA’s Web Forms service handles up to 100 slips in a browser.

Late filing is priced by the number of slips in the return, with one penalty equal to the greater of $100 and a daily amount. The CRA’s reduced policy is what it charges in practice, rather than the larger amounts the legislation allows. Under that policy, one to five slips is a flat $100, and six to ten slips is $5 for each day the return is late, up to $500. Eleven to fifty slips is $10 a day, up to $1,000, with the day count stopping at 100 days.¹⁰ Note that $100 floor, because a six-slip return one day late costs $100 rather than $5. Above fifty slips the daily rates and the caps both step up, so a business with sixty trades should talk to us before filing late. Filing on paper when electronic filing was required is a separate $125 for six to fifty slips, and it stacks on top.¹¹

How often this changes

Two of the answers above can change under you. The more-than-half test has to be re-run whenever your revenue mix shifts, because dropping to half or less switches the T5018 obligation off and the T4A one on (e.g. renting equipment out without an operator pushes your mix the wrong way). The $500 threshold is CRA policy rather than legislation, so it can move without Parliament doing anything, and it deserves a look each spring. The six-month deadline sits in the Regulations and is steadier, though a business that stops operating has 30 days from the day it stops.⁸

Closing thoughts

The T5018 is a small filing and a decent indicator of a larger problem. The form itself is straightforward; the work is producing a clean list of payments by vendor covering twelve months. If that list is hard to assemble, the filing has told you something about the bookkeeping behind it. That list is worth more than the slip, because it tells you what a job cost you while you can still price the next one differently.

How we handle it

We keep the subcontractor list current through the year rather than rebuilding it in June, and collect each trade’s account number when they’re first hired. Where the fiscal-year choice makes the dates coincide, we file the T5018 alongside the corporate income tax return. T5018 filing is part of the tax work we scope for construction clients. If you’ve missed prior years, we’ll work out roughly what the penalties could come to and agree a catch-up plan before anything goes to the CRA.