The primary purpose of T5 slip is to identify the different types of investment income that Canadian residents must report on their overall income tax and benefit returns. If you usually make investment income payments to a Canadian resident or if you get some investment income payments as an agent or nominee for an individual who is a resident of Canada, you must prepare the T5 information return. Remember, you shouldn’t report on a T5 slip investment income that has been paid to non-residents of Canada.
What payments are included in the T5 slip?
All eligible dividends, including deemed dividends, are included in the T5 slip. Also, you should include interest from the following:
– A fully registered debenture or bond.
– Funds loaned to or on deposit with, all types of properties placed with, association, a corporation, an institution, an organization, trust, or partnership.
– An annuity contract or an insurance policy, particularly when the interest is paid by the insurer.
– An account with an investment broker or dealer.
– Amount of money owing as a form of compensation for expropriated property.
Other payments that must be included in the T5 slip include:
1) Amount of interest deemed to accrue pursuant 20(14.2) subsection of the Income Tax Act resulting from an assignment or transfer of associated notes.
2) Specific amounts of money distributed from an eligible funeral plan.
3) The specific amount of money indicated in a policyholder’s income, particularly under section 12.2.
4) Blended capital and income payments made by an association, corporation, institution, organization, trust, or partnership.
5) Royalties associated with the use of an invention, work, or the right to take natural resources.
Note that for all investment contracts signed before 1990, you must report the accrued interest every 3 years unless you have chosen to report yearly. For all investment contracts signed after 1989, the accrued interest must be reported annually.
Steps to preparing the T5 slip
Follow these eight steps to prepare a T5 slip successfully.
1) Fill in the recipient’s full name and address. Note that the recipient is the person getting the dividend or payment.
2) Indicate the payer’s (the name of your corporation) name and address.
3) Specify the year in which the dividend or payment was received. For example, in 2019.
4) Establish whether or not the dividend paid is eligible or non-eligible. Simply put, an eligible dividend is paid from company profits in excess of $500,00, and the non-eligible dividend is paid for profits below this amount.
5) Specify the number of dividends acquired in the calendar year (Jan 1st to December 31st) in box 24 (for eligible dividends) or box 10 (for all non-eligible dividends).
6) Indicate the number of all taxable dividends in box 11. This is calculated as follows; the actual amount of dividends multiplied by a factor (1.17). Note that on your personal tax return, you will indicate the amount of the taxable dividends in your taxable income.
7) Enter the dividends tax credit amount in box 12.
8) Complete the T5 summary.
Note that the T5 summary adds up all the amounts reported in the T5 slip. A company might issue several T5 slips in case it has many shareholders. Remember to indicate the year and your corporation’s business number of the T5 summary form.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.