Members of partnerships in Canada are often expected to file a Statement of Partnership Income (Form T5013) with the Canada Revenue Agency (CRA). Form T5013 provides the CRA with basic financial information about a partnership for the tax year. While partnerships do not pay taxes, the members do, and the CRA compares the information on the T5013 with individual tax filings.
What is a partnership?
A partnership is a business alliance between two or more entities – people, corporations or trusts – that join together to operate a business or trade. Each partner will likely contribute complementary elements to the business. For example, one partner may provide financing while another does the labour.
Ideally, the partnership has a written agreement that lays out how profits and losses are split among the partners. The agreement should also set out how the work, decision-making and financial investment are managed.
Partnerships can have income from:
- the business’s operations
- rental property
- other sources, such as farming, fishing and interest income
Each income source should be calculated separately for profit or loss.
There are three types of partnership structure in Canada.
A general partnership (GP) can be formed with an oral or written agreement, and requires no formal business filing. All partners are equally liable for debts and losses.
In a limited partnership (LP), there can be two different types of partners – a general partner and a limited partner. While the general partner manages the business, the limited partner only contributes capital and isn’t involved in running the business. Liability is limited to the amount of capital agreed to be contributed.
Partners in an LP must file a Certificate or Declaration of Limited Partnership, and register with a provincial authority.
Limited liability partnership
A limited liability partnership offers some legal protection for the personal assets of the partners. That means they’re not always held personally responsible for the debts of the business, or the mistakes of their business partners.
What is a T5013 partnership information return?
A T5013 Statement of Partnership Income shows the CRA the financial status of a partnership. Under Subsection 229(1) of the Income Tax Act, many Canadian partnerships, and partnerships that carry out business in Canada, must file a T5013 Statement of Partnership Income.
The form is informational only – it provides basic financial information about a partnership, such as net income or losses from the previous year. It is part of the partnership’s tax preparation when it files its tax return.
The Canadian Income Tax Act doesn’t treat partnerships as entities that pay taxes. This means that income goes to the partners, and is reported and accounted for through either their personal or corporate tax returns. The T5013 fills the gap and allows the CRA to compare and check that the information on their returns is correct.
Individuals must complete the T1 income tax and benefit return reporting on their income for the previous tax year. Corporations must complete the T2 corporation income tax return. To claim partnership expenses as an individual, members of a partnership can file the Employee and Partner GST/HST Rebate Application (form GST370).
Non-residents must pay tax on income earned in Canada and need to complete the T5013 form as well.
Although partnerships in Quebec are not subject to tax, they may have to report their share of business income or losses from the partnership in the province on this non-CRA form. Some partnerships may be exempt.
Who needs to file a T5013?
Partnerships have to file a T5013 partnership form if any of these things is true about their business:
- The combined absolute value of revenue and expenses is greater than $2 million or more than $5 million in global assets. An exception to this is for farming partnerships reporting farming income.
- During the tax period, one of the following occurs. The partnership:
Completing the T5013 partnership information form
There are four steps to file the T5013:
- Complete the T5013 FIN
- Fill out and attach the T5013 schedules
- Complete a T5013 slip for each partner
- Complete a T5013SUM for the partnership as a whole
You might need an accountant or tax professional to help you complete these forms.
1. Complete the T5013 FIN
The first step is to fill out the Partnership Financial Return. It is a 4-page document with three parts:
1. Partnership information
The cover page asks for basic information about the company, including the business name, address, the type of partnership and the partnership account number.
2. Documents required to be attached
Page 2 is where partners find which schedule documents should be included with the return. There are several questions to help partners.
3. Additional miscellaneous information
On pages 3 and 4, you record information about the partnership’s operations, taxes and finances.
2. Fill out and attach the T5013 schedules
Several schedules must be attached to the T5013 form:
- T5013 Schedule 1: Partnership’s Net Income (Loss) for Income Tax Purposes.
- T5013 Schedule 50: Partner’s Ownership and Account Activity. This includes box 105, where you record a limited partner’s at-risk amount.
- T5013 Schedule 100: Balance Sheet Information.
- T5013 Schedule 125: Income Statement Information. This includes farming and non-farming income and expenses.
- T5013 Schedule 140: Summary Statement.
- T5013 Schedule 141: Financial Statement Notes Checklist.
Other schedules you may need to attach:
- T5013 Schedule 2: Charitable Donations, Gifts and Political Donations
- T5013 Schedule 5: Allocation of Salaries and Wages, and Gross Revenue for Multiple Jurisdictions.
- T5013 Schedule 6: Summary of Dispositions of Capital Property. This schedule includes any proceeds from the sale of capital property, such as capital gains or losses, rental income, or proceeds from shares and bonds.
- T5013 Schedule 8: Capital Cost Allowance (CCA).
- T5013 Schedule 9: List of Partnerships. Complete this schedule if the partnership was part of another partnership.
- T5013 Schedule 12: Resource-Related Deductions if the partnership is involved in natural-resource mining or development, such as for oil and gas.
- T5013 Schedule 52: Summary Information for Partnerships that Allocated Renounced Resource Expenses to their Members.
There are other schedules if you need to claim tax credits, such as industry-specific tax credits for farmers, fishing and the resource industry.
3. Complete a T5013 slip for each partner
This form includes information about the partnership’s operating results for the current tax year, including total capital gains and losses, and the amount allocated to the partner.
Fixed boxes are for information about the partnership, like the percentage share of the partnership and tax shelter identification number.
There are five generic boxes on the slip for extra information, like each partner’s share of revenue, expenses and net income:
- Canadian and foreign net rental income (loss)
- professional net income (loss)
- renounced Canadian development expenses
- expenses qualifying for an ITC
- total carrying charges
In Box 108, limited partners can carry forward limited partnership losses if they have a positive at-risk amount.
4. Complete the T5013SUM for the partnership
The T5013SUM Summary of Partnership Income is a 2-page document. This shows the details allocated to partners from the T5013 slips. The summary shows the income and losses allocated to the partners identified in the T5013 slips.
There are four parts to this form. Users must fill out the identification section and totals from their T5013 slips, and the contact information and certification.
Filing the T5013 form
- If all partners are individuals rather than part of a corporation, the deadline for filing is March 31 each year.
- If a partner is part of a corporation, the deadline is March 31 or 5 months after the end of the partnership’s tax year, whichever is earlier.
- If all partners in the partnership are corporations, the deadline is 5 months after the end of the partnership’s tax year.
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
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