Effective January 1, 2011, the Canada Revenue Agency (CRA) has changed the criteria for filing the Partnership Information Return (Form T5013 including schedules and slips). The new filing criteria will apply to partnerships with fiscal periods ending on or after January 1, 2011. This article outlines the new criteria and how they might impact your business.
Partnership Information Return filing requirements
Previously, the CRA’s administrative policy generally exempted partnerships with fewer than six partners from filing the Partnership Information Return. Effective January 1, 2011, this policy has been changed and now a partnership that carries on a business in Canada, or a Canadian partnership with Canadian or foreign operations or investments, has to file a T5013 for each fiscal period of the partnership if:
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At the end of the fiscal period, the partnership has:
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At any time during the fiscal period, the partnership:
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is a tiered partnership (i.e. has another partnership as a partner or is a partner in another partnership);
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has a corporation or trust as a partner;
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invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership; or
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is requested in writing to file a return by the CRA.
Determining if you have a filing requirement
Annually, you will have to assess whether your partnership has met any of the filing criteria for that year. Depending upon your business, you may find that one year you have a filing requirement and the next you do not meet any of the criteria.
The absolute value test takes gross revenues and expenses from your financial statements and adds the two balances together. Revenues refer to revenues that have not been netted against other expenses. Expenses include both current costs and capital costs (i.e. depreciation). If this total is more than $2 million, your partnership has a filing requirement for that particular year.
The asset investment test looks at the original purchase cost of all the assets of the partnership, both tangible and intangible, without taking into account the depreciated amount to determine if the company has more than $5 million in assets. The fair value of your assets for a particular year is not relevant in assessing this criterion.
Due dates
If you determine you have a filing requirement for a particular year, you will need to file this return on time to avoid late filing penalties. The due date for filing the Partnership Information Return depends on the type of partners and has not changed. The chart below highlights the filing due dates for most partnerships.
Completing the Partnership Information Return
To complete a Partnership Information Return, the information needed by your BDO advisor will include:
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A summary of basic information about the partnership;
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Copies of information slips distributed to the partnership;
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The partnership’s financial statements (balance sheet, income statement and explanatory notes where applicable);
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A reconciliation of partners’ capital accounts; and
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If applicable, information on capital property, charitable donations made by the partnership, and scientific research and development expenditures claimed by the partnership. Other information may be needed in specific situations.
If you already have financial statements prepared by your BDO advisor, all of this information should be readily available. Otherwise, you will need to assess if your internally prepared statements are sufficient to meet this reporting requirement. If not, you should engage your BDO advisor to prepare or assist you with the preparation of the financial statements needed to complete the return.
Because the assessment of the filing criteria is based on the current year results and not the prior year, you may find at the end of a year you have a filing requirement that you were not expecting. Therefore, it is a good idea, if you think you are close to meeting any of the criteria, to begin assembling the information early or talk to your BDO advisor about how they can help you comply with this filing requirement well before the filing deadline.
Should you have any questions about the Partnership Information Return and the filing requirements, please do not hesitate to contact your BDO advisor.
Next section: The CRA Reviews Not-For-Profit Organizations
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