Subsection 201(1)
Administrative Policy
15 August 2014 T.I. 2014-0532941E5 - T5 reporting obligations
Opco has issued the "Debentures" in fully registered form to the resident "Brokers," who then sold them to their resident "Clients" for whom they act as agents. Interest payments are made from Opco to its paying agent (the "Bank"), from it to the Brokers, and then from the Brokers to their Clients. What are the T5 reporting obligations?
After noting that Opco is not required to issue a T5 to the Bank as it is acting as Opco's agent (so that the Bank is not receiving the interest for a beneficial owner), CRA stated:
When interest amounts are paid by the Bank to the Brokers, there has been a payment of interest on the Debentures. Accordingly, a T5 slip…[is] required [although] it is not necessary for both Opco and the Bank to file a T5… . The name of the payee recorded on the T5 slip should be the relevant Broker. … T5 slips will also have to be issued when interest is paid by the Brokers to their Clients.
T4015(E) "T5 Guide - Return of Investment Income 2013"
If the payment is made to the registered holder of an investment (for example, broker or trustee of an RRSP), enter the name of the registered holder, not the name of the individual. ...
For investment contracts acquired after 1989, you have to report accrued interest every year. Base this calculation on the date the investment contract was issued. We will consider an investment contract acquired before 1990 to be a new contract acquired after 1989 if certain material changes were made after 1989. For details, see Interpretation Bulletin IT-448, Dispositions - Changes in Terms of Securities, and its Special Release.
Subsection 201(2)
Administrative Policy
90 C.R. - Q23
Regulation 201(2) is considered to apply in the situation where a law firm holds funds received from its client in trust pending application of those funds for disbursements or against fees for services rendered, on the basis that s. 75(2) of the Act deems the investment income to be income of the client rather than of the trust. Where the client is a non-resident (so that s. 75(2) does not apply) RC is prepared to waive the requirement under s. 204(1) of the Regulations to file a T3 return where the appropriate Part XIII tax is remitted to RC.
Subsection 201(4)
Administrative Policy
19 June 2014 T.I. 2014-0519881E5 - T5 reporting requirements
In Year 1, Canco issued unsecured convertible Debentures bearing interest that is payable only on maturity one year later in Year 2. In finding that the Debentures are "investment contracts" so that a T5 only needs to be issued for Year 2, CRA stated:
[A] debt obligation will not be an investment contract… if the taxpayer has (otherwise than because of the interest accrual rules in subsection 12(4) of the Act), at periodic intervals of not more than one year, included in computing the taxpayer's income throughout the period in which the taxpayer held an interest…in the obligation the income accrued on it for those intervals. If a Debenture matures exactly in one year or less after issuance and the interest on the Debenture is payable on maturity, then the taxpayer will include in income all the interest accrued on the Debenture within the requisite one year period, and therefore the Debenture will not be an investment contract.
28 July 1994 940615 (C.T.O. "T-5 Reporting")
In response to a query as to whether T-5 reporting was required for a stock-index linked obligation on which a contingent payment was based on the TSE 100 stock index, RC indicated that "where the maximum amount that could be payable in respect of the year cannot reasonably be calculated, the interest amount is only included in income pursuant to paragraph 12(1)(c) of the Act in the year received or receivable.