Partnership Information Return

As background, in Canada, a partnership is not a legal entity, rather a relationship between two or more persons carrying on business with a common view to profit. However, for the purposes of computing income, it is seen as a separate person. As such, any discretionary deductions, such as capital cost allowance (depreciation for tax purposes), are taken at the partnership level. Although income is calculated at the partnership level and the income or loss of the partnership is allocated to the partners based on their respective interest, it is not a taxable entity and there is no requirement to file an income tax return for the partnership.

There may, however, be a filing requirement of the T5013 Partnership Information Return. Subsection 229(1) of the Income Tax Regulations requires all partnerships carrying on business at any time during the year, or a partnership that is at any time during the year a Canadian partnership or specified investment flow through partnership, to file a partnership information return. Though administratively, CRA only requires partnerships to file the information return if any of the following criteria are met:

• At the end of the fiscal period, the partnership has an absolute value of revenues plus an absolute value of expenses more than $2 million, or has more than $5 million in assets;
• At any time during the fiscal period:
• the partnership is a tiered partnership (has another partnership as a partner or is itself a partner in another partnership, or
• the partnership has a corporation or a trust as a partner, or o the partnership invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership, or
• the minister of National Revenue requests one in writing.

The filing date of this information return varies depending on the type of partners. As noted in guide T4068—Guide for the Partnership Information Return, the due dates are as follows:

• March 31^st after the calendar year in which the fiscal period of the partnership ended if, throughout the fiscal period all partners are individuals (trusts are considered individuals), including end members of tiered partnership, and investment clubs that file on the modified partnership basis.
• Five months are the end of the partnership’s fiscal period if, through the fiscal period all partners are corporations, including end members of a tiered partnership
• In all other cases the earlier of March 31^st after the calendar yar in which the fiscal period of the partnership ended, and the day that is five months after the end of the partnership’s fiscal period.

It is important this information return is filed on a timely basis since there is a late filing penalty of $25 per day, from a minimum of $100 to a maximum of $2,500. This penalty is assessed on each mandatory form of the return which includes each T5013 slip issued.

Our office would be happy to discuss the partnership information return and how it may be applicable to you.