Paying Subcontractors: Tax Rules
Who files T5018 slips, the $500 threshold, deadlines and penalties, plus what to collect from every sub before you pay them.
The short version
- If more than half your business income comes from construction, you report payments to subcontractors for construction services on T5018 slips.
- Report each resident subcontractor paid more than $500 for services in the reporting period, before GST/HST. Goods-only purchases are not reported.
- Due within six months after the end of the reporting period, which is either the calendar year or your fiscal year. Pick one and stay with it.
- More than five slips: file electronically. Late slips carry the same daily penalties as T4s, starting at $100.
- Before the first cheque, get the sub's legal name, address, business number and GST/HST number. In Ontario, get a WSIB clearance too.
Paying Subcontractors: Tax Rules
Construction runs on subcontractors, and CRA knows it. The T5018 is how CRA lines up what general contractors pay with what subs report, and it's one of the most productive matching programs CRA has. For the contractor, it's a once-a-year slip. For the sub who forgot some cash jobs, it's a letter two years later. Here's how to do the paperwork right on both sides.
Do You Have to File?
| Question | If yes |
|---|---|
| Is more than 50% of your business income from construction activities? | You file T5018s |
| Did you pay a sub for construction services (labour, or labour with materials)? | Report it |
| Was the total to that sub over $500 in the reporting period? | Issue a slip for that sub |
| Was it goods only (lumber, concrete delivered, rentals without an operator)? | Not reportable |
| Is the sub a non-resident? | Different rules: 15% withholding on services in Canada, unless waived |
Construction activities include building, renovating, repairing and demolishing buildings, roads, bridges and other structures, and the trades that go with them. Check every invoice with the construction invoice analyzer.
Not sure which subs need a slip?
List the subs you paid last year, roughly what for and how much. The assistant tells you who needs a T5018, what goes on it and your deadline.
Before You Pay a Sub
- Business number and GST/HST number. Confirm the GST/HST number with CRA's registry; a fake one costs you the input tax credit. See input tax credits.
- Invoice details CRA needs for the ITC: name, date, GST/HST number, amount, description; see GST/HST for contractors.
- WSIB clearance (Ontario) or the equivalent workers' compensation clearance elsewhere. Without it, you can be liable for an uncovered sub's premiums.
- Contractor, not employee. A "sub" who works only for you, on your schedule, with your tools, may be an employee; see employee vs contractor.
- Holdbacks: the 10% construction holdback changes when payments count; record the date actually paid.
Filing the T5018
- Reporting period: calendar year or fiscal year; you need CRA's permission to change.
- Amount: total paid for services in the period, excluding GST/HST.
- Deadline: six months after the period ends. Calendar year 2026: by June 30, 2027.
- Filing: electronically if more than five slips. Sending slips to the subs is not required, though many contractors do.
- Late or missing: the information-return penalties apply, $10 a day for up to 50 slips, minimum $100; see T4 filing deadline for the full table.
Subcontracting and not sure your GST/HST is right?
The GST/HST SmartFile checks your registration date, what you should have charged, and your input tax credits on sub invoices, quarter by quarter.
For the Subcontractor
Your income doesn't depend on getting a slip; you report everything you earned, slip or not. CRA compares T5018s with your return, and gaps lead to reassessments; see unreported income letters. Self-employment rules: independent contractor taxes and tax instalments. Building whole houses to sell is a different tax situation again; see building a house to sell.
T5018 Questions
Who has to file T5018 slips?
Businesses whose primary activity is construction, meaning more than 50% of business income comes from construction activities, for payments to subcontractors for construction services.
What is the T5018 reporting threshold?
Payments to a subcontractor totalling more than $500 for construction services in the reporting period, excluding GST/HST. Goods-only purchases are not reported.
When is the T5018 due?
Within six months after the end of the reporting period. For the 2026 calendar year, by June 30, 2027.
Do I report payments to incorporated subcontractors?
Yes. T5018 reporting applies to resident subcontractors whether they are individuals, partnerships or corporations.
Do I have to give T5018 slips to subcontractors?
It is not required, but it is good practice. You must file them with CRA.
Sources: CRA, T5018 Statement of contract payments; RC4120 (information return penalties). Checked October 2026. Workers' compensation and holdback rules are provincial and summarized only. Non-resident withholding (Regulation 105) has its own waiver process not covered here.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.