Canadian Tax Adviser
February 7, 2012

Partnership Information Return Guide — CRA's New Financial Activity Test

Lorne Shillinger and Louisa Ding
Toronto, Canadian Corporate Tax

The CRA recently released a revised Guide T4068, "Guide for the T5013 Partnership Information Return - 2011". The CRA has revised the return, forms and schedules and introduced several new forms and schedules. Only minor changes have been made to the T5013 and T5013A information slips themselves.

Filing requirements
In 2010, the CRA announced that it was changing its administrative policy that exempts partnerships with five or fewer members from filing an annual partnership information return and instead introducing a new exemption based on a financial activity threshold or the type of partnership.

Effective January 1, 2011, a partnership that carries on a business in Canada, or a Canadian partnership with Canadian or foreign operations or investments, must file Form T5013 for each fiscal period of the partnership if any of the following conditions are met:

• At the end of the fiscal period, the partnership has an absolute value of revenues plus an absolute value of expenses of 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)
  • The partnership has a corporation or a trust as a partner
  • The partnership invested in flow-through shares of a principal-business corporation that incurred Canadian resource expenses and renounced those expenses to the partnership
  • The Minister of National Revenue requests a Form T5013 in writing.

For purposes of the revenue and expense threshold, the "absolute" value of a number refers to the numerical value of the number without regard to its positive or negative sign. To determine whether a partnership exceeds the $2 million absolute value threshold, add total expenses to total revenues rather than subtracting expenses from revenues as you would to determine net income.

For example, a partnership with revenues of $1.5 million and expenses of $1.25 million would have an absolute value of revenues plus an absolute value of expenses of $2.75 million ($1.5 million plus $1.25 million). Thus, this partnership would be required to file Form T5013 starting in 2011.

In addition, when determining whether there are more than $5 million in assets, a partnership should include the cost of both tangible and intangible assets without regard for depreciation.

Forms and schedules
The partnership information return now includes four new forms:

• T5013 FIN, "Partnership Financial Return"
• T5013 SUM, "Information Slips Summary"
• T5013 SCH 5, "Allocation of Salaries and Wages, and Gross Revenue for Multiple Jurisdictions (Schedule 5)"
• T5013 SCH 9, "Affiliated Corporations, Partnerships, Partners, or Trusts (Schedule 9)".

The partnership information return no longer requires the following forms:

• T5013 "Summary, Information Return of Partnership Income"
• Schedule T5013 SCH 19, "Non-resident Member Information"
• Schedule  T5013 SCH 25, "Investment in Foreign Affiliates".

For more information, contact your KPMG adviser.

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