The T5 — Statement of Investment Income is a mandatory information return prescribed by the Canada Revenue Agency (CRA) under section 201(1) of the Income Tax Regulations, made pursuant to the Income Tax Act (R.S.C. 1985, c. 1, 5th Supp.). It is the Canadian equivalent of the U.S. Forms 1099-INT (interest) and 1099-DIV (dividends) and reports all types of investment income paid or credited to a Canadian resident during the calendar year.

The T5 slip is issued by financial institutions (banks, credit unions, trust companies), corporations paying dividends, investment dealers, and any other person or entity that pays or credits investment income exceeding $50 in a calendar year. The types of investment income reported include dividends from taxable Canadian corporations (both eligible and other than eligible), interest from bonds, debentures, treasury bills, and bank accounts, foreign investment income held through Canadian financial intermediaries, capital gains dividends from mutual fund corporations, accrued income on anniversary dates for investment contracts, and royalty income.

Canada’s dividend taxation system uses a unique gross-up and dividend tax credit mechanism under Income Tax Act s. 82(1) and s. 121 that is designed to integrate corporate and personal income tax. The T5 slip reports both the actual dividend amount paid and the grossed-up taxable amount, along with the corresponding federal dividend tax credit. This system ensures that dividend income is taxed at approximately the same rate as other income, once the corporate tax already paid by the company is taken into account through the dividend tax credit.

A T5 slip must be issued for any calendar year in which a person or entity pays or credits more than $50 of investment income to a Canadian resident. The $50 threshold applies to each type of investment income separately — for example, if a bank pays $40 in interest and a corporation pays $60 in dividends, only the corporation must issue a T5 for the dividends. However, many financial institutions issue T5 slips even for amounts below $50 as a service to their clients.

Banks and credit unions issue T5 slips for interest earned on savings accounts, chequing accounts, Guaranteed Investment Certificates (GICs), and term deposits. Corporations issue T5 slips when they pay dividends to shareholders — the slip must designate whether the dividends are eligible (from income taxed at the general corporate rate) or other than eligible (from income taxed at the small business rate). Investment dealers and mutual fund companies issue T5 slips for interest, dividends, and foreign income earned through investment accounts that are not registered (i.e., not RRSP, TFSA, or RESP accounts — income in registered accounts is generally not reportable on T5 slips).

The filing deadline for T5 slips is the last day of February following the calendar year in which the income was paid or credited. Electronic filing is mandatory for filers issuing more than 50 T5 slips in a year. Recipients need T5 slips to accurately complete their T1 General Income Tax and Benefit Return, particularly Schedule 4 (Statement of Investment Income) and the federal worksheet for the dividend tax credit calculation.

A properly completed T5 slip must identify the payer by full legal name and address. Unlike T4 and T4A slips, the payer’s Business Number is not a mandatory field on the T5 slip itself but must be included on the T5 Summary filed with the CRA. The recipient’s full legal name, Social Insurance Number (SIN) or Business Number (BN), and mailing address are required for identification and CRA matching.

The dividend section is the most complex part of the T5 because of Canada’s gross-up and tax credit system. Box 24 reports the actual dollar amount of eligible dividends paid, Box 25 reports the taxable amount after the 38% gross-up (i.e., Box 24 multiplied by 1.38), and Box 26 reports the federal dividend tax credit at 15.0198% of the taxable amount. For other than eligible dividends, Box 10 reports the actual amount, Box 11 reports the taxable amount after the 15% gross-up (Box 10 multiplied by 1.15), and Box 12 reports the federal dividend tax credit at 9.0301% of the taxable amount.

Box 13 reports interest from bonds, debentures, treasury bills, and promissory notes, while Box 14 reports other interest (bank accounts, GICs, term deposits). Box 15 reports foreign investment income converted to Canadian dollars at the applicable Bank of Canada exchange rate. Box 18 reports capital gains dividends from mutual fund corporations or investment corporations — these are treated as capital gains by the recipient. Box 19 reports accrued income on the anniversary date of investment contracts under the accrual rules of Income Tax Act s. 12(4). Box 17 reports royalty income from natural resources or intellectual property. The recipient type field indicates whether the income is paid to an individual, joint account holders, a corporation, or a trust.