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Partnership Tax

A partnership is an association between two or more individuals, corporations, trusts, or other partnerships who join together to carry on a trade or business.

Each partner contributes money, labour, property, or skills to the partnership and, in return, is entitled to a share of the profits or losses based on the terms of the partnership agreement.

Forming a partnership is straightforward, and while a simple verbal agreement can technically suffice, most partnerships are governed by a written agreement outlining rules for partners entering or leaving, profit sharing, and operational responsibilities.

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Tax Treatment of Partnerships

Unlike corporations, a partnership does not pay income tax on its operating results and does not file a traditional annual income tax return. Instead, each partner reports their share of the partnership’s income or loss on their personal, corporate, or trust income tax return.

Partners may also be required to provide financial statements or copies of forms relevant to their situation. Commonly used forms include:

  1. • Form T2125 – Statement of Business or Professional Activities
  2. • Form T5013 – Statement of Partnership Income

A Form T5013 must be filed for each fiscal period of the partnership in Canada if any of the following occurs:

1. At the end of the fiscal period, the partnership has combined revenues and expenses exceeding $2 million, or assets exceeding $5 million.

2. During the fiscal period:

  1. o The partnership is tiered (another partnership is a partner or it is a partner in another partnership).
  2. o A corporation or trust is a partner.
  3. o Investments include flow-through shares of a principal-business corporation that renounced Canadian resource expenses to the partnership.
  4. o The Canada Revenue Agency requests the completed Form T5013 in writing.

Our licensed CPA team ensures that all partnership income and deductions are correctly reported, compliance requirements are met, and your tax strategy is optimized.

GST/HST Registration for Partnerships

Since a partnership is considered a separate legal entity, it may be required to register for and collect GST/HST if it provides taxable supplies in Canada.

Guidance for registration and compliance can be found in CRA Guide RC4022 – General Information for GST/HST Registrants.

Why Choose Momentum Accounting CPA Professional Corporation?

Canadian law recognizes several types of partnerships, each with unique legal and tax implications:

  1. • Licensed CPA firm with expertise in partnership taxation and Canadian compliance.
  2. • Provides remote, virtual, and online services through CRA-approved software for clients across Canada.
  3. • Local expertise for clients in Hamilton and Toronto, with experience serving partners nationally and internationally.
  4. • Personalized guidance to ensure compliance, optimize deductions, and plan for business growth

Get Professional Partnership Tax Support

At Momentum Accounting CPA Professional Corporation, we help partnerships of all sizes manage tax reporting obligations, file accurate returns, and navigate the complex Canadian tax system with confidence.

📞 Contact us today to learn how our licensed CPA team can assist with partnership tax preparation, planning, filing, and compliance, whether in person or through secure virtual services.