Canada: Expanded foreign affiliate reporting by resident multinational corporations

Canada: Expanded foreign affiliate reporting

Many multinational corporations resident in Canada will have to provide additional information on their foreign affiliates for taxation years beginning after 2020.

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The Canada Revenue Agency (CRA) released a preview of the revised Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates, that includes additional questions and more detailed requests than in the past. The new form has been expanded to 12 pages (from six); will be published in January 2021; and will apply to filings for tax years that begin after 2020.


Background

Canadian resident taxpayers (and certain partnerships) with foreign affiliates generally must file Form T1134 and include a separate T1134 Supplement for each foreign affiliate held at any time in a reporting year or period (other than certain dormant affiliates).


New T1134 information requirements

The revised Form T1134 will require reporting entities to provide significantly more information, in particular:

  • Details on certain transactions and arrangements, including upstream loans, foreign affiliate dumping, tracking interests, and certain elections
  • Surplus balances and relevant elections in some cases (taxpayers that already provide this information will now also have to provide additional details)
  • Additional details on reorganizations to determine whether certain rules may apply (e.g., rollovers, liquidation)
  • Unconsolidated financial statements for foreign affiliates in which the reporting entity has an interest of at least 20% of the voting shares
  • More information on foreign accrual property losses and foreign accrual capital losses
  • A breakdown of gross revenue for each foreign affiliate including whether the source was arm's length or non-arm's length
  • The tax adjusted cost base of the foreign affiliates' shares, instead of book value
  • Details on transactions and events that affect surplus account balances for certain lower-tier non-controlled foreign affiliates

If specific information requested on the form is not available at the time of filing, taxpayers must explain the steps they took to obtain the required information.


Additional Form T1134 changes

The revised Form T1134 also includes a few changes that may provide relief for certain multinationals, such as to:

  • Allow reporting entities to jointly file one set of Form T1134 summary and supplements for all foreign affiliates, when certain conditions are met
  • Increase the gross receipts threshold to qualify for exemptions based on dormancy to $100,000* (from $25,000) and apply the $100,000 cost-amount threshold on a legal entity basis
  • Allow reporting entities to attach a group organizational chart electronically instead of completing certain sections of the form


KPMG observation

The new information requirements for Form T1134 will coincide with a shorter 10-month filing deadline that applies to filings for tax years that begin after 2020.

Read a December 2020 report [PDF 247 KB] prepared by the KPMG member firm in Canada


*$ = Canadian dollar

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