CCH iFirm Tax T2 2019 v.2.3 (2019.50.v27)

T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates

This form includes a summary as well as supplements. This form is a multiple copy form of which the first copy includes the summary and the first supplement. The second and subsequent copies include only the additional supplements. Each reporting entity must file a summary as well as a separate supplement for each foreign affiliate.

Note: When a T1134 Supplement is an “Unmodified,” an “Amended” or a “Cancelled” type slip, that supplement can no longer be deleted.

Form T1134 will be applicable:

if the answer to the question Do you want to file Form T1134? is “Yes” at the top of the form; and
if at least one name is entered in subsection A, “Identification of foreign affiliate” of Section 2, “Foreign affiliate information” in Part II, “Foreign affiliate information” of Form T1134 Supplement.

Search box for fields relating to the NAICS code, Country code, and Currency code of the form

To facilitate the selection of the appropriate code, you can display a search box by clicking the ellipsis points of the data entry cell or by using the Alt+Down arrow shortcut.

Type of return and type of supplements (for electronic transmission purposes)

The four codes to use are the following:

1 New

2 Unmodified

3 Amended

4 Cancelled (only for supplements)

During initial transmission of a Form T1134, the program displays New for the summary and each individual supplement.
When Form T1134 is amended, the program displays Unmodified for any summary or supplement that has not been modified.
If the summary or any of the supplements has been modified, the program displays Amended for each summary or supplement that has been amended.
Only a supplement can be cancelled, and not a summary. If a supplement is cancelled, the answer to the question Do you want to cancel this supplement? must be “Yes,” and the program displays Cancelled.

When a supplement is cancelled, the reason why it is cancelled must be selected among the following:

1 Duplicate
2 Filed in Error
3 Other

Electronic Filing

Forms T1134 are transmitted separately from the T2 return. However, the electronic transmission of Form T1134 has been implemented in the program so that the T2 return and Form T1134 can be transmitted at the same time.

However, the T2 return can be transmitted without Form T1134, or Form T1134 without the T2 return.

Consult the Electronic transmission to the CRA topic for more information on how to proceed to transmit this form.

The program defines the status of the check boxes Were all diagnostics related to Form T1134 corrected in the T2 EFILE diagnostic tab?, Were all diagnostics with the "T1134" mention and relating to electronic filing corrected in the CCH diagnostic tab? and Form T1134 applicable based on the corporation’s information (e.g. depending on whether the corporation’s name, Business Number (BN) and address comply with EFILE requirements) and the data entered in Form T1134.

If you selected Form T1134 for electronic filing and one of the above-mentioned check boxes is not selected, make sure to verify the diagnostics before making any required adjustment.

When Form T1134 is selected for electronic filing and the required information is complete, the EFILE status of Form T1134 will be “Eligible”:

if the answer to the question Do you want to file Form T1134? is “Yes” at the top of the form; and
if at least one name is entered in subsection A, “Identification of foreign affiliate” of Section 2, “Foreign affiliate information” in Part II, “Foreign affiliate information” of Form T1134 Supplement.

The information on the transmission status of Form T1134 is also accessible via the File/Properties (F11) command.

The electronic filing date displays automatically after the electronic filing of the form.

Note that you cannot electronically transmit Form T1134 using a WAC with the program. An EFILE number must be used.

Amended Form T1134

An amended Form T1134 can also be transmitted. In that case, indicate that it is an amended Form T1134 by selecting the appropriate check box at the top of the form.

If you have to retransmit an amended Form T1134 for which the EFILE status value is “Accepted,” this value will have to be changed to “Eligible” using the File/Properties (F11) command.

The following instructions are taken from the form.

All legislative references on this sheet refer to the Income Tax Act (the Act).

Do you have to file this return?

Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates, must be filed annually by:

a taxpayer resident in Canada (other than a taxpayer all of whose taxable income for the year is exempt from tax under Part I of the Act) for which a non-resident corporation or trust is a foreign affiliate (FA) or a controlled foreign affiliate (CFA) at any time in the year; and
a partnership where:

the share of the income or loss of the partnership for the year of non-resident members is less than 90% of the income or loss of the partnership for the year; and

a non-resident corporation or trust would be a FA or CFA of the partnership at any time in the year if the partnership were a person resident in Canada.

Note:
A trust deemed under paragraph 94(1)(c) of the Act to be resident in Canada for purposes of Part I (i.e., a non-resident discretionary trust) is also deemed to be so resident for the purpose of filing this return.

This return is to be filed by a reporting entity only in respect of a foreign affiliate in which the reporting entity or a controlled foreign affiliate of the entity has a direct equity percentage at any time in the reporting entity's taxation year.

Do not file Form T1134 if the total cost amount to the reporting person at any time in the year of the interest in all foreign affiliates was less than $100,000 AND the foreign affiliate is "dormant" or "inactive" for the affiliate's taxation year ending in your taxation year. For purposes of completing Form T1134, a dormant or inactive foreign affiliate means, for a taxation year of the affiliate, one that:

had gross receipts (including proceeds from the disposition of property) of less than $25,000 in the year; and
at no time in the year had assets with a total fair market value of more than $1,000,000;

For the purpose of completing Form T1134, the definition of gross receipts refers to any receipt received in the year, and not just income amounts. This would include all non-revenue receipts, such as loans, etc. The purpose of the test is meant to indicate the level of activity in the foreign affiliate.

For short taxation years (e.g. where there is a deemed year-end due to a change in control), reporting for more than one fiscal period (not exceeding the normal 12-month or 53-week period) is sufficient if the information that would otherwise be reported for the short taxation year is included on the T1134 returns that are filed.

As an individual (other than a trust) you do not have to file Form T1134 for the year in which you first become a resident of Canada. Section 233.7 exempts an individual (other than a trust) from the requirement to file T1134 if the individual first became resident in Canada in the year. The expression "first became resident" in section 233.7 does not include a situation where a former resident of Canada again becomes resident of Canada at a later date. An individual who has already been a resident of Canada during a prior year, whether he or she was a factual resident of Canada or a deemed resident of Canada at that time, may not take advantage of the exception provided in section 233.7 when he or she again becomes resident in Canada during a year. A "returning" resident could immediately be subject to the reporting requirements of section 233.4.

Note:

In determining whether a non-resident corporation is a foreign affiliate of a taxpayer resident in Canada or of a partnership for purposes of these reporting requirements, the following rules apply:

the reference to "any corporation" in paragraph (b) of the definition of "equity percentage" in subsection 95(4) of the Act should be read as if it were a reference to "any corporation other than a corporation resident in Canada";

the definitions "direct equity percentage" and "equity percentage" in subsection 95(4) of the Act should be read as if a partnership were a person; and

the definitions "controlled foreign affiliate" and "foreign affiliate" in subsection 95(1) of the Act should be read as if a partnership were a taxpayer resident in Canada.

Only the lowest tier subsidiary in a group of Canadian corporations under common control has to report for its foreign affiliate. However, if another corporation in the Canadian group has a direct equity percentage in the foreign affiliate; it too is required to report on that foreign affiliate.

If a foreign affiliate is owned indirectly by a partnership through a Canadian corporation(s), only the lowest tier Canadian corporation reports for the foreign affiliate. However, if a member of the partnership also has a direct equity percentage in the foreign affiliate, it too is required to report on the foreign affiliate.

Due date for filing this return

Form T1134 should be filed within the following deadlines depending on the taxation year end:

15 months for taxation years starting before January 1, 2020;
12 months for taxation years starting in 2020; and
10 months for taxation years starting after December 31, 2020.

Foreign currency conversion

Report monetary values in Canadian dollars except where an election has been made under paragraph 261(3)(b) of the Act to use a functional currency (if the election to use the functional currency is made, the currency code must be indicated on the top of page 1 of the T1134 Summary). The accepted codes for functional currencies are as follows:

AUD – For Australian dollar
USD – For U. S. dollar
GBP – For U.K. pound
EUR – For Euro

Where a monetary value is not stated in Canadian dollars or the elected functional currency (i.e.: it is an amount obtained from the Foreign affiliate’s financial information), the currency code in which the value is reported must be indicated in the space provided.

A nil amount should be reported by indicating "0" (zero) in the "amount" field rather than leaving the field empty.

For a list of currency codes, see the CRA publication T4061 entitled NR4 – Non-Resident Tax Withholding, Remitting and Reporting Guide, Appendix D – Currency Codes.

When converting amounts into Canadian dollars from a foreign currency, you should use the exchange rate in effect at the time of the transaction (e.g., the time the income was received). If income is received throughout the year, we will accept an average rate for the year.

Where you are required to provide an amount at the beginning or at the end of the year, you may use the exchange rate in effect at the relevant time.

Country codes

For a list of country codes, see the CRA publication T4061 entitled NR4 – Non-Resident Tax Withholding, Remitting and Reporting Guide, Appendix A – Country Codes.

More information

If you need more information, visit our website at canada.ca/taxes or call 1-800-959-5525. You can also write to your local tax services office. Our addresses and fax numbers are listed on our website and in the government section of your telephone book.

How to complete the T1134 Summary

Part I – Identification

Section 1 – Reporting entity information

Identify the reporting entity.

Section 2 – Certification

This area should be completed and signed by:

the person filing this return in the case of an individual;
an authorized officer in the case of a corporation;
the trustee, executor, or administrator where the person filing the return is a trust; or
an authorized partner in the case of a partnership.

Section 3 – Group structure

This section 3 is only required to be completed if there is a controlled foreign affiliate in the group. Provide information about the organizational structure of the group (including trusts and partnerships) at the end of the taxation year. Only one Section 3 has to be filed by a related group—however, if Section 3 is filed by a taxpayer or partnership other than the reporting entity, the name and a CRA registered identification number (SIN, BN, etc.) of the taxpayer reporting Section 3 must be provided.

How to complete the T1134 Supplement

Part II – Foreign affiliate information

Section 1 – Reporting entity information

Identify the reporting entity.

Section 2 – Foreign affiliate information

A. Identification of foreign affiliate

Identify the foreign affiliate for which this return is being filed.

For the purpose of this return, residence generally means where the foreign affiliate's central management and control is.

State the main business activities of the foreign affiliate by entering the appropriate North American Industrial Classification System (NAICS) codes. The current NAICS codes can be found at Statistics Canada internet site, http://www23.statcan.gc.ca/imdb/p3VD.pl?Function=getVD&TVD=1181553.

You can enter more than one code.

For the list of country and currency codes, see the CRA publication, T4061 entitled NR4 – Non-Resident Tax Withholding, Remitting and Reporting Guide (Appendix A – Country Codes and Appendix D – Currency Codes).

B. Capital stock of foreign affiliate

Provide information about your direct ownership and ownership by another controlled foreign affiliate and by other related parties of the capital stock of the foreign affiliate. Use the book cost of the shares on a non-consolidated, non-equity basis.

C. Other Information

Provide additional information about your interest in the foreign affiliate. For the purpose of completing this return, gross indebtedness does not include set-offs or trade accounts payable.

Section 3 – Financial information of the foreign affiliate

Include the unconsolidated financial statements (including the notes to the financial statements) of the foreign affiliate or, if unavailable, the financial information that is available to you as a shareholder.

The total assets reported should be net of depreciation or amortization. The net income should be accounting net income. Tax paid or payable should be the actual tax paid or payable and not deferred tax. Do not include withholding tax. Foreign language information will only be accepted if the information is not available in English or French.

Section 4 - Surplus accounts

A. Surplus accounts of foreign affiliates

Provide information about any dividends you received from the foreign affiliate and information about the foreign affiliate's surplus accounts.

B. Surplus accounts and share transactions

Provide information about any events that affected the controlled foreign affiliate's surplus accounts. "B" applies to controlled foreign affiliates only.

Part III – Nature of Income of "controlled" foreign affiliates

Part III applies to a controlled foreign affiliate (CFA) only. Do not complete this part for not-controlled foreign affiliates.

Section 1 – Employees per business

Provide the number of full-time employees or employee equivalents employed by the CFA on a business by business basis.

Section 2 – Composition of revenue

Provide the amount of the CFA’s gross revenue from the sources listed. Report interest and dividends received from foreign affiliates separately from interest and dividends from other sources.

Section 3 – Foreign accrual property income (FAPI)

Provide information about the gross foreign accrual property income earned by the foreign affiliate. This section does not include the subsection 91(4) adjustment (amounts deductible in respect of foreign taxes).

Section 4 – Capital gains and losses

Provide information about capital gains and losses realized by the foreign affiliate. Only dispositions of shares or partnership interests that are excluded property and capital property that is not excluded property needs to be reported.

Section 5 – Income included in income from an active business

Provide information about the income of the foreign affiliate that is from an active business.

Part IV – Disclosure

Part IV is applicable to both not-controlled and controlled foreign affiliates. State whether any of the information requested on this return is not available at the time of filing. If information is not available, specify what information is not available and why it is not available. Also explain what steps were taken to obtain the information.

Due diligence exception

The information required to be filed on this return does not include information that is not available, on the day that the return is filed, to the person or partnership required to file the return where:

there is reasonable disclosure in the return of the unavailability of the information;
before that day, the person or partnership exercised due diligence in attempting to obtain the information;
it was reasonable to expect, at the time of each transaction, if any, entered into by the person or partnership after March 5, 1996, that gives rise to the requirement to file the return or that affects the information to be reported in the return, that sufficient information would be available to the person or partnership to comply with the reporting requirements; and
if the information subsequently becomes available to the person or partnership, it will be filed no more than 90 days after it becomes available.

Filing this return

Each reporting entity must file one T1134 Summary. The reporting entity must also file separate T1134 Supplements for each foreign affiliate, along with the foreign affiliate's financial statements and the notes to the financial statements.

A copy of this return must be filed separately from your income tax return.

Before you file this return, make a copy of it for your records.

Send the original return, amended return, or any additional information to:

Winnipeg Taxation Centre
Data Assessment & Evaluation Programs
Validation & Verification Section
Foreign Reporting Returns
66 Stapon Road
Winnipeg MB R3C 3M2

Penalties for non-reporting

There are substantial penalties for failing to complete and file this return by the due date.

Voluntary disclosures

To promote compliance with Canada's tax laws, we encourage you to voluntarily correct any deficiencies in your past tax affairs. You can make a voluntary disclosure by contacting your tax services office. Our addresses and fax numbers are listed on our website at canada.ca/taxes and in the government section of your telephone book.

For more information, see Information Circular IC00-1R2, Voluntary Disclosures Program (Income Tax Act).