The Canada Revenue Agency (CRA) has many tools at its disposal to track the investment of Canadian taxpayers in foreign entities. On December 31, 2012, a new Form T1134 (Information Return Relating to Controlled and Not-controlled Foreign Affiliates) was released, replacing forms T1134A and T1134B. In the following paragraphs, AG Tax will give a brief overview of the T1134.
Form T1134, Information Return Relating to Controlled and Not-controlled Foreign Affiliates
On the T1134, a taxpayer who resides in Canada (individual, company, partnership or trust) reports details of its controlled and non-controlled foreign affiliates (non-resident corporation or non-resident trust).
What needs to be reported on the T1134?
Information required to be reported on the T1134 includes (but is not limited to), details of the reporting entity (individual, company, partnership or trust), details of rates used for foreign currency conversion, details and signature of a certifier, along with the reporting entity’s organizational structure (if applicable) .
Who Needs to File Form T1134?
Taxpayers resident in Canada who have foreign affiliates which have an investment cost equal to or more than $100,000.
No reporting is required if the foreign affiliate is inactive or dormant (i.e., gross receipts are less than $25,000 and assets with fair market value is less than $1 million), and total cost of investment in all foreign affiliates is less than $100,000. (CRA)
Only the lowest-tiered Canadian corporation has to report its foreign affiliate. For example, if Company A (Canadian) fully owns Company B (Canadian), and Company B further owns Company C (Foreign Affiliate). Only Company B needs to report this partnership although Company A is indirectly connected.
What is the Filing Due Date for the T1134?
The form is due within 15 months of the end of the reporting taxpayer’s tax year or, in the case of a partnership, the fiscal period.
What are the Penalties for Failing to File the T1134?
The penalty for failing to file Form T1134 is $25 per day for up to 100 days. If an individual knowingly or due to negligence misses filing this form, the penalty is $500 per month for up to 24 months. After 24 months the penalty is 5% of either the cost of the foreign property, or the cost of the shares and indebtedness of the foreign affiliate.
How is the T1134 filed?
Currently the form T1134 must be paper-filed since there is no e-filing available.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance.
Furthermore, as a full service accounting firm, AG Tax associates are dedicated to assist you with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
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