Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Is Form T1134B required to be filed in respect of a foreign affiliate if the foreign affiliate does not have a tax year ending in the reporting taxpayer's tax year?
Position: Yes.
Reasons: To ensure accurate record of the history of the foreign affiliate and transparency of offshore structures, filing is required in this circumstance.
XXXXXXXXXX
2012-045649
K. Podor
August 22, 2012
Dear XXXXXXXXXX:
Re: Form T1134B Filing Requirements
This is in response to your letter of July 20, 2012, wherein you asked whether Form T1134B, “Information Return Relating to Controlled Foreign Affiliates (2003 and later taxation years)”, is required to be filed in respect of a foreign affiliate if the foreign affiliate does not have a fiscal year-end in the reporting taxpayer’s tax year.
You outlined a scenario where a Canadian resident individual subscribes and obtains 100% ownership of a newly established foreign affiliate corporation during October 2011. The foreign affiliate has a June 30th taxation year-end. As the Canadian resident individual has a calendar year reporting period, the foreign affiliate would not have a fiscal year ending in the reporting taxpayer’s 2011 taxation year.
Our Comments
The reporting requirements for foreign affiliates are outlined in section 233.4 of the Income Tax Act (the “Act”). The legislative requirement is that Form T1134A or T1134B must be filed if the non-resident corporation is a foreign affiliate or a controlled foreign affiliate, as the case may be, at any time in the reporting taxpayer’s tax year. This requirement provides the Canada Revenue Agency (CRA) with an accurate record of the history of the foreign affiliate and transparency of offshore structures.
The CRA recognizes that in certain situations, the amount of information required to be filed will be minimal. An example of this situation may occur if the foreign affiliate has not prepared financial statements because the date is prior to its fiscal year-end.
If the required information is not available, the reporting taxpayer should complete the Disclosure section of the form to comply with the requirements of the due diligence exception pursuant to section 233.5 of the Act.
Conclusion
We confirm that the reporting taxpayer is required to file Form T1134B in the circumstances outlined in your request.
We trust these comments are helpful.
Lita Krantz, CA
Assistant Director
International Division/ Division des opérations internationales
International Section III
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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