This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: 1. If a corporation has two short tax years due to an acquisition of control, will the CRA accept that only one form T106 needs to be filed in respect of each relevant non-resident? 2. If so, would the CRA accept that the filing deadline with respect to the single T106 be the corporation’s filing-due date for the latest of the two taxation years?
Position: 1. Yes, if the short tax years together do not exceed 12 months and if information for each of those tax years is detailed in a letter that accompanies the T106 documentation. 2. Yes
Reasons: Administrative policy.
Federal Taxation Roundtable 7 October 2016
APFF - Conference 2016
Question 1C - T106 and multiple year ends
The Income Tax Act requires the filing of Form T106, "Information Return of Non-Arm's Length Transactions with Non-Residents" for each taxation year/fiscal period.
The instructions on Form T106 indicate:
"For short tax years/fiscal periods which together do not exceed 12 months, one set of T106 documentation is enough if information for the tax years/fiscal periods is detailed in a letter that must accompany the T106 documentation.”
Questions to the CRA
(a) If a company has a short taxation year due to an acquisition of control, for example, now ending on April 30, 2016, and then chooses a year-end of December 31, 2016, will the CRA accept the filing of a single T106 form for the 12- months 2016 period by the Canadian corporation in respect of transactions with each non-resident person with whom the corporation does not deal at arm's length?
(b) If yes, will the CRA accept in this situation that the T106 filing deadline for 2016 transactions is June 30, 2017, despite the deemed taxation year end of April 30, 2016 caused by the acquisition of control?
CRA Response to Question 1C (a)
The most recent version of the T106 - Information Return of Non-Arm's Length Transactions with Non-Residents, was reviewed in 2011. The instructions in the current Form T106 reflect current administrative policy.
Accordingly, if the number of months from the start of the fiscal period until the new year end of December 31, 2016 exceeds 12 months, the CRA will require the filing of more than one T106 form. Otherwise, one T106 form with a letter accompanying the form will be acceptable.
CRA Response to Question 1C (b)
Provided that the sum of the stub taxation years/fiscal periods does not exceed 12 months, the CRA will accept the filing of the T106 form on June 30, 2017 (6 months after the December 31, 2016 year end).
Also note that the CRA regularly updates information returns and appreciates any comments that the tax community provides to clarify the forms.
October 7, 2016
Answer prepared in collaboration with:
General Directorate of the International Large Business and Investigations Sector
International Taxation Division
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