2 December 2025 CTF Roundtable Q. 3, 2025-1080671C6 - T1134 Reporting

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: 1. In a case where two Canadian resident companies, Canco and Holdco held a direct ownership in a U.S. Company, USco for part of their 2025 taxation year, who needs to file a T1134 for that year; is it Canco or Holdco or both? 2. What is the equity percentage that needs to be reported under Part I, Section 3.C ii) of form T1134 summary if USco held a 50% of the interest in a LLC on June 30, 2024, a 100% interest on December 31, 2024, and a 0% interest on May 1, 2025?

Position: 1. Both. 2. The equity percentage that must be reported is the one for June 30. For tax year 2024, Canco will need to report that USco had a 50% equity percentage in LLC and in tax year 2025, both Canco and Holdco will need to report that USco had a 0% equity percentage in LLC regardless of their choice of filing jointly or separately.

Reasons: 1. Canco and Holdco must each file a T1134 in relation to their direct share ownership in USco during their 2025 taxation year. However, Canco and Holdco also have the option of jointly filing the T1134 form provided that they meet the requirements described in the instructions for filing for a group of reporting entities that are related to each other. More specifically, in order to file as a group, Canco and Holdco must be related to each other, share the same tax year-end and both use either the Canadian dollar or the same functional currency. It should be noted that the transfer of the shares of USco from Canco to Holdco during the year, in the example provided, would need to be reported under Part I Section 3.B, of the T1134 summary for tax year 2025. 2. The equity percentage that must be reported is the one at the end of the tax year of the reporting entity or entities which is June 30th. It should be noted that the liquidation of USco would need to be reported under Part II, Section 3.B of the T1134 supplement for USco.

2025 CTF Annual Conference

CRA Round Table

Question 3: T1134 Reporting

Consider the following scenario:

1. Canco, a corporation resident of Canada, owns all of the issued and outstanding shares of USCo, a corporation resident of the United States, which in turn owns all of the units of USLLC, a company that is resident of the United States for purposes of the Act, and that is transparent for U.S. tax purposes.

2. On March 31, 2025, Canco incorporated Holdco, a corporation resident in Canada. Canco is its sole shareholder.

3. On April 30, 2025, Canco rolled all of its shares of USCo into Holdco pursuant to section 85.

4. On May 1, 2025, USCo is liquidated into Holdco.

5. Both Canco and Holdco have a taxation year-end of June 30, while USCo and USLLC have a December 31 taxation year-end.

Questions

A. Who must file the T1134 information return for the 2025 taxation year: Canco, Holdco, or both?

B. What equity percentage and direct equity percentage of USCo in USLLC should be reported in Part I, Section 3.C ii) of the T1134 information return if USCo held 50% of US LLC on June 30, 2024, 100% on December 31, 2024, and 0% on May 1, 2025?

CRA Response (A)

For the purposes of this response, it is assumed that USCo and USLLC were not “dormant” corporations for the purposes of filing the T1134 information return.

As indicated at the 2024 APFF Conference, (footnote 1) section 233.4 requires a reporting entity (taxpayer or partnership) to file a T1134 information return in respect of each of its corporations that were foreign affiliates during its taxation year. Pursuant to paragraph 233.4(1)(a), a reporting entity is a taxpayer resident in Canada and for which a non-resident corporation is a foreign affiliate of that taxpayer at any time in the year. The determination of whether a non-resident corporation is a foreign affiliate, for purposes of section 233.4, is made pursuant to the definition of “equity percentage” found under subsection 95(4), and paragraph (b) of that definition is amended by paragraph 233.4(2)(a) in order to disregard equity percentages held in corporations residents in Canada.

As stated in the instructions to the T1134 information return, only a corporation that holds direct equity, often the subsidiary at the lowest tier of a group of Canadian corporations under common control, is required to file a T1134 information return for a foreign affiliate held during the fiscal year. However, if another Canadian corporation has a direct equity percentage in the same foreign affiliate during that fiscal year, it is also required to file a return for that foreign affiliate.

In the present case, Canco directly held all of the shares of USCo from July 1, 2024 until April 30, 2025, and Holdco directly held all of the shares of USCo from May 1, 2025 until June 30, 2025. Therefore, both Canco and Holdco had a sufficient direct equity percentage in USCo and USLLC, for purposes of paragraph (a) of the definition of “equity percentage” under subsection 95(4), such that USCo and USLLC were foreign affiliates of each corporation during the taxation year ending June 30, 2025. Canco and Holdco are therefore reporting entities for the purposes of filing the T1134 information return for their respective June 30, 2025 year-ends. The “Question and answers about Form T1134” page on the CRA’s website,(footnote 2) mentions under the section “Do you have to file a return” that a T1134 information return must be filed for a foreign affiliate that stopped being a controlled foreign affiliate before the end of the reporting taxpayer's tax year.

If Canco and Holdco meet the conditions set out in the instructions of the T1134 information return, each corporation may designate the other one as their representative, and the designated company may file a single T1134 information return, providing the information required for both corporations. This administrative relief, described in the instructions to the T1134 information return under “A group of reporting entities that are related to each other,” is available to reporting entities who are members of a related group of reporting entities, who file their tax returns in Canadian dollars or in the same functional currency, and who have the same fiscal year-end. The “related group” concept, which is referenced in the administrative measure, refers to its definition under subsection 251(4), and therefore to a group of persons each member of which is related to every other member of the group.

The transfer of the USCo shares in favor of Holdco will have to be reported appropriately on the T1134 information return, including under Section 3.B of the summary.

CRA Response (B)

Part I, Section 3.C of the T1134 information return must be completed to provide the CRA with the organizational structure of the group of corporations and partnerships that owns foreign affiliates. Alternatively, the reporting entity may provide an organizational chart of the group structure that includes the information requested therein.

As mentioned in the “Question and answers about Form T1134” page on the CRA’s website,(footnote 3) the organizational structure of the group must be reported as it exists at the reporting taxpayer's year-end. It also mentions on this page that other information may be reported on a page attached to the form, including information about entities that are no longer part of the organizational structure at the end of the fiscal year, but that still need to be declared.

For its June 30, 2024 year-end, if Canco completes Part I, Section 3.C of the T1134 information return, it must indicate that USCo had an equity percentage of 50% in USLLC and a direct equity percentage of 50% in USLLC under item ii).

For their June 30, 2025 year-end, Canco and Holdco must indicate that USCo had a 0% equity percentage in USLLC and a 0% direct equity percentage in USLLC. This is the case regardless of whether Canco and Holdco each file a T1134 information return, or whether a single return is filed in accordance with the administrative relief provided for groups of reporting entities that are related to each other.

Operations relating to the liquidation of USCo must be reported under Part II, Section 3.B of the Supplement filed in respect of USCo.

Isabelle Sauvé
2025-108067
December 2, 2025

Response prepared in collaboration with:

Darren Poiré, Senior Technical Specialist
Compliance Programs Branch
International Technical Issues Section

Amélie Guimont, Senior Technical Specialist
Compliance Programs Branch
International Technical Issues Section

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1. CRA Document No. 2024-1028431C6, October 10, 2024

2. CRA website at: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1134.html

3. Ibid.