Section 233.5

Finance indicated that given that ss. 90(2) and (5) provided a comprehensive definition of what constituted a dividend (namely, a pro rata distribution on the shares of a foreign affiliate), pro rata distributions to its members by an LLLP or LLC that was a corporation for purposes of the Act would be treated as dividends, including for disclosure in a T1134 supplement.

CRA further indicated that where the taxpayer does not have all the information required to fulfill the reporting requirements under Form T1134 in respect of its foreign affiliate, it should file the T1134 form on time, indicating clearly in the disclosure section of the T1134 that some information is missing. In this scenario, the availability of the due diligence exception under s. 233.5, or the reasonable efforts exception under s. 162(5), will depend on the facts of the transaction, and give rise to the requirements to file reasonable disclosure of the unavailable information to be reported in the T1134 return.

Will CRA grant any administrative relief in relation to the reporting requirements of Canadian multinationals for their subsidiaries in the Ukraine or Russia, such as country-by-country reporting, and forms T1134, given that financial reporting from these subsidiaries may not be available for 2022? CRA indicated:

• For forms T1134 and T1141, the due diligence exception in s. 233.5 would be available if the taxpayer provides: the available information; the circumstances making the other information unavailable; and an explanation of the steps taken to obtain the information.
• The application of s. 233.5 would also relieve any potential penalties under s. 162(5).
• Relief may also be granted under s. 220(2.1), which could include the unconsolidated financial statements of the foreign affiliate that otherwise would have to be filed along with the T1134.

Where s. 94.2(2) deems a non-resident unit trust whose units are majority-owned by an investment dealer, or other taxpayer subject to the mark-to-market (or specified debt obligation) rules ("FI"), to be a controlled foreign affiliate of FI, then the CFA will itself generally be deemed to be a FI, so that in computing the foreign accrual property income of the CFA, the mark-to-market and SDO rules will apply. In commenting on this situation where the FI lacked the data to do this computation properly in Canadian dollars, CRA refused to provide any comfort that it would permit the use of a "proxy" method. CRA went on to state:

… [A] failure to report income as required, and false statements or omissions, in respect of prescribed reporting requirements may result in substantial penalties under section 162 or 163. However, section 233.5 may provide some relief concerning the prescribed reporting requirements where a Canadian taxpayer may not have all the information required to fulfil the reporting requirements of subsection 233.4(4)… . Additional relief in connection with reporting requirements may be available on a case-by-case basis under subsection 220(2.1).

See summary under s. 95(2)(f.14).