Form T106 (non-arm’s length transactions with non-residents)
Form T106 is the information return of non-arm’s length transactions with non-residents. Under section 233.1 of the Income Tax Act, a reporting person must file one for each non-resident person with whom it does not deal at arm’s length, subject to the exceptions in that section.
A Canadian company owned by a foreign parent, or one selling to a foreign buyer it is connected to, may meet this form. Subsection 233.1(2) says a reporting person for a taxation year shall, on or before its filing-due date, file the prescribed return for the year in respect of each non-resident person with whom it does not deal at arm’s length in the year, about the reportable transactions they took part in, subject to the de minimis exception in subsection 233.1(4). See foreign buyers for the wider picture.
The de minimis policy
The CRA says that, where a T106 is required, taxpayers must still file it to report other information, but do not need to report detailed information in Part III of the slip where their transactions with a particular non-resident are below its de minimis threshold. The CRA page sets that threshold, which has changed over time.
What to ask
- Which non-residents the company does not deal with at arm’s length
- Whether past T106 returns were filed, and when
- How related-party loans are reported, see thin capitalization
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Government of CanadaGovernmentIncome Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
- 02Canada Revenue AgencyGovernmentForm T106, Information Return of Non-Arm’s Length Transactions with Non-Residents - De Minimis Policy
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