T1134 Reporting Requirements
Budget 2018 Proposal
The Income Tax Act contains specific information reporting requirements in respect of foreign affiliates. In general terms, taxpayers (and certain partnerships) are required to file an information return each year in respect of each of their foreign affiliates in the year T1134). These returns contain, among other things, information about amounts included in, and excluded from, FAPI. The provision of this information to the CRA allows for a more efficient administration of the Income Tax Act in respect of income arising in connection with foreign affiliates.
Most entities that file these information returns are corporations. Although a corporate taxpayer is typically required to file its income tax return within six months after the end of its taxation year, a taxpayer’s information return in respect of its foreign affiliates is not due until 15 months after the end of its taxation year. As a result, much of the information required to evaluate income of a taxpayer arising in connection with its foreign affiliates is not sent to the CRA until up to nine months after the submission of the taxpayer’s income tax return, even though the taxpayer must have most of this information before filing its income tax return in order to properly compute its income tax liability.
Budget 2018 proposes to bring the information return deadline in respect of a taxpayer’s foreign affiliates in line with the taxpayer’s income tax return deadline by requiring the information returns to be filed within six months (*note: the actual legislation is more lenient – see below) after the end of the taxpayer’s taxation year.
In order to give taxpayers time to adjust to this change, this measure will apply to taxation years of a taxpayer that begin after 2019.
Legislation Update – October 2018
Returns respecting foreign affiliates
Section 233.4 of the Act establishes reporting requirements in respect of foreign affiliates. In general terms, it provides that taxpayers resident in Canada (or certain partnerships), of which a non-resident corporation is a foreign affiliate, must file an information return in respect of the affiliate. The entity required to file this information return is defined by the expression “reporting entity” for the purposes of section 233.4.
Subsection 233.4(4) requires a reporting entity for a taxation year or fiscal period to file an information return in prescribed form (T1134) in respect of each foreign affiliate of the entity in the year or period. The filing deadline for the information return is 15 months after the end of the reporting entity’s taxation year or fiscal period.
Subsection 233.4(4) is amended to provide that the new filing deadline for this prescribed information return is:
- for taxation years or fiscal periods of a reporting entity that begin in 2020, within 12 months after the end of a reporting entity’s taxation year or fiscal period; and
- for taxation years or fiscal periods of a reporting entity that begin after 2020, within 10 months after the end of a reporting entity’s taxation year or fiscal period.