Do you or your Company own a Foreign Investment?

The T1134 – Information Return Relating to Controlled and Non-Controlled Foreign Affiliates, in brief, is a form that must be filed annually by any Canadian resident taxpayer that has an interest in certain foreign investments (generally referred to as a foreign affiliate).

The Canada Revenue Agency (CRA) will officially release a revised T1134 form this month (January 2021), and it will require a more extensive disclosure of information within a taxpayer’s group of foreign affiliates than previously required. Although a new revision will be officially published very shortly, no actual legislative changes have been proposed to the provisions of the Income Tax Act that establishes these reporting requirements. Instead, the form has been overhauled to take into account any legislative amendments enacted after the previous major revision (which took place a few years ago), as well as to address CRA’s policy of revising forms to ensure an enhanced compliance commitment by taxpayers.

The overhaul consists of a long list of changes which can be quite daunting to look at, therefore it’s important that affected taxpayers and tax advisors fully understand the new comprehensive filing requirements and revisions.

Here are some of the more prominent changes –

  • Additional questions directed at the reporting entity focusing on any reorganization transactions, elections undertaken, surplus account transactions, foreign affiliate dumping and upstream loans
  • A request for a breakdown of gross revenue for each foreign affiliate, including whether the source was arm’s length or non-arm’s length
  • Disclosure of the reporting entity’s tax ACB of shares owned in each foreign affiliate, identifying any changes during the reporting year
  • Additional information requested on foreign accrual property losses (FAPL) and foreign accrual capital losses (FACL)
  • A joint filing option for related entities to file one set of T1134 summary and supplementary forms for all foreign affiliates within the group

Compounded with a new earlier filing deadline of 10-months after year-end (previously 15 months), taxpayers who have an interest in foreign affiliates should review the new version of the form so that they can be well acquainted with it and adequately prepare the information needed when it’s time to file.

We acknowledge that these changes will require affected taxpayers to devote more time and resources to ensure that CRA’s filing obligations are met, and our advisors at Welch LLP are well equipped to help you understand the revisions and information you need to gather.

David Zheng

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