What happens if we file Form T106 late?
The exposure on an information return is charged by reference to the form and the length of the delay rather than to the tax, which is why a year with nothing to pay can still be expensive. For context on the CRA's ordinary late-filing charge, for the 2025 tax year a return with a balance owing attracts 5% of that balance plus 1% for each full month it is late, to a maximum of 12 months. Form T106 reports transactions rather than a tax liability, so the practical priority is different: get the return in, since the delay is the only variable still under your control.
We filed T106 but left out one related company — what now?
An incomplete return is a live problem rather than a finished filing, because the point of the return is to show the CRA the whole map of your dealings with related non-residents. The fix is an amended return for each year that counterparty was missing, with the totals by category for it. Two things are worth doing at the same time. Check whether the omission also affects the answer given on documentation, since a party nobody reported is usually a party nobody priced. And record how the omission arose, because that account is what any request for relief will rest on.
Does a late T106 increase our transfer pricing audit risk?
Treat it as raising visibility rather than as a formula. This return is the transfer-pricing risk map the CRA reads first, so a group that files late arrives with the map missing, and its related-party relationships get disclosed by something other than its own return. The more consequential half is what the return says once filed: which related parties, which categories, and whether the pricing is supported by documentation. A group filing late at least has time to build that support before answering, and an accurate answer with support behind it is a better position than a prompt filing that answers no.
Does a second late filing within three years double the penalty?
Repetition by itself is not the trigger, which is where most descriptions of this go wrong. The higher rate applies where the CRA has issued a demand to file and has charged a late-filing penalty in any of the three preceding tax years. Where it does apply, for the 2025 tax year the ordinary 5% plus 1% for each full month to a maximum of 12 months becomes 10% plus 2% for each full month to a maximum of 20 months — a higher rate over a longer run of months rather than a straight doubling. Establish first whether a demand was actually issued. A group that has filed this return every year and simply filed one of them late does not fall into the higher category on that fact alone.
Can we file missing T106 returns for past years ourselves?
Yes, and filing before the question is put to you is generally the better position. Sequence the work. Build the structure chart, identify every non-arm's-length non-resident counterparty, total the dealings with each by category for each year, then file the years that were over the threshold, oldest first. Settle the documentation answer honestly before filing rather than after. A written account of how the returns came to be missed should accompany them, supporting a request that penalties and interest be cancelled. That account carries more weight when each step in it is tied to a document.
Is a late T106 worth filing if we barely passed the threshold?
Yes. Whether the return was due is decided by that year's transactions against the filing threshold, and a year that was over it by a little was over it. Filing closes the year, and a marginal year is usually quick to prepare, because the intercompany dealings are few enough to list. There is a second reason not to leave it. The threshold is tested every year, so a group that ignores one marginal year tends to ignore the next as well, and what would have been a single short return becomes a run of unfiled years to reconstruct.
How is a GILTI inclusion calculated, in outline?
Start at the foreign company: its tested income or loss for the year, computed under US principles. Aggregate those across all your controlled foreign corporations, net the losses, then reduce by a return on qualifying tangible business assets less certain interest expense. What remains is your inclusion, brought into your own return, where the deduction and any credit are applied. Every one of those percentages has been amended, so the mechanism is stable and the arithmetic is year-specific. See the GILTI inclusion and Form 8992.
What is Form 5471 and who has to file it?
The information return a US person files about a foreign corporation they own or control, in one of several filer categories that determine which schedules apply. It is not a tax computation, which is exactly why it gets missed — and why the penalty regime is severe. The consequence people underestimate is that a missing 5471 can keep the limitation period open on the whole return, not merely on the foreign company's figures. See Form 5471.
