What does a Canadian company with a foreign parent have to file?
More than a Canadian corporate return. A Canadian company with a foreign parent files the corporate return, a return covering its transactions with related parties outside Canada, and slips for the payments it makes to non-residents, and it may have foreign affiliate positions of its own to report. Each of those attracts its own schedule or return, with its own deadline. The practical point is that they are separate filings, so a company can be perfectly up to date on its corporate return and late on two others without anyone noticing.
Why did the CRA start with our intercompany pricing?
Because those filings are read together, and the intercompany pricing is where they most often fail to agree. The corporate return reports the result, the related-party information return reports the transactions that produced it, and the non-resident slips report what was paid out. Where the figures or the descriptions differ between them, the follow-up starts with the pricing, because that is the assumption all three depend on. Reconciling the three before they are filed is far less work than explaining a difference afterwards.
Do management fees paid to our foreign parent need a slip?
Payments to non-residents attract their own slips, and the question for any given payment is what it is for and how it is characterised, so start there rather than with the label on the invoice. Management fees, service charges, royalties and interest are not all treated the same way, and the amount reported on a slip has to match the amount deducted in the corporate return and the transaction described in the related-party information return. Where one monthly charge covers several things, splitting it before the year end is easier than defending the composite later.
Our parent sets our prices, so is that a problem for our Canadian filings?
It is the thing the filings have to be able to explain. Prices set by a parent are still reported as transactions between related parties, and the return that reports them expects a description of what each charge is for and a basis for the amount. The exposure is rarely the price itself. It is that nobody on the Canadian side can say how the price was arrived at. Getting the basis written down while the people who set it are still available is the difference between a short enquiry and a long one.
We are a small Canadian subsidiary, so do the related-party rules still apply?
The obligations follow the relationship and the transactions, not the size of the Canadian company. A subsidiary with a handful of staff that pays its parent for services, borrows from it, or licences anything from it has related-party transactions to report and payments to non-residents to slip. Being small tends to make it harder rather than easier, because there is usually nobody locally whose job includes these returns, and they are exactly the filings that get missed.
What should we have ready before our first Canadian year end as a subsidiary?
A written description of every charge moving between the Canadian company and the rest of the group, the basis on which each amount is set, the agreements behind them, and a list of every payment expected to go to a non-resident during the year. Those four things feed all three filings, and they are much easier to assemble before the year end than after it. We agree the scope of that work and the fee in writing at the start, and the output is the file the returns are then prepared from.
How do I actually stop being taxed twice?
In this order. Fix your residence under each country's own rules, and if both claim you, apply the treaty tie-breaker. Identify where each type of income is sourced. Read the article that covers that income type, because it decides who taxes and at what maximum rate. Then claim the relief on the residence-country return, with proof of the foreign tax. Most of the tax people lose to double taxation is lost at the last step, not the first. See how double taxation is relieved.
Do NRIs pay tax on money sent to India?
Sending your own funds to India is a transfer of capital, not income, so the remittance itself is not taxed. What is taxable is income the money then earns in India — interest, rent, capital gains — under the rules for the account type it sits in. Sending money out of India is the direction that needs certification before the bank will act. See NRE, NRO and FCNR accounts.
