Does my company file T106 for payments to its foreign parent?
That depends on the size of the dealings rather than the size of the company. Form T106 is the information return of non-arm's-length transactions with non-residents, and it is due where a Canadian corporation's reportable transactions with related non-residents exceed the filing threshold for the year. Management charges, goods, services, royalties, interest and loans all count towards it. Two points catch owner-managed groups. Profitability is irrelevant, so a loss-making subsidiary with substantial intercompany dealings still files. And the threshold is tested on the transactions themselves, so one large recharge can bring an otherwise quiet year into the reporting.
Do intercompany loans count towards the T106 filing threshold?
Loans and the interest on them are reportable categories, so yes. This is how groups with almost no trading between them end up filing: the Canadian company has been funded by its foreign parent, the balance sits on the balance sheet, and nothing about it feels like a transaction. A funding balance and the interest charged on it are exactly what the return asks about. It is worth examining the intercompany accounts rather than the sales ledger when deciding whether you are inside the reporting, because the amounts that take a group over the threshold are frequently financing rather than trade.
Do partnerships and trusts file Form T106 too?
Yes. The return is not confined to corporations: Canadian partnerships, trusts and individuals file it as well, where their reportable transactions with related non-residents exceed the threshold. In practice this catches structures nobody thought of as international. A partnership that recharges support from an affiliated foreign firm, or an individual dealing with a company they control abroad, sits in the same position as the subsidiary of a multinational. The test looks at the relationship between the parties rather than at the legal form of the Canadian one, so the entity type is the wrong place to go looking for an exemption.
Do we file T106 if the intercompany charges carried no markup?
Yes. The return reports that the transactions happened and what they amounted to; it does not ask whether a profit arose on them. Charging at cost changes the transfer-pricing analysis, and it may well be the right answer for certain services, but it does not take the dealings out of the reporting. Nor does it settle the pricing question: cost with no markup is a position that needs support like any other, and the return is where the CRA first sees that the dealings exist at all. Treat a no-markup recharge as reportable, and as something you should be able to justify.
Does Form T106 ask whether we have transfer pricing documentation?
It does, and that question is the reason the return deserves care. Form T106 is the transfer-pricing risk map the CRA reads first: it sets out who you deal with abroad, in which categories, for how much, and whether the pricing is supported by documentation. For many groups, answering that last question honestly is the moment they discover their intercompany pricing has never been supported by anything written down. The useful response is not to soften the answer but to fix the underlying position, so the following year's return can be answered differently and with something behind it.
Is a T106 needed if we are related but hardly traded?
Where the reportable transactions for the year fall below the filing threshold, the return is not required for that year. Two cautions. The test is applied year by year, so a group can sit outside the reporting one year and inside it the next without any change in the relationships between its companies. And the threshold is measured on the transactions rather than on tax owing, so a nil tax position, a loss, or a dormant year carrying a financing balance settles nothing. Total the intercompany dealings for each year separately before concluding that no return was due.
Does GILTI apply to individuals?
Yes, and it lands harder on them. An individual US shareholder of a controlled foreign corporation has the same inclusion a corporate shareholder does, but without an election gets neither the corporate-level deduction nor credit for the foreign corporate tax already paid — so foreign profit can be taxed at individual rates with no relief for tax the company paid abroad. An election to be taxed as though through a domestic corporation is usually the first thing to model. See Form 5471 and CFCs.
Is GILTI computed at the CFC level or the shareholder level?
Both, in sequence. Tested income, tested loss and the qualifying asset base are measured company by company. They are then aggregated at the US shareholder, which is where the netting of losses across companies happens and where the inclusion, the deduction and the credit are determined. That order matters in practice: a loss in one foreign subsidiary can reduce the inclusion caused by another, but only for a shareholder who owns both. See the GILTI inclusion and Form 8992.
