Do I have to file T1134 if the foreign company made no profit?
Yes. The T1134 is an information return, so the obligation follows ownership rather than income. A foreign affiliate that traded at a loss, or did not trade at all, still has to be reported, and the return still asks for its financial position and its ownership chain. This catches people out because every other filing they deal with is driven by tax payable. Here nothing is payable and the return is still late. Where several years have gone by with no filings, the exposure attaches year by year rather than as a single lapse, which is why a position like this is worth regularising as soon as it is found.
What is the difference between T1134 and T1135?
They report different things, and filing one does not answer the other. T1135 is concerned with holdings of specified foreign property. T1134 is concerned with foreign affiliates, meaning corporations in which your interest is large enough to bring affiliate status with it, and it asks for detail about the company itself rather than a holding at a value. It is possible to have one obligation and not the other, and possible to have both in the same year on the same investment. The mistake we see most often is a client who filed T1135 for years, assumed the foreign company was therefore disclosed, and had never filed a T1134 for it.
Does T1134 apply to individuals or only to corporate groups?
Individuals file it. The return and its schedules read as though they were written for corporate groups, and that appearance is probably the single biggest reason it goes unfiled: a person who owns shares in a family company abroad does not think of themselves as having a foreign affiliate. The test is the shareholding, not whether you run a group. Trusts and partnerships come into it as well, because an interest held through them can still be traced to a Canadian filer. If you hold shares in a non-resident corporation personally, the first question is not whether you owe tax but whether the return was due.
What happens if I have never filed T1134 for past years?
Each year stands on its own, so the first task is establishing which years the obligation actually arose in. That is a computation on the ownership facts rather than an assumption. Once the years are fixed, the returns are prepared from the affiliate's own records: its financial statements, its share register, and the chain between it and you. Where the omission was not deliberate, there is a route for coming forward voluntarily, and the practical value of that route depends on using it before the CRA raises the subject. We would rather see the file the week you discover the problem than the week after a letter arrives.
Do I need a T1134 for a dormant foreign company?
Dormancy does not remove the affiliate. If the corporation existed and your interest in it met the test at any time in the year, it is reportable, and the return is completed on the basis that there was no activity rather than skipped. In practice the work on a dormant affiliate is mostly evidential: showing that the bank account did not move, that no income arose, that the shares were held throughout. That evidence is easier to assemble now than it will be several years from now, which is the argument for filing a dull return rather than leaving a gap in the sequence.
What information does the T1134 actually ask for?
More than most people expect from a form they had not heard of. It wants the affiliate identified, the ownership chain between you and it set out, its financial results, and detail on the nature of its income and its surplus position. That means the affiliate's local accounts have to be made usable for Canadian purposes, which is where the real work sits. A set of statements prepared under another country's conventions, in another currency, has to be restated before any of the schedules can be completed. Gathering that from a company you do not control is the part to start early.
Why should a Canadian rarely own a US LLC?
Because the two systems classify it differently. The United States generally treats a single-member LLC as transparent while Canada treats it as a corporation, so the income is taxed in different hands in each country and the foreign tax credit does not line up. The result is tax paid twice with no relief to claim. Other structures reach the same commercial outcome without the mismatch. See why a Canadian should rarely own an LLC.
What is double taxation?
Double taxation means the same income being taxed by two authorities. It comes in two forms: juridical, where two countries each tax one person on one amount, and economic, where two different people are taxed on the same underlying profit — a company on its earnings and a shareholder on the dividend paid out of them. Relief comes from a treaty, a foreign tax credit, or an exemption, and which one applies depends on the income type. How to avoid double taxation sets out the routes.
