Do I file Form T106 even if no tax is owed?
Information return obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. Canadian corporations, partnerships, trusts and individuals whose reportable transactions with related non-residents exceed the filing threshold.
What happens if I have missed Form T106 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form T106 the same as the other reports I already file?
No. The information return of non-arm's-length transactions with non-residents — goods, services, royalties, interest, and loans. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
Do loans between my Canadian and foreign companies have to be reported?
Loans between a Canadian entity and a related non-resident are among the transactions Form T106 reports, alongside goods, services, royalties and interest. Two things catch groups out. First, a loan carrying no interest and no repayment schedule is still a transaction between related parties, and it does not stop being reportable because nothing passed through the profit and loss account. Second, the balance and the interest on it are separate items arising from the same relationship. Whether a return is required at all depends on the reportable transactions for the year against the filing threshold, which is tested rather than assumed.
What counts as a transaction with a related non-resident?
The return reaches goods, services, royalties, interest and loans passing between the Canadian filer and non-residents it does not deal with at arm's length. In practice the items missed are the ones that never looked like transactions: a management charge absorbed into head office costs, software or a brand used across the group without an invoice, staff seconded between entities, a balance left outstanding with no interest charged. Each of those is a dealing with a related non-resident even where little money moved in the year. Identifying them is the first task, before the threshold is tested or anything is completed.
The form asks whether we have transfer-pricing documentation - what if we don't?
Then you answer that question honestly, and you treat the answer as the start of a piece of work rather than the end of one. This is frequently the moment a group discovers its intercompany pricing has never been supported: the charges were set years ago, nobody has revisited them, and there is no analysis behind them. Signing a return that says documentation exists when it does not is a far worse position than saying it does not. The practical response is to answer as things stand and to put the documentation in place for the year ahead.
How does the CRA use the information return we file?
It is read as a map of the group's dealings with its related non-residents: which categories of transaction exist, in what direction, and whether the group says documentation supports them. That is why consistency matters more than presentation. A return that disagrees with the financial statements, or with what the group filed the year before, invites the question of which version is right. Before filing we reconcile the reported transactions to the accounts and to the prior year, so any change in the picture is a change we can explain rather than one that surprises us.
Our transactions are small - do we still have to file?
The obligation depends on whether the reportable transactions for the year exceed the filing threshold, so a small group may genuinely have nothing to file. What we would not do is reach that conclusion from impression. The test is run on the transactions identified for the year and the working is kept, because 'we were below the threshold' is an answer that needs support if the question is ever asked later. Groups also cross the line without noticing, usually when a new charge starts partway through a year, so the test is worth repeating rather than inherited from the last conclusion.
Does a partnership or a trust file this return too?
The filing obligation is not confined to corporations. Canadian corporations, partnerships, trusts and individuals can all be caught where their reportable transactions with related non-residents exceed the threshold, and partnerships in particular get overlooked because the people running them think of filing obligations as sitting with the partners. The analysis is the same whatever the vehicle: identify the dealings with related non-residents for the year, classify them, test them against the threshold, and answer the documentation question truthfully. The vehicle changes who signs, not whether the return is due.
Which transactions count as non-arms-length for T106 purposes?
The test is the relationship, not the size of the transaction. Dealings with a non-resident you are related to, or with whom you do not deal at arms length in fact, are reportable once the year's total reaches the reporting threshold — and the threshold is measured across all such transactions together, which is how filers who look at each contract separately miss it. Whether a particular counterparty is at arms length is a question of control and of who actually decides the terms, and it is settled from the facts before the summary is prepared.
What is OECD Pillar One?
The part of the international agreement that reallocates a share of taxing rights over the very largest and most profitable groups to the jurisdictions where their customers and users are, regardless of physical presence — plus a simplified approach to routine marketing and distribution returns. It is aimed at the digitalised economy problem that physical-presence rules could not reach, and its implementation is still moving, which is why we read the current instrument rather than the original blueprint. See BEPS and Pillar Two.
