The T106 form is an annual information return required for corporations in Canada to report non-arm’s length transactions with non-residents, particularly for transactions exceeding $1,000,000.
What is the T106 Form?
The T106 form is an information return that corporations must file with the Canada Revenue Agency (CRA) to disclose their non-arm’s length transactions with non-residents. Non-arm’s length transactions are those where the parties involved are considered related, which can include various types of financial interactions such as loans, sales of goods, or services provided.
Who Must File the T106 Form?
- Corporations: Any corporation that engages in non-arm’s length transactions with non-residents must file a T106 form if the total reportable transactions exceed $1,000,000 CAD in a tax year.
- Partnerships: Partnerships that include a member who is a resident in Canada or that carry on business in Canada are also required to file the T106 form. 2
Reporting Requirements
- Each corporation must complete a separate T106 form for each non-resident with whom it has engaged in reportable transactions.
- The form must include details about the nature of the transactions, including amounts and types of transactions (e.g., tangible property, services, loans).
Filing Deadline
The T106 form must be filed within six months of the corporation’s tax year-end. Late filings can incur penalties, which may exceed $100 CAD or $25 CAD per day, up to a maximum of $2,500 CAD for each year.
Additional Information
- Corporations are also required to maintain contemporaneous transfer pricing documentation to support the reported transactions, as per section 247 of the Income Tax Act.
- If a corporation is unaware of the filing requirements and has not filed, it may be eligible for penalty relief under the Voluntary Disclosure Program if it submits the T106 form.
- For more detailed guidance, corporations should consult the CRA’s official resources or seek assistance from tax professionals.