T106 Reporting for Transactions With Related Non-Residents
Canadian taxpayers with significant dealings with related parties abroad must report them each year on Form T106. Bestax identifies the reportable transactions, prepares a slip for each non-resident and files the return consistently with your transfer pricing documentation and tax return.
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Who Has to File a T106
The T106 applies when a Canadian taxpayer’s reportable transactions with non-arm’s length non-residents total more than $1,000,000 in the year. Once that total is crossed, every such non-resident is reported, not only the largest.
- Canadian corporations that buy from or sell to a foreign parent, subsidiary or sister company.
- Canadian entities that pay or receive management fees, service charges or royalties within a foreign group.
- Businesses with intercompany loans, interest or guarantees involving related non-residents.
- Trusts and partnerships with reportable transactions with non-arm’s length non-residents.
- Individuals resident in Canada whose dealings with related non-residents cross the threshold.
- Taxpayers who missed a T106 in earlier years or received a CRA letter about one.
The T106 is not the same as the T1134 or the T1135. Those report foreign affiliates and foreign property; the T106 reports transactions with related non-residents. A taxpayer can owe all three.
See how we support your figures with Benchmarking Studies, or our full Transfer Pricing Services.
What Our T106 Reporting Service Covers
We take the T106 from the general ledger to the CRA, checking it against your documentation and your return on the way.
- A review of the year’s related-party transactions to confirm whether the $1,000,000 threshold is crossed.
- Identification of each non-arm’s length non-resident and the categories of transactions with each one.
- Preparation of a T106 slip for each non-resident and the T106 Summary for the filer.
- A check that the methods and documentation questions on the form match your transfer pricing file.
- Reconciliation of the reported amounts to the financial statements and the income tax return.
- Filing by the due date, amended T106 returns where needed, and replies to the CRA.
The CRA Rules for Form T106
Form T106 is an information return under the Income Tax Act. It is filed by corporations, trusts, partnerships and individuals resident in Canada, and by non-residents carrying on business in Canada, whose reportable transactions with non-arm’s length non-residents total more than $1,000,000 in the year.
The return has two parts: a slip for each non-resident, showing the types and amounts of transactions, and a summary for the filer. The slips also ask about the transfer pricing methods used and whether contemporaneous documentation was prepared, so the answers need to match the file behind them.
The T106 is due on the filer’s income tax return due date, or the partnership information return due date for a partnership.
One slip is filed for each non-arm’s length non-resident, with the summary covering them all.
Reported amounts should agree with the financial statements, the tax return and the transfer pricing documentation.
Late-filing penalties can apply for each slip, and higher penalties apply where a return is knowingly not filed or a demand is ignored.
Filing a T106 does not satisfy the transfer pricing documentation rules. It reports the transactions; the documentation shows they were priced at arm’s length.
The T106 and the Forms It Is Confused With
Several CRA information returns deal with cross-border affairs. Each reports something different, on its own timetable.
| Form | What it reports | When it is due | Who files it |
|---|---|---|---|
| T106 | Reportable transactions with non-arm’s length non-residents | The filer’s income tax return due date | Filers whose total of those transactions exceeds $1,000,000 |
| T1134 | Information on foreign affiliates | Within 10 months after the tax year end | Canadian taxpayers with foreign affiliates |
| T1135 | Specified foreign property | The filer’s income tax return due date | Residents whose foreign property cost more than $100,000 |
| Country-by-country report | Revenue, profit and tax of a large multinational group by country | Within 12 months after the group’s fiscal year end | Large multinational groups, through the parent or a designated filer |
A Canadian subsidiary of a foreign group often files a T106 but not a T1134. A Canadian parent with foreign subsidiaries may file both, and sometimes a T1135 as well.
What We Need to Prepare Your T106
The T106 is built from the ledger, so we start with the year’s intercompany accounts and the entities behind them.
Where intercompany balances are recorded inconsistently, we reconcile them first, so the slips report what actually happened.
- A group chart showing each non-resident related party and its country.
- The general ledger or intercompany accounts for the year.
- Intercompany agreements for goods, services, royalties and loans.
- Your financial statements and the draft income tax return for the year.
- Your transfer pricing documentation or study, if one exists.
- Last year’s T106, and any CRA correspondence about it.
Our T106 Reporting Process
Test the threshold
We total the year’s transactions with non-arm’s length non-residents and confirm whether a T106 is required.
Map the parties
We identify each related non-resident and the transactions with each one.
Prepare the slips
We complete a slip for each non-resident and the summary, using reconciled figures.
Check consistency
We compare the T106 with your financial statements, tax return and transfer pricing documentation.
File on time
We file by your return’s due date and keep the working papers with your file.
Amend and respond
We file amended returns when figures change and answer the CRA’s questions about the form.
Why Groups Choose Bestax for T106 Reporting
Consistent with your file
Your T106, documentation and benchmark describe the same transactions in the same way.
Every party captured
We report each non-arm’s length non-resident, not only the main parent or subsidiary.
Reconciled to the books
Amounts on the slips agree with the ledger, the statements and the return.
The right forms
We confirm whether the T106, T1134 or T1135 applies, so nothing is filed twice or missed.
Filed with your return
The T106 is prepared alongside your income tax return, on the same deadline.
Related Bestax Services
Transfer Pricing Services for the documentation and policies behind the amounts you report.
Cross-Border & International Tax for foreign affiliates, foreign property and other cross-border filings.
Foreign Tax Credits when income earned abroad has already been taxed there.
T2 Corporate Tax Returns filed together with the T106 on the same deadline.
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Frequently Asked Questions
You file a T106 when your reportable transactions with non-arm’s length non-residents total more than $1,000,000 in the tax year. It is due on the same date as your income tax return.
Transactions with each related non-resident, grouped by type: tangible property, rents and royalties, services, loans and interest, and other amounts. The slip also asks about the transfer pricing methods used and whether contemporaneous documentation was prepared.
No. The T1134 reports foreign affiliates, and the T1135 reports specified foreign property. The T106 reports transactions with non-arm’s length non-residents. Depending on your structure, you may need one, two or all three.
Late-filing penalties can apply for each slip that is late, so they grow with the number of related non-residents. Larger penalties can apply where a return is knowingly not filed or a CRA demand is not met.
Yes. If figures change after filing, for example because of a transfer pricing adjustment or a correction to the books, an amended T106 is filed with the corrected slips.
No. The T106 reports the transactions; it does not show they were priced at arm’s length. That comes from your documentation and, usually, a benchmarking study.