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Foreign Reporting for Businesses

Foreign reporting is a broad term in reference to Canada Revenue Agency forms and information related to foreign affiliates. There are different tax obligations depending on if your business is a sole proprietorship, partnership or corporation. If you earned income from a foreign affiliate, you must file Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates. This tax form is filed separate and apart from your regular tax return. The form must be mailed in and cannot be sent via NETFILE.

Do You Have to Report?

To declare income earned from a foreign affiliate, complete Form T1134.  This tax form includes a summary and supplements. File a supplement for each controlled or non-controlled foreign affiliate. Do not file a tax form if your affiliate is inactive. When reporting foreign income for a foreign affiliate, only the lowest-tiered Canadian corporation must report to the CRA.

What Do You Report?

Form T1134 provides details on what needs to be reported on your tax return. The required information is described in detail on Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates. Complete T1134 Summary – Part I, Section 1 and 2 of the summary for reporting entries. Please refer to this link from the CRA for further clarity.

The corporation responsible for reporting at least one controlled affiliate must complete Part I, Section 3 of the summary. In addition, you must file Part II, Section 1, 2, 3, 4A and Part IV for every foreign affiliate along with a separate supplement. Here is the PDF of this form.

Filing Your Taxes

Your required form should be provided to the Canada Revenue Agency within 15 months of the tax year, or for partnerships, by the end of the fiscal period.

Unlike your tax return, you cannot submit Form T1134 electronically. Complete the form and mail it to the address found here. Although you may be able to complete the form with certain tax software, it is not filed when you use NETFILE.

Filing Thresholds

If the total cost of the foreign affiliate is less than $100,000 and it is inactive, do not file Form T1134. The filing threshold has been increased. The filing threshold changed from assets with a fair market value under $100,000 and fewer than $10,000 gross receipts to assets with a fair market value under $1 million and fewer than $25,000 gross receipts. With the new rules, there is less likelihood of your foreign affiliate being required to report.

The Foreign Income Verification Statement

If your Canadian corporation owned ‘specified foreign property’ worth over $100,000 at any time during the tax year, file Form T1135, Foreign Income Verification Statement. Specified foreign property includes property located outside Canada, copyrights and patents held outside Canada and any shares of Canadian corporations outside the country.

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