T106 Forms - Revised Version Released

T106 Forms – Revised Version Released

The Canada Revenue Agency (CRA) yesterday issued a revised version of the Form T106 to be used by taxpayers for tax years or fiscal periods beginning after 2021. A new question has been added to Part IV of the 2022 version of Form T106 to determine if a Pertinent Loan or Indebtedness (PLOI) election was made. If yes, the corporation resident in Canada is required to provide the amount of deemed interest related to the election. Reporting persons or partnerships are also required to provide additional information in Part IV about investments in the reporting entity by the non-resident (paid-up capital (PUC)). More information on the revised versions of the Form T106 can be found on the CRA website HERE.

Specifically, if debt is a PLOI, it will be subject to the new deemed interest income rule under section 17.1 of the Act instead of potentially being treated as a deemed dividend.

  • The new version of the T106 information return to be used when filing for tax years or fiscal periods that begin after 2021 (released on March 3, 2022)
  • When filing for tax years or fiscal periods that began before 2022, taxpayers must use the previous version of the T106 information return (released on November 16, 2017)
  • Individual Di Minimis threshold
    • For tax years or fiscal periods beginning in 2022 and later, the individual de minimis threshold has been increased to CAN$100,000 for the filing of Form T106, Information Return of Non-Arm’s Length Transactions with Non-Residents.
    • For tax years or fiscal periods beginning before 2022, the individual de minimis threshold remains at CAN$25,000

Where a reporting person or partnership’s total amount of the transactions with a particular non-resident during the tax year or fiscal period is below the threshold, there is no need to report these transactions in Part III of the T106 Slip. In other words, taxpayers must still file a T106 information return to report other information, but they do not need to report detailed information in Part III of the information return where their total transactions with a particular non-resident are below:

    • CAN$25,000 for tax years or fiscal periods beginning before 2022, and
    • CAN$100,000 for tax years or fiscal periods beginning in 2022 and later

Additional guidance on the individual di minis threshold is available on the CRA website HERE.

Contact our Transfer Pricing Principal & Practice Leader Avinash S. Tukrel for more information.

Leave a Reply