Tax Alert - Changes to Filing Deadlines for Form T1134 Reporting

November 05, 2018


The 2018 Federal budget contained a proposal with respect to the foreign reporting form of foreign affiliates and controlled foreign affiliates that didn’t garner a lot attention, but it may have significant compliance impacts for Canadian companies with foreign affiliates. The budget proposed to change the information return deadline for Form T1134 - Information Return Relating to Controlled and Not-Controlled Foreign Affiliates. On October 24, 2018, the government announced that the deadline would now change to require this form to be filed within 10 months of a taxpayer’s year-end, for taxation years beginning after 2020. Taxation years that begin in 2020 will be a transition year — for this year only — there will be a requirement to file Form T1134 within 12 months of a taxpayer’s year-end.

The budget originally proposed to move this deadline to be in line with the corporate income tax return deadline by requiring the information returns to be filed within six months after the end of the taxpayer’s taxation year. Pressure from both the professional and business communities forced the government to rethink their original proposal.

Currently, Form T1134 is due 15 months after year-end, regardless of the taxpayer. A separate Form T1134 is required for each foreign affiliate. The purpose of Form T1134 is to capture information about a taxpayer’s foreign affiliates (“FA”) and controlled foreign affiliates (“CFA”). In cases of a CFA, Form T1134 reports any Foreign Accrual Property Income (typically called “FAPI”), which is passive income earned such as interest, dividends, rents, and royalties. FAPI is taxed immediately in Canada and is reported on a taxpayer’s Canadian tax return. The government felt that the extended filing deadline for Form T1134 was not warranted when a taxpayer needed most of the information before filing their income tax return in order to compute Canadian income tax liability.

The challenge with moving the Form T1134 deadline forward is that most foreign jurisdictions have different tax reporting deadlines than Canada. Foreign affiliates in those jurisdictions have to comply with those deadlines and not Canada’s. In a small multi-national group, there may be some ability to influence when the information can be made available for Form T1134 reporting purposes. However, in a large multi-national group with many jurisdictions, this can be problematic and a short filing deadline such as six months often will not provide enough time to gather the information necessary to prepare the Form T1134.

Ultimately, the government’s decision to extend the filing deadline to 10 months was influenced by the filing deadline for U.S. corporate tax returns. Take a simple example — a Canadian company (“Canco”) with a wholly owned U.S. C corporation (“USCO”), both with a December 31 year-end. In this example, there is a requirement for Canco to file Form T1134 in respect of USCO since it would be considered a CFA. Under the old rules, Form T1134 would be due 15 months from the December 31 year-end date, whereas under the proposed changes the deadline is 10 months after year-end. For U.S. tax purposes, the USCO return would be due April 15 in respect of the December 31 year-end; however, the filing deadline can be extended to October 15. Most U.S. taxpayers extend their deadline for U.S. tax filings and U.S. corporate tax returns are often not filed until 9-1/2 months after a company’s year-end. Canada has now essentially aligned the filing deadline for Form T1134 to the extended filing deadline for U.S. corporate tax returns. While this is welcome news when compared to the original budget announcement, we anticipate that obtaining information for the timely filing of Form T1134 will still be problematic in these circumstances. The new deadline for filing Form T1134 also does not account for the challenges in obtaining the necessary information for foreign affiliates in other jurisdictions.

The changes to the filing deadline for Form T1134 apply to taxation years that begin after 2019. So what should Canadian taxpayers do to prepare for this change?

  • Evaluate FA’s/CFA’s and jurisdictions that they currently operate in
  • Determine the filing deadlines in the foreign jurisdiction versus the new proposed deadline of Form T1134
  • Determine an action plan for collecting the information required to complete the necessary Form T1134s

Please contact one of our trusted BDO advisors to discuss how the proposed changes will impact you and your business.

The information in this publication is current as of November 2, 2018.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.