Form T106, Information Return of Non-Arm's Length Transactions with Non-Residents - De Minimis Policy

What is the new de minimis policy for Form T106?

The policy reinstates the $25,000 individual de minimis threshold with respect to the filing of Form T106, Information Return of Non-Arm's Length Transactions with Non-Residents.

Before the 1998 amendments to section 233.1 of the Income Tax Act, the Canada Revenue Agency (CRA) required taxpayers to report detailed information on a T106 return only when their transactions with particular non-residents amounted to $25,000 or more. The 1998 amendments introduced a de minimis rule that eliminated reporting unless the total amount of non-arm's length transactions with all non-residents exceeded $1,000,000 in a reporting period. Since this overall de minimis threshold exempted a significant number of smaller taxpayers from the reporting requirement, the CRA removed the $25,000 individual threshold.

Even though the $1,000,000 threshold eliminates reporting for many taxpayers, it creates an administrative burden for others. Once taxpayers exceed the threshold, they must report all their non-arm's length transactions with non-residents. As a result, some taxpayers must prepare detailed information returns even when their total transactions with particular non-residents fall well below the previous $25,000 threshold.

To reduce this administrative burden, the $25,000 threshold for non-arm's length transactions with each non-resident person is once again applicable. Taxpayers must still file Form T106 to report other information, but they do not need to report detailed information where their total transactions with a particular non-resident are below the $25,000 threshold. In other words, taxpayers are no longer required to report these transactions in Part III of the form.

This administrative policy is effective for tax years that begin after 2002.

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