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?

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.

Historically, 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 information return only when their transactions with particular non-residents amounted to CAN$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 CAN$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 CAN$25,000 individual threshold.

Even though the CAN$1,000,000 threshold eliminated reporting for many taxpayers, it created an administrative burden for others. Once taxpayers exceeded the threshold, they had to report all their non-arm's length transactions with non-residents.

For tax years or fiscal periods beginning in 2002, the CRA reinstated the CAN$25,000 threshold for non-arm's length transactions with each non-resident person.

The CRA is now increasing the de minimis threshold from CAN$25,000 to CAN$100,000 for tax years or fiscal periods beginning in 2022 and later in an effort to further decrease the administrative burden of reporting requirements on taxpayers.