Questions and answers about Form T1134

• Do you have to file a return?
  • Does Form T1134 have to be filed for a foreign affiliate in each of the following situations?
• Tracking Interests
  • If a reporting entity holds a property that is a tracking interest (as defined in subsection 95(8)), how are they to report this on Form T1134?
  • If a reporting entity holds a property that is a tracking interest (as defined in subsection 95(8)), how does the application of administrative relief for "Dormant Affiliates" apply to the tracking interest in respect of a foreign affiliate?
• Penalty application
  • In technical interpretation 2019-0791541I7, CRA indicated that an information return missing substantial information will be considered invalid, and therefore, not considered to have been filed. Can the CRA provide examples of what it would consider to be "substantial information" on the revised T1134 information return?
• Reporting entity information (Section 1 of Part I of the summary of Form T1134 2021 version)
  • In circumstances where an individual or trust is required to file Form T1134, what North American Industry Classification System (NAICS) code should be used?
• Taxpayer identification number (TIN) for non-resident(s)
  • Based on a resource from the OECD website, certain jurisdictions (for example, the Cayman Islands) do not issue taxpayer identification numbers (TINs). How do reporting entities adequately disclose this information?
• Organizational structure (Part I – Section 3)
  • What is the definition of "related person" as used in Part I, Section 3 and in Part II, Section 2.B of the 2012/2017 version of Form T1134?
  • At what point during the year should the organizational structure filed with Form T1134 be reported? What disclosure, if any, is required for changes in the organizational structure during the reporting taxpayer's tax year?
  • When reporting on the organizational structure in Part I, Section 3, the equity percentage is defined in subsection 95(4) as including direct and indirect share ownership percentages. In the case of a tiered corporate structure, this could result in significant repetitive reporting. Is there any administrative relief for this?
  • If a reporting entity does not have a direct ownership in a dormant affiliate, does one leave the “Cost Amount” entry as zero when filling out Part I, Section 3.D, Dormant foreign affiliates?
  • Lower-tier non-controlled foreign affiliates (Part I, Section 3 E)
  • Column 6 of the table asks whether any “transformation transactions” have taken place during the reporting period. The term appears in the context of Part II, Section 3.B in the matter of surplus accounts with more specific questions. What does the term "transformation transaction" mean within the context of form T1134?
• Foreign affiliate information (Part II – Section 1)
  • Foreign affiliate dumping rules (Section 1.D)
  • Where a corporation resident in Canada is not controlled by a non-resident such that the conditions in subsection 212.3(1) are not met with the result that subsection 212.3(2) is not applicable, should one leave this section blank?
• Capital stock of foreign affiliate (Part II – Section 2.B of the 2012/2017 version)
  • If the share capital was subscribed in a foreign currency by the parent company and if the investment is accounted for in the financial statements in Canadian dollars and is re-valued each year in the financial statements at the exchange rate at the end of the year, what amount has to be reported: the cost in the foreign currency, the cost in Canadian dollars at the historical exchange rate (at the investment date), or the cost in Canadian dollars at the current exchange rate in accordance with the financial statements?
• Financial information of the foreign affiliate (Part II – Sections 2 (2021 version) and 3 (2012/2017 version) of Form T1134)
  • For which foreign affiliate do I have to submit financial statements?
  • As explained in the instructions to the form, a reporting entity is required to include the foreign affiliate's financial statements with their T1134 filing if it owns, directly or indirectly, shares representing at least 20% of the voting rights of that affiliate. Within this context, please provide guidance on the following:
  • a) Mr. A is the reporting entity owning 60% of a first tier FA (FA1) that owns 25% of a second tier FA (FA2). Is Mr. A required to provide the unconsolidated financial statements of FA2?
  • b) Mr. A is the reporting entity owning 50% of a first tier FA (FA1) that owns 25% of a second tier FA (FA2). Is Mr. A required to provide the unconsolidated financial statements of FA2?
  • c) In respect of the determination in sub-question (b), above, would the existence of a unanimous or non-unanimous shareholder's agreement be relevant?
  • It's not always possible to provide all the required financial information of a foreign affiliate that's not controlled. What should the taxpayer do to avoid the penalty for not reporting?
  • Under what circumstances will the CRA accept consolidated financial statements?
  • How does the CRA interpret the phrase "available to you as a shareholder" in Part II, Section 3 (2012/2017 version) and "available to you" in Part II, Section 2 (2021 version) of Form T1134?
  • What does the CRA mean by "income or profits tax paid or payable" on accounting income in Part II, Section 3 of the 2012/2017 version of Form T1134? Does it mean only the current provision component of the tax provision, as reflected in the foreign affiliate's financial statements? Or is it the tax liability from the foreign affiliate's income tax return?
• Surplus Accounts (Part II, Section 3)
  • In Question 2, Section 3.B of the T1134 Supplement, filers are asked whether the reporting entity, or any member of the related Canadian group, or another foreign affiliate of the reporting entity (-ies) acquires or disposes of a share of the capital stock of the foreign affiliate. If the answer is yes, the filer is required to disclose the identity of the relevant reporting entity in a table. The reporting entity is typically the Canadian entity filing the form. Is this the correct disclosure required? What should be disclosed if the acquisition or disposition was carried out by another foreign affiliate of the reporting entity? Should the table be left blank?
• Upstream loans (Part II, Section 3, Question 4)
  • In the table to Question 4 about the upstream loan rules, reporting entities are required to identify if a specified debtor owed an amount to the foreign affiliate at any time during the reporting period. If so, it requires the reporting entities to answer if subsection 90(6) or 90(8) applies to that debt. As the application of 90(6) or 90(8) would not be confirmed until two years later, at the time when Form T1134 is prepared, the reporting entities would not have a firm answer to these questions. How should reporting entities provide the answers to these questions in such a situation?
• Nature of income of controlled foreign affiliate (Part III)
  • Can dollar amounts be rounded to the nearest thousand?
  • Part III, Section 2 of Form T1134 asks for gross income amounts from certain sources. Are these amounts to be provided based on Canadian income tax measurement rules or based on local accounting standards and local tax measurement rules?
  • In Part III, Section 3 of Form T1134 (concerning the different sources of "foreign accrual property income" or "FAPI"), should the reporting taxpayer indicate 100% of the FAPI income earned by the controlled foreign affiliate? Or should they indicate the percentage attributable to the reporting taxpayer?
  • What is the definition of "total participating percentage" as used in Part III, Section 3 of the 2012/2017 version of the Form T1134 and "participating percentage" as used in Part III, Section 3 of the 2021 version of the Form T1134?
  • Are the amounts of FAPI to be reported on a gross or net basis in Part III, Section 3 of Form T1134?
  • What is the definition of "excluded property" for the purposes of Part III, Section 4, of Form T1134 of the 2012/2017 version of the T1134 or Part II, Section 3.B, Question 4 of the 2021 version of the T1134?
  • On Form T1134, the instructions for Sections 4 and 5 of Part III of the 2012/2017 version and for Sections 3 and 4 of Part III of the 2021 version indicate that the reporting taxpayer has to provide information about capital gains and losses realized by the foreign affiliate, as well as income of the foreign affiliate that's from an active business. Is the taxpayer required to attach to the form details on the capital gains and losses and income of the foreign affiliate?

Do you have to file a return?

Does Form T1134 have to be filed for a foreign affiliate in each of the following situations?

• the foreign affiliate does not have a tax year ending in the reporting taxpayer's tax year
• the foreign affiliate has been sold before its tax year-end
• the foreign affiliate is acquired or formed in the year and has not had a tax year end in the reporting taxpayer's tax year
• the foreign affiliate stops being a controlled foreign affiliate before the end of the reporting taxpayer's tax year

To ensure an accurate record of the history of the foreign affiliate and transparency of offshore structures, filing is required in all of the above situations.

The legislative requirement is that Form T1134 must be filed if the non-resident corporation or trust is either a foreign affiliate or a controlled foreign affiliate at any time during the reporting taxpayer's tax year.

It is recognized that, in certain situations, the amount of information to be filed will be minimal. For instance, this is the case if the corporation or trust stops being a controlled foreign affiliate before the end of the reporting taxpayer's tax year. Another example is if the foreign affiliate hasn't prepared financial statements because the reporting taxpayer's year end is before the foreign affiliate's year end.

If the required information isn't available, the reporting taxpayer must complete the disclosure section of the form to comply with the requirements of the due diligence exception.

Tracking Interests

If a reporting entity holds a property that is a tracking interest (as defined in subsection 95(8)), how are they to report this on Form T1134?

Where the reporting entity is deemed to own shares of a separate corporation that is a controlled foreign affiliate because of subsection 95(11) of the Income Tax Act (the Act), the reporting entity is required to file one T1134 Supplement in respect of each such separate corporation. On each T1134 Supplement filed, specify the name of the tracking class you are reporting on – in addition to the name of the actual affiliate – in Part II – Section 2 of the 2012/2017 version or Section 1 of the 2021 version – Foreign Affiliate Information – A. Identification of foreign affiliate – "Name" portion of the T1134 Supplement.

For each separate corporation so determined, the reporting entity must also provide a separate set of unconsolidated financial statements that reflects the tracked property and activities as described in that provision, as well as the income, loss or gains in respect of such property and activities. If a reporting entity directly or indirectly holds shares in more than one tracking class issued by the same actual affiliate, it is required to provide separate unconsolidated financial statements for each deemed separate corporation as determined by subsection 95(11). A separate T1134 Supplement must also be filed in respect of the actual affiliate, along with a set of unconsolidated financial statements in respect of this legal entity.

In completing the T1134 Supplement in respect of a separate corporation, you must provide information relevant to the determination of the amounts, if any, to be included under subsection 91(1) in respect of the separate corporation. This would typically require completing the following sections of the T1134 Supplement in respect of the separate corporation:

Information not relevant to the determination of amounts required to be included under subsection 91(1) in respect of the separate corporation need not be included on the T1134 Supplement in respect of the separate corporation. Instead, you must provide that information, as determined at the level of the actual affiliate, on the T1134 Supplement for the actual affiliate.

Where the foreign affiliate is deemed to be a controlled foreign affiliate because of subsection 95(12) of the Act, the reporting entity is required to file one T1134 Supplement in respect of the affiliate on the basis that it is a controlled foreign affiliate.

If a reporting entity holds a property that is a tracking interest (as defined in subsection 95(8)), how does the application of administrative relief for "Dormant Affiliates" apply to the tracking interest in respect of a foreign affiliate?

For purposes of determining whether a foreign affiliate meets the criteria to be considered as "dormant" in a T1134 filing context, each one of the three (3) conditions set out in the instructions to Form T1134 are to be applied at the legal entity level. Where a reporting entity is deemed to own shares in a separate corporation that is a controlled foreign affiliate because of subsection 95(11), the conditions are to be applied to the actual affiliate – that is, instead of being applied to each such separate corporation resulting from the application of subsection 95(11). For clarity, in the event that a reporting entity directly or indirectly holds shares in more than one (1) tracking class (as defined in subsection 95(11)), the thresholds pertaining to total gross receipts and total fair market value of assets are to be applied at the actual affiliate level.

Penalty application

In technical interpretation 2019-0791541I7, CRA indicated that an information return missing substantial information will be considered invalid, and therefore, not considered to have been filed. Can the CRA provide examples of what it would consider to be "substantial information" on the revised T1134 information return?

A proper determination of whether substantial information is missing from an information return is a question of fact that can only be answered after a careful examination of all relevant facts and circumstances giving rise to the non-disclosure. As such, what constitutes "substantial information" varies from case to case. To avoid penalty application, the onus is on the reporting entity to demonstrate that they have exercised due diligence in preparing their T1134 filing. The unavailability of any information at the time of filing should be disclosed in Part IV – Disclosure, along with an explanation as to why it is not available and a description of the steps taken to obtain it.

Reporting entity information of the T1134 Summary (Section 1 of Part I of Form T1134 2021 version)

In circumstances where an individual or trust is required to file Form T1134, what North American Industry Classification System (NAICS) code should be used?

With the 2021 version of Form T1134, it is mandatory to provide a NAICS code for each reporting entity in Section 1 of Part I, "Reporting entity information".

If the individual or trust is carrying on business activities such that a suitable NAICS code would properly reflect those activities, use that code. If a suitable code is not otherwise applicable, then 551113 "Holding companies" should be used. The CRA recognizes that an individual or trust is not a corporation however this code best reflects the activity associated with holding shares of a foreign affiliate in these circumstances. It should be noted the CRA has confirmed that the T106 Summary NAICS field is also mandatory and the guidelines above should also be adopted for that field.

Taxpayer identification number (TIN) for non-resident(s)

Based on a resource from the OECD website, certain jurisdictions (for example, the Cayman Islands) do not issue taxpayer identification numbers (TINs). How should a reporting entity adequately disclose this information to the CRA so to avoid any penalties?

For foreign affiliates that reside in jurisdictions that do not issue TINs, NA is an acceptable response. To ensure that no penalty will result, reporting entities should explain the reason for non-disclosure in Part IV, Disclosure, of the form.

Organizational structure (Part I – Section 3)

What is the definition of "related person" as used in Part I, Section 3 and in Part II, Section 2.B of the 2012 / 2017 version of Form T1134?

"Related person" is defined under subsection 251(2) of the Act.

At what point during the year should the organizational structure filed with Form T1134 be reported? What disclosure, if any, is required for changes in the organizational structure during the reporting taxpayer's tax year?

The organizational structure must be reported in Part I, Section 3 as it exists at the reporting taxpayer's year-end. If you are providing this information for tax years or fiscal periods beginning before 2021, where the table included in the Summary has insufficient space, attach a separate page with a continuation of the information. Additional information can also be reported on a separate page, for example: entities that do not exist in the organizational structure, such as the acquisition and disposal of an affiliate in the same year.

For tax years or fiscal periods beginning after 2020, you have the option of providing the information required in Part I, Section 3.C of the 2021 version of the form in a pictorial format, submitted electronically with the return. If you choose to complete the tables in Part I, Section 3.C, the same instructions regarding insufficient space and means to provide additional information as described above continue to apply.

When reporting on the organizational structure in Part 1, Section 3, the equity percentage is defined in subsection 95(4) as including direct and indirect share ownership percentages. In the case of a tiered corporate structure, this could result in significant repetitive reporting. Is there any administrative relief for this?

For tax years or fiscal periods that begin after 2020, there is an option to electronically submit a pictorial of the organizational chart which will significantly reduce the filing burden if you are reporting on a tiered structure of foreign affiliates in the T1134 Summary, Part I, Section 3 C, Organizational Chart, tables i) through iv).

When reporting on the organizational structure in Part I, Section 3 of the 2012/2017 version, the CRA will accept information limited only to each foreign affiliate of the reporting entity that has a direct equity percentage in any other foreign affiliate of the reporting entity. If the foreign affiliate of the reporting entity does not have a direct equity percentage in another foreign affiliate of the reporting entity, but does have an equity percentage, you are not required to provide information regarding this situation in Part I, Section 3.B of the 2012/2017 version of the form. For tax years or fiscal periods that begin after 2020, this administrative relief will continue to apply if you choose to fill out Part I, Section 3.C of the 2021 version of the form instead of providing the organizational chart in pictorial format. When completing these sections of the form (that is, Part I, Section 3.B of the 2012/2017 version or Part I, Section 3.C, table (ii) of the 2021 version), list the name and country code of the country of residence of each foreign affiliate of the reporting entity that has a direct equity percentage in any other foreign affiliate of the reporting entity. Include the foreign affiliate's equity percentage and direct equity percentage in the other foreign affiliate.

If a reporting entity does not have a direct ownership in a dormant affiliate, does one leave the "Cost Amount" entry as zero when filling out Part I, Section 3.D, Dormant foreign affiliates?

Yes.

Lower-tier non-controlled foreign affiliates (Part I, Section 3.E)

Column 6 of the table asks whether any "transformation transactions" have taken place during the reporting period. The term appears in the context of Part II, Section 3.B in the matter of surplus accounts with more specific questions. What does the term "transformation transaction" mean within the context of form T1134?

The term "transformation transactions" is not defined in the Act. Examples of the types of "transformation transactions" that are of interest to the CRA are provided within each question in Part II, Section 3.B of the form. These transactions can result in changes in the ownership structure of a multinational group. The types of transformation transactions that are of interest to the CRA include, but are not limited to, transactions that will have an impact on either a reporting entity's income as determined under Part I of the Act or the surplus and underlying tax accounts of its foreign affiliates. Within this context, Question 5 in Part II, Section 3.B is intended to be a catch-all for any other types of share or "transformation" transactions that are not specifically identified in the questions before it. This meaning applies to all references to "transformation transactions" within Form T1134, including the question in Part I, Section 3.E of the form.

Foreign affiliate information (Part II – Section 1)

Foreign affiliate dumping rules (Section 1.D)

Where a corporation resident in Canada is not controlled by a non-resident such that the conditions in subsection 212.3(1) are not met with the result that subsection 212.3(2) is not applicable, should one leave this section blank?

To prevent the non-disclosure of transactions of interest to the CRA, certain data fields on the form are mandatory; the questions in Part II, Section 1 B are an example. Where a corporation resident in Canada is not controlled by a non-resident such that the conditions for subsection 212.3(2) application are not met, a "no" response to each question contained in this table would be acceptable.

Capital stock of foreign affiliate (Part II – Section 2.B of the 2012/2017 version)

If the share capital was subscribed in a foreign currency by the parent company and if the investment is accounted for in the financial statements in Canadian dollars and is re-valued each year in the financial statements at the exchange rate at the end of the year, what amount has to be reported: the cost in the foreign currency, the cost in Canadian dollars at the historical exchange rate (at the investment date), or the cost in Canadian dollars at the current exchange rate in accordance with the financial statements?

If the share capital of the foreign affiliate is owned by the reporting entity, report the cost in Canadian dollars at the historical exchange rate. If an election has been made under paragraph 261(3)(b) of the Act to use a functional currency, then report the book cost in that currency. If the share capital of the foreign affiliate is owned by a controlled foreign affiliate of the reporting entity, or another person related to the reporting entity, and the cost in Canadian dollars at the historical exchange rate is readily available, report that amount on the form. Otherwise, report the historical cost in the foreign currency and indicate the foreign currency being used. Include the appropriate currency code from the list contained in the instructions.

Financial information of the foreign affiliate (Part II – Sections 2 (2021 version) and 3 (2012/2017 version) of Form T1134)

For which foreign affiliate do I have to submit financial statements?

For tax years or fiscal periods that begin before 2021, each reporting entity is required to include the unconsolidated financial statements (including the notes to the financial statements) of each foreign affiliate in respect of which a T1134 Supplement is filed.

When filing the T1134 forms for tax years or fiscal periods that begin after 2020, each reporting entity must also include the financial statements and the notes to the financial statements for each controlled foreign affiliate as well as each foreign affiliate in respect of which the reporting entity directly or in indirectly holds 20% or more of the voting interest.

In determining whether the 20% threshold has been met, it is not appropriate to use as a basis for the calculation, the equity percentage (i.e. multiplying ownership percentages in the chain of ownership) or the voting percentage indirectly controlled by the reporting entity. The ownership percentage(s) in the foreign affiliate(s) that are part of a chain of ownership of a specific foreign affiliate are not taken into account for this purpose. For example, if a reporting entity owns 75% of FA1 which in turn owns 20% of FA2, the CRA would require the filing of FA2's financial statements.

Where the reporting entity is deemed to own shares of a separate corporation that is a controlled foreign affiliate because of subsection 95(11) of the Act, it must also provide a separate set of unconsolidated financial statements for each such separate corporation that reflect the tracked property and activities as described in that provision, as well as the income, loss or gains in respect of such property and activities.

When filing the T1134 form for taxation or fiscal periods that begin after 2020, this information must be included for each reporting entity within the related Canadian group in situations where a representative reporting entity is filing on behalf of a related Canadian group.

As explained in the instructions to the form, a reporting entity is required to include the foreign affiliate's financial statements with their T1134 filing if it owns, directly or indirectly, shares representing at least 20% of the voting rights of that affiliate. Within this context, please provide guidance on the following:

a) Mr. A is the reporting entity owning 60% of a first tier FA (FA1) that owns 25% of a second tier FA (FA2). Is Mr. A required to provide the unconsolidated financial statements of FA2?

In this scenario, CRA would require Mr. A to include FA2's unconsolidated financial statements when filing Form T1134. Through his direct ownership of the shares of FA1, Mr. A indirectly owns 25% of the shares in FA2. As such, the condition that the reporting entity (Mr. A) owns, directly or indirectly, shares representing at least 20% of the voting rights of the affiliate (FA2) is met.

b) Mr. A is the reporting entity owning 50% of a first tier FA (FA1) that owns 25% of a second tier FA (FA2). Is Mr. A required to provide the unconsolidated financial statements of FA2?

To have an appropriate basis for this determination, all facts and circumstances surrounding the ownership structure of FA1 must be examined. For example, who owns the remaining 50% of the FA1 shares? What is the relationship between Mr. A and the other shareholders in FA1? Are there any agreements or arrangements in place that would affect Mr. A's ability to direct or otherwise influence the decisions at FA1? And how can such agreements or arrangements in turn, affect Mr. A's ability to direct or otherwise influence the decisions at FA2? To the extent that Mr. A is in a position to exercise influence over FA2's decisions that are commensurate with what a shareholder can expect from holding at least 20% of the voting rights of that affiliate, Mr. A is expected to include the unconsolidated financial statements of FA2 when filing Form T1134. If Mr. A is uncertain about whether the threshold has been met, he should include the foreign affiliate's financial statements to ensure their filling obligations have been met.

c) In respect of the determination in sub-question (b), above, would the existence of a unanimous or non-unanimous shareholder's agreement be relevant?

The specific terms and conditions set out in any unanimous or non-unanimous shareholder's agreement can affect how decisions are made at the foreign affiliate level and, as a result, can be relevant to the 20% determination.

It's not always possible to provide all the required financial information of a foreign affiliate that's not controlled. What should the taxpayer do to avoid the penalty for not reporting?

The taxpayer must make a reasonable effort to get the required information. If the taxpayer cannot provide the required information, they must demonstrate that due diligence was exercised in trying to get it. In Part IV of the T1134 Supplement, the taxpayer is required to disclose the steps taken to get the information and the reasons it was not available.

Under what circumstances will the CRA accept consolidated financial statements?

The CRA does not accept consolidated financial statements to satisfy the reporting requirements under Part II, Section 2 of the 2021 version or Part II, Section 3 of the 2012/2017 version of Form T1134.

How does the CRA interpret the phrase "available to you as a shareholder" in Part II, Section 3 (2012/2017 version) and "available to you" in Part II, Section 2 (2021 version) of Form T1134?

The financial information that is available to you as a shareholder includes all information to which you, as a shareholder, are legally entitled to get from the foreign affiliate.

What does the CRA mean by "income or profits tax paid or payable" on accounting income in Part II, Section 3 of 2012/2017 version of Form T1134? Does it mean only the current provision component of the tax provision, as reflected in the foreign affiliate's financial statements? Or is it the tax liability from the foreign affiliate's income tax return?

For purposes of Form T1134, "income or profits tax paid or payable" means the income tax liability from the foreign affiliate's income tax return.

The income tax liability reported on Form T1134 must include loss carry-overs and losses of another entity in the same corporate group when such losses are offset by an intercompany charge by the corporate group. If the corporate group does not make an offset or adjustment to income taxes, there must be no adjustment to income tax paid or payable for purposes of these reporting requirements.

If income tax paid or payable is to be determined for a foreign affiliate that is part of a group that files its tax returns on a consolidated basis, each foreign affiliate must report the tax liability allocated to it where there is a reasonable intercompany charge or offset.

Where adjustments to tax paid or payable have occurred after filing Form T1134, only those adjustments that are significant have to be reported. This can be done by sending a letter to the CRA to indicate these adjustments. An amended form is not required.

Surplus Accounts (Part II, Section 3)

In Question 2, Section 3.B of the T1134 Supplement, we are asked whether the reporting entity, or any member of the related Canadian group, or another foreign affiliate of the reporting entity (-ies) acquires or disposes of a share of the capital stock of the foreign affiliate. If the answer is yes, we are required to disclose the identity of the relevant reporting entity in a table. The reporting entity is typically the Canadian entity filing the form. Is this the correct disclosure required? What should be disclosed if the acquisition or disposition was carried out by another foreign affiliate of the reporting entity? Should the table be left blank?

The table is intended to identify the specific reporting entity within a related Canadian group that has either acquired or disposed of foreign affiliate shares itself or whose foreign affiliate has acquired or disposed of foreign affiliate shares during the reporting period.

In a single-entity filing scenario, the reporting entity will be the one identified in this table if the answer to Question 2 in Section 3.B is "yes."

In a group filing scenario, the response will depend on which specific reporting entity within the related Canadian group has itself, or indirectly through a foreign affiliate, either acquired or disposed of the shares. As such, if it is another foreign affiliate of a reporting entity that has acquired or disposed of shares in a foreign affiliate, the identity of the reporting entity in respect of which that other foreign affiliate is a foreign affiliate should be provided in the table. The table should not be left blank if the response to Question 2 is "yes."

Upstream loans (Part II, Section 3, Question 4)

In the table to Question 4 about the upstream loan rules, reporting entities are required to identify if a specified debtor owed an amount to the foreign affiliate at any time during the reporting period. If so, it requires the reporting entities to answer if subsection 90(6) or 90(8) applies to that debt. As the application of 90(6) or 90(8) would not be confirmed until two years later, at the time when Form T1134 is prepared, the reporting entities would not have a firm answer to these questions. How should reporting entities provide the answers to these questions in such a situation?

Answers to the questions on upstream loans in Part II, Section 3.A of the form should be consistent with the reporting entity's filing position for the tax year or fiscal period in respect of which Form T1134 is filed. If, during a reporting period, a specified debtor (as defined in subsection 90(15)) in respect of the reporting entity owes an amount to the foreign affiliate or a partnership of which the foreign affiliate is a member, the response to Question 4.1 should be "yes." For an upstream loan that is incurred during the reporting period in respect of which the exception conditions in subsections 90(6) or 90(8) have yet to be confirmed, a "no" response would be acceptable to each of the two follow-up questions in the table – that is:

• If the answer to 4.1 is "yes," did subsection 90(6) apply to that debt? And,
• If the answer to 4.1 is "yes" but subsection 90(6) did not apply, was that because of subsection 90(8)?

Nature of income of controlled foreign affiliate (Part III)

Can dollar amounts be rounded to the nearest thousand?

Yes.

Part III, Section 2 of Form T1134 asks for gross income amounts from certain sources. Are these amounts to be provided based on Canadian income tax measurement rules or based on local accounting standards and local tax measurement rules?

The amounts must be reported based on local accounting standards and local tax measurement rules. If the amounts are not reported in Canadian dollars, the currency code of the currency in which the amounts are reported must be provided in the space available.

In Part III, Section 3 of Form T1134 (concerning the different sources of "foreign accrual property income" or "FAPI"), should the reporting taxpayer indicate 100% of the FAPI income earned by the controlled foreign affiliate? Or should they indicate the percentage attributable to the reporting taxpayer?

For the controlled foreign affiliate's tax year that ends in the reporting taxpayer's tax year, the reporting taxpayer must report 100% of the amount of FAPI earned in that year.

What is the definition of "total participating percentage" as used in Part III, Section 3 of the 2012/2017 version of the Form T1134 and "participating percentage" as used in Part III, Section 3 of the 2021 version of the Form T1134?

"Total participating percentage" has the same meaning as "participating percentage" under subsection 95(1) of the Income Tax Act and subsection 5904(1) of the Income Tax Regulations. The participating percentage is the part of the FAPI that's attributed to the reporting taxpayer.

Are the amounts of FAPI to be reported on a gross or net basis in Part III, Section 3 of Form T1134?

The gross amount of FAPI must be reported.

What is the definition of "excluded property" for the purposes of Part III, Section 4, of Form T1134 of the 2012/2017 version of the T1134 or Part II, Section 3.B, Question 4 of the 2021 version of the T1134?

"Excluded property" is defined under subsection 95(1) of the Income Tax Act.

On Form T1134, the instructions for Sections 4 and 5 of Part III of the 2012/2017 version and for Sections 3 and 4 of Part III of the 2021 version indicate that the reporting taxpayer has to provide information about capital gains and losses realized by the foreign affiliate, as well as income of the foreign affiliate that's from an active business. Is the taxpayer required to attach to the form details on the capital gains and losses and income of the foreign affiliate?

No. However, the taxpayer must keep related information on-hand in case of an audit.