TEI Comments on Proposed Change to Canada's Foreign Affiliate Reporting Requirements.

Position:Tax Executives Institute
 
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On May 1, 2018, TEI submitted comments to the Canadian Department of Finance concerning the government's proposed change to the fiiing deadline for Form 11134, Information Return Relating to Controlled dnd Not-Controlled Foreign Affiliates. TEI's comments, reprinted below, were prepared by a cross-industry working group of Canadian Income Tax Committee members under the leadership of Sue Wooles.

On behalf of Tax Executives Institute, Inc. ("TEI"), I am pleased to comment on the proposed change to the filing deadline for Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates, as detailed in the Tax Measures: Supplementary Information annex to the government's 2018 federal budget plan ("Budget 2018"). (1)

If adopted, the proposed change to the Form T1134 filing deadline would impose significant additional compliance costs and administrative burdens on Canadian taxpayers with foreign operations, while producing no material benefit to the Canada Revenue Agency ("CRA") or its ability to efficiently administer the Income Tax Act.

In developing these comments, TEI conducted an online survey of Canadian members to better understand their Form T1134 preparation processes and the potential impact of the proposed change thereon. Overall, the survey responses indicate that accelerating the Form T1134 filing deadline would materially impact (1) their ability to obtain the required information and (2) the quality of information reported to the CRA, and would exacerbate the existing compliance burdens of Canadian corporate taxpayers in preparing their income tax returns and Forms T106.

The comments below include a more detailed discussion of our members' concerns together with our recommendations. TEI respectfully requests an opportunity to meet with representatives of the Department of Finance and the CRA to discuss these concerns.

About TEI

Tax Executives Institute was founded in 1944 to serve the professional needs of in-house tax professionals. Today, the organization has 57 chapters in North and South America, Europe, and Asia, including four chapters in Canada. Our approximately 7,000 members represent 2,800 of the largest companies in the world, many of which either are resident or do business in Canada.

Over 15 percent of TEI's membership comprises tax professionals who are employed by Canadian businesses from all regions and a variety of industries, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver. TEI members must contend daily with the planning and compliance aspects of Canada's business tax laws. Many of our non-Canadian members (including those in Europe, South America, and Asia) work for companies with substantial activities and investments in Canada. These comments reflect the views of TEI as a whole but, more particularly, those of our Canadian constituency.

As the preeminent association of business tax professionals worldwide, TEI has a significant interest in encouraging the uniform and equitable enforcement of tax laws, and reducing the cost and burden of tax administration and compliance to the benefit of taxpayers and government. TEI is committed to maintaining a system that works--one that builds upon the principle of voluntary compliance, is consistent with sound tax policy, is easy to administer, and is efficient. The diversity, professional training, and global viewpoint of our members enable us to bring a balanced and practical perspective to the issues raised by the proposed change discussed herein.

Discussion

The Income Tax Act contains specific information reporting requirements with respect to foreign affiliates of Canadian taxpayers. Under current law, a corporate taxpayer is generally required to file an information return (i.e., Form T1134) annually with respect to each of its foreign affiliates within 15 months of its taxation year-end. One of the tax measures proposed in Budget 2018 would shorten--by more than half--this information return filing...

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