Principal Issues: Has the CRA surveyed its large file case managers to enquire whether or not T1134s are, in fact, used as a risk assessing tool in the context of companies of a size that are subject to CbC reporting? Does the CRA have any plan to assess, on an ongoing basis, whether both forms of reporting are required in order for it to efficiently perform its audit function?
Position: At this time, the T1134 information return is used in risk assessment, and the CRA is of the view that the information requirements in the return are relevant to the reporting of income from Canadian controlled and non-controlled foreign affiliates. Going forward, as CRA gains experience with increased electronic data sources and filing requirements, consideration could be given to conducting a review to reduce or eliminate overlap and duplication where possible.
IFA 2018 International Tax Conference
Canada Revenue Agency Roundtable
Question 9 - T1134s and Country by Country Reporting
Large taxpayers must file both T1134 forms and country-by-country (“CbC”) reporting forms. Both are intended to be used by the CRA as risk assessment tools. It is our understanding that one of the objectives of CbC reporting, as a result of the OECD’s BEPS project, is to standardize reporting in different jurisdictions to minimize administrative and compliance costs to both taxpayers and tax authorities.
We recognize that the filing of T1134s and CbC reporting by large taxpayers are mandated by law and that it would take action by the Department of Finance to change those rules. That said, we are interested in the CRA’s views around whether both forms of reporting are required. It is true that the information contained in T1134s is very different than that contained in CbC reporting. However, both were introduced as risk assessment tools. Why is it necessary for a Canadian parent of a multinational group which is obligated to file CbC reporting forms in Canada to also file T1134s? Has the CRA surveyed its large file case managers to enquire whether or not T1134s are, in fact, used as a risk assessing tool in the context of companies of a size that are subject to CbC reporting? Does the CRA have any plan to assess, on an ongoing basis, whether both forms of reporting are required in order for it to efficiently perform its audit function?
CRA Response
The effectiveness of the risk assessment process is largely dependent on the information, inputs, and tools used for the initial risk identification activity. Relevant, accurate, and complete information, as well as employing automated tools, enables a more comprehensive and efficient process.
Information provided to the CRA in the context of business intelligence and compliance risk assessment activities is used to identify and assess risks of non-compliance. Risk assessment models are developed and applied using a variety of different data elements. Models are created using techniques such as analytical algorithms and statistical models that generate risk scores that predict the risk of non-compliance.
At this time, the T1134 information return is used in risk assessment, and the CRA is of the view that the information requirements in the return are relevant to the reporting of income from Canadian controlled and non-controlled foreign affiliates. The taxpayers required to file CbC reports versus T1134s are overlapping but not identical.
In general terms, the existing requirements of T1134s are more detailed than CbC reporting. In contrast, CbC reporting offers benefits of higher level information and uniformity for reporting across jurisdictions. Going forward, as CRA gains experience with increased electronic data sources and filing requirements, consideration could be given to conducting a review to reduce or eliminate overlap and duplication where possible.
Lori M. Carruthers
2018-074815
May 16, 2018
Response provided by:
Geri Porteous
International Tax Division
International, Large Business and Investigations Branch