Getting Audit Ready: Major Expansion in T106 Reporting for Financing and Derivative Transactions

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Your challenges

The Canada Revenue Agency’s (CRA) newly revised T106 form significantly expands disclosure requirements for financing and derivative transactions. Companies that frequently conduct transactions with related entities, must provide greater transparency concerning:

  • Financial property sales (including factoring, securitizations and securities)
  • Lease payments
  • Securities lending (fees and compensation payments)

The CRA now requires additional disclosure associated with derivative contracts involving related parties, including contracts for interest rates, foreign exchange, credit, equities, commodities, indexes, as well as fees and commissions and other payments and receipts related to derivative transactions. The tax authority also requires disclosure of tax structures that involve instruments with explicit or embedded derivatives. In other words, the CRA wants disclosure of the total value of these contracts, as well as the number of contracts for each transaction type.

The expanded T106 disclosure will increase the CRA’s ability to screen financial transactions for audits. The tax authority has informed us that companies must comply with these new requirements for tax returns filed after May 2009.

How PricewaterhouseCoopers can help

PwC’s transfer pricing specialists can help you determine which additional disclosures are needed and whether the documentation you’ve prepared will withstand an audit. We’ll also help with the legwork to prepare your documentation across multiple jurisdictions.

For further information or if you would like to have a PwC tax professional contact you, please send an email to PwC Tax Opportunities.

This communication is intended to inform readers of developments as of the date of publication, and is neither a definitive analysis of the law nor a substitute for professional advice. Readers should discuss with professional advisers how the information may apply to their specific situations.

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