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Accounting for international subsidiaries from Canada means keeping two things straight: the foreign company’s own books, and what the Canadian parent has to tell the CRA about it. On the second point, a Canadian corporation with a foreign affiliate generally files Form T1134, and for tax years beginning after 2020 it’s due 10 months after the parent’s year end. Transfer pricing paperwork for dealings between the two companies has its own rules.
What does the CRA want to know about a foreign subsidiary?
T1134 is the information return on controlled and non-controlled foreign affiliates, and the CRA’s T1134 form page has the current version and instructions. The CRA says it’s the lowest-tiered Canadian corporation that has to report on its foreign affiliate, so in a chain you don’t file at every level. Dormant affiliates may be excluded under conditions the CRA lists. The dollar tests differ by tax year, so read them for your year rather than relying on an old article.
Plan the T1134 data early. It needs ownership details, financial information and tax positions for each affiliate, and those come from the foreign books. If the foreign accountant closes the year after you need the numbers, you’ll be filing late by design.
Penalties for late or missing returns exist, but their amounts change, so ask your accountant or check the CRA page before you assume a figure.
How does transfer pricing affect the books?
Any price charged between related companies in different countries should match what unrelated parties would agree on. The CRA describes it as the same terms whether or not you deal at arm’s length. That covers management fees, loans, royalties, goods and services.
In practice it means three habits. Write the pricing method down before the first invoice. Keep the paperwork that supports it, which the CRA says must be prepared by the filing deadline for the return. And bill at the agreed rate every time, not whatever the month’s cash flow suggests.
Form T106 reports non-arm’s-length transactions with non-residents. Sources disagree on the reporting threshold, so check the T106 page for the current figure.
| Item | Who it concerns | What to do |
|---|---|---|
| Form T1134 | Canadian parent with foreign affiliates | File within 10 months of year end (tax years beginning after 2020) |
| Transfer pricing records | Related-party cross-border deals | Document pricing by the return filing date |
| Form T106 | Non-arm’s-length dealings with non-residents | Check the threshold on the CRA page |
| Corporate T2 | The Canadian parent | File within six months of year end |
Which currency and which standards?
Good question, and the honest answer is that it depends. The foreign subsidiary usually keeps books in its local currency under local rules. The parent has to translate and bring them into its own reporting. Which functional currency and accounting standard apply to you is a call for your accountant, and the decision belongs in a written policy.
What you can control is consistency. Use one exchange rate source, one cut-off date and one chart of accounts mapping for every subsidiary, then reconcile the foreign ledger to the parent’s intercompany accounts each quarter.
What should you collect from the subsidiary each quarter?
Picture a Winnipeg manufacturer with a small sales subsidiary in Minnesota. Every quarter, the parent’s bookkeeper asks for the same five things: the trial balance in local currency, the bank reconciliations, the intercompany balance confirmed by both sides, a list of related-party invoices with the pricing basis, and any changes to ownership or directors. None of it is exotic. Together, it means the T1134 and transfer pricing file build themselves during the year instead of in a panic after it.
What if the subsidiary’s books are in another language or system?
It happens more than you’d think. The records you rely on for the Canadian return still have to be usable, so ask the subsidiary for a short summary in English or French of each major account and any unusual entries, kept next to the originals. You don’t need a full translation of every invoice. You do need to be able to explain a number if the CRA asks about it, and that’s much easier when the explanation was written at the time rather than rebuilt two years later by someone who never saw the file.
What does Canadian tax cost on the parent’s own profit?
Foreign income is a different subject and our tools don’t model it. They do cover the Canadian side. The corporate tax calculator gives $55,000 on $500,000 of Alberta taxable income at the small-business rate (11% combined), and $115,000 at the general rate (23%). The federal part is 9% or 15% per the CRA, and provinces add their own. Small-business status isn’t automatic for groups with foreign ties, since only Canadian-controlled private corporations qualify.
If you pay yourself from the parent, the dividend tax calculator shows the personal tax on what you take out. And if the subsidiary bills the parent, or the reverse, remember that Canadian GST/HST questions may arise on services supplied in Canada. Use the GST/HST calculator for the Canadian amounts only.
Common ways this goes wrong
The worst one is the undocumented intercompany loan. The second is a T1134 that nobody owns, so it’s done in a rush. The third is keeping records only in the subsidiary’s country. The CRA’s record-keeping guide says records must be kept at your Canadian residence or place of business unless the CRA gives permission to keep them elsewhere, for six years from the end of the last tax year they relate to.
Put one person in charge of the calendar and let them nag everyone.
The sources behind this page
T1134 filing rules, transfer pricing principles, corporate rates and record-keeping rules come from Canada Revenue Agency pages checked in September 2026. Tax figures in the example are from our own corporate data file. Penalty amounts, the T106 threshold and the foreign tax rules are left out because they change and need current confirmation. The 2026 corporate filing dates weren’t published when we looked. This site isn’t connected to the CRA or any government.
Frequently asked questions
Who files Form T1134?
A Canadian corporation or partnership with foreign affiliates. The CRA says only the lowest-tiered Canadian corporation reports on its foreign affiliate.
When is T1134 due?
For tax years beginning after 2020, 10 months after the reporting taxpayer's year end.
What is transfer pricing?
Pricing between related companies in different countries. The CRA expects the terms to match what unrelated parties would agree on.
Where should records be kept?
At your Canadian residence or place of business unless the CRA gives permission to keep them elsewhere. Keep them six years.
Can I use the corporate tax calculator for foreign income?
No. It covers Canadian provincial and federal rates on Canadian taxable income only.
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