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The short answer
A Canadian corporation files Form T106 when its reportable transactions with non-arm's-length non-residents, such as a related Nigerian company, total more than $1,000,000 in the tax year (CRA T2 guide, May 2026). The return reports the dealings; it does not set prices. The 2025 and later version is a T106 Summary with a T106-1 supplement package, available from the CRA's form page.
What T106 is for
Form T106, the Information Return of Non-Arm's Length Transactions with Non-Residents, tells the CRA what a Canadian taxpayer bought from, sold to, paid or received from related parties abroad during the year. The CRA's transfer pricing page describes it as the annual return for that activity. For a founder with a Canadian company and a Nigerian company under common ownership, it is the form that puts the Lagos relationship on the record.
It is an information return, not a tax calculation. Filing it does not mean you owe anything, and not filing it does not make the transactions disappear: it gives the CRA a record it can set beside your T2 return and your transfer pricing file, so figures that do not match your T2 return or your transfer pricing file invite questions.
The threshold
The CRA's T2 Corporation Income Tax Guide (chapter 2, dated May 2026) says a corporation files Form T106 if its reportable transactions with non-residents with whom it does not deal at arm's length total more than $1,000,000. The test is the total for all such non-residents together, for the tax year.
Who counts as non-arm's length
Related persons are generally treated as not dealing at arm's length: for example, a Nigerian company controlled by the same person or group that controls the Canadian company, a Nigerian parent, or a Nigerian subsidiary. Unrelated parties can also fail to deal at arm's length in particular circumstances. If you are unsure whether a Nigerian company is related, your accountant can check against the control rules.
Worked example of the test
Example only. A Toronto fintech owns 100% of a Lagos subsidiary that runs its engineering and support.
| Transaction with the Lagos subsidiary | Amount in the year |
|---|---|
| Development services bought | C$640,000 |
| Customer support services bought | C$210,000 |
| Licence fee charged to the subsidiary for software | C$180,000 |
| Total | C$1,030,000 |
Check: 640,000 + 210,000 + 180,000 = 1,030,000, which is over $1,000,000, so the company files T106. Had the licence fee been C$140,000, the total would have been C$990,000 and below the line. Amounts paid and received both count towards the total, so a group that charges in both directions crosses sooner than its net position suggests.
Getting the filing right
The CRA's T106 form page (updated July 2025) offers fillable and print versions of the T106 Summary Form for 2025 and later tax years, plus a T106-1 supplement package. Earlier versions remain for older years. Fillable PDFs must be downloaded and opened in Acrobat Reader 10 or later, not in a browser. The detailed rules on what to report, the due date and penalties are in the supplement package and CRA guidance, so read those before you file rather than relying on last year's habit.
- List every related non-resident and confirm each one's relationship to the Canadian company.
- Pull the year's intercompany invoices, payments, loans and charges from the ledger, in CAD.
- Total them and compare with $1,000,000.
- If over, complete the T106 Summary and the supplement for each relevant non-resident as the package directs.
- Check the figures against your transfer pricing documentation so the two tell the same story.
Common mistakes
- Counting only the net. The Canadian company owes the subsidiary C$200,000 after netting, but C$1.1 million moved gross. The gross figures are what you test.
- Missing the sister company. A Nigerian company owned by the founder personally, not by the Canadian company, can still be non-arm's length.
- Unrecorded charges. Staff time, software or office costs one company bears for the other with no invoice are still dealings; they need recording and pricing.
- Inconsistent currency. Mixing naira invoices converted at different rates makes the totals hard to defend; use one documented method.
How T106 links to other obligations
- Transfer pricing. T106 does not replace contemporaneous documentation under section 247; see transfer pricing between a Canadian and Nigerian company.
- Part XIII. Royalties, interest or management-type payments to the Nigerian company may need withholding and NR4 reporting; see Part XIII tax on royalties paid to a Nigerian company.
- Other foreign reporting. The same T2 guide lists Form T1134 for foreign affiliates and T1135 where specified foreign property costs more than $100,000; a Canadian parent of a Nigerian subsidiary should ask whether these apply too.
- Conversion. Report in CAD using a consistent rate method; the Bank of Canada does not publish a naira rate.
This is information, not tax advice. A late or missing information return can attract penalties even when no tax is owed, so treat T106 as part of the T2 season, not an afterthought.
Where Pryme fits
The hardest part of T106 is often finding every intercompany payment. Keeping the Lagos company's invoices and payments in one place helps: a Pryme Business Account holds NGN, USD, GBP and EUR, and the Finance agent can prepare a year-end list of transactions with related parties for your accountant to review. Nothing is filed or paid without a person approving it.
Questions people ask
What is the T106 threshold?
More than $1,000,000 of reportable transactions in the tax year with all non-arm's-length non-residents combined (CRA T2 guide, May 2026).
Do I file T106 for my Nigerian subsidiary?
If the Canadian company's transactions with it, and with any other related non-residents, total more than $1,000,000 in the year, yes.
Do payments in both directions count?
Yes. Amounts the Canadian company pays to and receives from the related non-resident both count towards the total.
Where do I get Form T106?
From the CRA's T106 form page, which has the 2025-and-later T106 Summary and the T106-1 supplement package; read the package for due dates and penalties.
Sources
- CRA guide T4012, T2 Corporation Income Tax Guide, chapter 2 (28 May 2026) · accessed Oct 2026
- CRA: T106 Information Return of Non-Arm's Length Transactions with Non-Residents, form page (updated 28 Jul 2025) · accessed Oct 2026
- CRA: Transfer pricing (modified 6 May 2026) · accessed Oct 2026
- Bank of Canada: Daily exchange rates (table dated 23 Oct 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.