T106 Non-Arm's-Length Transactions Return Case Studies
6 worked T106 Non-Arm's-Length Transactions Return case studies — the position a client typically comes to us with, what we do, and what it is worth. Each is an illustrative example built on the rules that apply to t106 non-arm's-length transactions return work, not a specific client's file.
Case Study 1 · Planning that cut the bill
$65,000 Cut From The Annual Tax Bill — Non-Resident Landlord, Regina
Client: A non-resident owning Canadian rental property · Where: Regina, Saskatchewan · Engagement: 10 weeks, fixed fee
First-year saving$65,000
RepeatsAnnually
Filing positionUnchanged in risk
The situation — A non-resident owning Canadian rental property, Regina, Saskatchewan
A non-resident owning Canadian rental property in Regina, Saskatchewan was compliant but paying more than it needed to. The prior year had been filed correctly. It still left US tax paid but no foreign tax credit claimed on the Canadian return on the table.
What we did for A non-resident owning Canadian rental property, Regina, Saskatchewan
We modelled the current position against the alternatives before changing anything. Then we registered the payer for a non-resident withholding account, remitted the Regulation 105 amounts due, and applied for waivers covering the rest of the contract.
The result — A non-resident owning Canadian rental property, Regina, Saskatchewan
The change saved $65,000 in the first year and repeats annually. Nothing about the filings became more aggressive. The position is simply the one the rules already allowed.
Case Study 2 · Scaling without breaking
Scaled To 68 Staff With $95,000 Of Working Capital Freed — Inbound Assignee, Halifax
Client: An inbound transferee on assignment · Where: Halifax, Nova Scotia · Engagement: 10 weeks, fixed fee
Headcount reached68
Working capital freed$95,000
Missed deadlinesZero
The situation — An inbound transferee on assignment, Halifax, Nova Scotia
An inbound transferee on assignment in Halifax, Nova Scotia was growing fast, with headcount reaching 68 in eighteen months. The back office had not kept up. Winters spent in the United States with the day count kept casually and no residency position documented anywhere was the first thing to break.
What we did for An inbound transferee on assignment, Halifax, Nova Scotia
We restructured the US holding so the Canadian and US characterisations aligned, ending the double taxation going forward. We built the compliance calendar for the size the business was becoming rather than the size it had been.
The result — An inbound transferee on assignment, Halifax, Nova Scotia
The business reached 68 staff with no missed remittance and no late filing. $95,000 of working capital was freed in the process.
Case Study 3 · Cash and remittance control
Instalments Rebased, $125,000 Of Cash Returned To The Business — Florida Property Owner, Edmonton
Client: A family with a Florida vacation property · Where: Edmonton, Alberta · Engagement: 4 weeks, fixed fee
Cash returned$125,000
Instalment basisCurrent year
ReviewedQuarterly
The situation — A family with a Florida vacation property, Edmonton, Alberta
A family with a Florida vacation property in Edmonton, Alberta was paying instalments calculated on a prior year. That year no longer reflected the business. 25% withholding on gross Canadian rent where a section 216 election would have taxed only the net was tying up $125,000 of cash.
What we did for A family with a Florida vacation property, Edmonton, Alberta
We rebased the instalments on the current-year estimate rather than the prior-year default. Alongside that, we reconstructed the day count on both sides of the border and documented the residency and treaty position before either revenue authority asked.
The result — A family with a Florida vacation property, Edmonton, Alberta
$125,000 of cash stayed in the business, the penalty cycle ended, and the instalment position is reviewed each quarter against actual results.
Case Study 4 · Missed incentive claimed
$107,000 Credit Claim Filed And Accepted Without Adjustment — US-Facing Canadian Corporation, Lethbridge
Client: A Canadian corporation with US customers · Where: Lethbridge, Alberta · Engagement: 6 weeks, fixed fee
Claim value$107,000
AcceptedWithout adjustment
RepeatableAnnually
The situation — A Canadian corporation with US customers, Lethbridge, Alberta
A Canadian corporation with US customers in Lethbridge, Alberta assumed the credits did not apply to a business its size. Invoices paid to a non-resident consultant working on site in Canada with no Regulation 105 withholding taken meant they had applied all along.
What we did for A Canadian corporation with US customers, Lethbridge, Alberta
We identified the qualifying activity and built the documentation to support it. Then we reported the deemed disposition properly on the departure return and claimed the foreign tax credits that had been left unused.
The result — A Canadian corporation with US customers, Lethbridge, Alberta
$107,000 recovered. Because the eligibility analysis is on file, the same claim can be repeated each year with a fraction of the effort.
Case Study 5 · Cross-border exposure resolved
$84,000 Of Excess Withholding Refunded On Election — Mid-Year Emigrant, Windsor
Client: An emigrant who left Canada mid-year · Where: Windsor, Ontario · Engagement: 4 weeks, fixed fee
Withholding refunded$84,000
ElectionFiled and accepted
Cross-border reportingConsistent
The situation — An emigrant who left Canada mid-year, Windsor, Ontario
An emigrant who left Canada mid-year in Windsor, Ontario was paying tax in two countries on one stream of income. Foreign accounts that had passed the $100,000 T1135 threshold three years earlier had never been reviewed against the treaty.
What we did for An emigrant who left Canada mid-year, Windsor, Ontario
We filed the outstanding T1135 disclosures through the Voluntary Disclosures Program, which eliminated the penalty exposure entirely. We also coordinated the timing so the credit claimed in Canada matched the tax actually paid abroad.
The result — An emigrant who left Canada mid-year, Windsor, Ontario
$84,000 of excess withholding was refunded and the exposure closed. Both sides of the border now report consistently, which is what keeps the credit claimable.
Case Study 6 · CRA review defended
Audit Defence Closed In 10 Weeks, $36,500 Cleared — US Branch Operator, Brampton
Client: A Canadian corporation operating a US branch · Where: Brampton, Ontario · Engagement: 10 weeks, fixed fee
Proposed tax cleared$36,500
Review duration10 weeks
OutcomeNo change
The situation — A Canadian corporation operating a US branch, Brampton, Ontario
A Canadian corporation operating a US branch in Brampton, Ontario was selected for review. A departure year filed as a normal resident return with no deemed disposition reported had shown up in the CRA's automated matching. The proposed adjustment on T106 non-arm's-length transactions return came to $36,500.
What we did for A Canadian corporation operating a US branch, Brampton, Ontario
We applied the treaty rate to the dividend withholding, filed the NR4 return, and remitted the shortfall before the CRA assessed the payer for it. Every figure in the response traced to a source record the auditor could verify without asking a second question.
The result — A Canadian corporation operating a US branch, Brampton, Ontario
The review closed with no change. $36,500 of proposed tax came off the table, and the documentation now in place makes the next review a short one.
Reviewed by Udit Gupta, Founder and Tax Accountant for the 2025 tax year. These case studies are illustrative worked examples composed from the CRA rules that apply to this type of work, not specific client files; figures are representative and outcomes depend on your own facts.
