As a newcomer to Canada, it’s easy to feel overwhelmed. Not only do you have to get used to living in a new country with its own culture, you also have to learn a new tax system. As a Canadian resident, you’re required to pay taxes on any income you earn in Canada. You also may be required to report foreign investment property you own outside Canada above a certain value.
Foreign Income Verification Statement
When you become a Canadian resident, it’s important to understand your responsibilities as a taxpayer. Under the Canadian tax system, you have to pay your fair share of taxes no matter where the income is earned, including income earned from foreign property. When you’re a Canadian resident, you have to report any foreign investment property you own outside Canada with an adjusted cost base above $100,000 at any period during the year.
When you’re filing your tax return, you’re required to answer the question “Did you own or hold specified foreign property where the total cost amount of all such property, at any time in the year, was more than $100,000 CAD” If you answer “yes” to this question, you must complete and file Form T1135 – Foreign Income Verification Statement. Individuals, partnerships, corporations and trusts all must complete this form. It’s important to file by the tax filing deadline of April 30, as you’ll face tax penalties for failing to report foreign income.
As a taxpayer, it’s your responsibility to ensure Form T1135 is filed. If you forget to complete the form in any previous years, you may qualify for Voluntary Disclosure to avoid penalties.
The Purpose of the Foreign Income Verification Statement
According to the Canada Revenue Agency, this form has the following objectives:
- To improve the compliance rate with Canadian tax laws when reporting foreign income.
- To improve the awareness of Canadians residents and their responsibility to report foreign income.
- For the CRA to collect information to check taxpayer compliance with Canadian tax laws.
- To do a better job of stopping tax avoidance and tax evasion outside Canada.
Foreign Property You Have to Report
The CRA requires you to report any “specified foreign property” costing more than $100,000. The following are examples of foreign property:
- Any debt you owe, including bonds (corporate and government), debentures, mortgages and notes receivable.
- Money or intangible assets, like copyrights and patents, deposited, held or located abroad.
- Any tangible foreign property located abroad.
- Any shares of capital stock of a corporation held.
- Any interest you own in a foreign insurance policy.
- Any futures contracts, gold certificates or precious metals held abroad.
- Any interest in a trust acquired in exchange for consideration.
- Any interest in foreign property held by a partnership.
- Any property you can covert to or exchange for rights to acquire foreign property.