Let’s get real: Canadian tax forms aren’t everyone’s cup of Tim’s. And if you’re a newcomer to Canada looking at Form T1135 and thinking to yourself, “I came to Canada for new opportunities, not to get tangled up in tax jargon,” we get it!
Which is why we’ve brewed up this in-depth guide to help you make sense of Form T1135—and meet the Canada Revenue Agency’s (CRA) requirements.
- Form T1135 is a tax form for Canadians who own foreign assets with a cost amount of more than $100,000.
- The form has two parts: Part A for simpler cases, and Part B for more complex foreign asset situations.
- The deadline for filing Form T1135 is usually April 30, the same as for your income tax return.
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What is Form T1135?
Let’s start with the basics. Form T1135, also called the Foreign Income Verification Statement, is a form you need to fill out come tax time if you own foreign assets with a total cost amount of more than $100,000. Whether it’s a bank account in Switzerland, investment property in Italy, or shares in an American tech company, Form T1135 is where you disclose your ownership of these assets to the CRA.
Now that you know what it is, let’s dive into why the T1135 is so important. Filing this form is more than just a formality. It’s a legal requirement for tax compliance in Canada. This means the CRA takes the T1135 very seriously—and as a tip for a new Canadian taxpayer, you’ll want to comply with CRA requirements. If you miss the filing deadline or forget to file altogether, you may risk fines and penalties which can impact your financial situation.
Do you need to file a T1135?
If you own what’s known in tax lingo as “specified foreign property,” and the total cost amount is more than $100,000 (in Canadian dollars), then you need to file a Form T1135.
But what exactly is your total cost amount? Turns out, it means more than just your cost or the amount you paid for your property. Your total cost amount is based on your adjusted cost base (ACB) (yes, more tax lingo!). ACB just means the original cost of an asset, plus any additional expenses (such as brokerage or legal fees). It’s different from fair market value, which is what you’d get if you sold the asset today.
Let’s break it down with some examples:
Scenario 1: You bought shares in a German company for $40,000, and spent $2,000 in broker fees. You don’t own any other specified foreign property. Your cost amount (that is, the adjusted cost base) is $42,000. This is under the $100,000 threshold—so a T1135 isn’t needed, and you can sit back and relax.
Scenario 2: But let’s say that, in addition to those German shares that cost $42,000, you also have $60,000 sitting in a savings account in Switzerland. That brings your total cost amount to $102,000, which puts you over the $100,000 limit—and into T1135 filing territory.
What qualifies as specified foreign property?
What exactly goes into that “specified foreign property” category? The list covers a whole latte—uh, lot—from foreign land to foreign stocks, including:
- Bank accounts in other countries
- Shares in foreign companies
- Real estate outside of Canada
- Interest in a foreign trust
- Foreign mutual funds
- Loans you’ve made to non-residents
- Bonds and debentures from foreign entities
- Intellectual property (such as patents or copyrights) held outside Canada
- Partnership interest, in which that partnership holds specified foreign property
- Interest in a foreign insurance policy
- Precious metals and gold certificates held outside Canada
- Futures contracts held outside Canada
What’s not considered specified foreign property?
Not all foreign assets need to be reported on a T1135, however. Foreign property that’s exempt from T1135 reporting obligations includes:
- Personal-use property (for example, a vacation home outside Canada that’s used mainly for personal reasons)
- Property used exclusively in an active business
- Shares or debts of a foreign company that are affiliated with your Canadian business
- A principal residence outside of Canada
- Interest in an exempt trust
- A right to purchase any of the above
How do you fill out Form T1135?
Ready to complete Form T1135? Here’s the info you’ll need:
- Your Social Insurance Number (SIN)
- Details about each foreign asset you have that qualifies as specified foreign property
- The country where each asset is located (you’ll need this to determine the correct country codes)
- The maximum funds held as well as the cost of each asset during the tax year
- Income you’ve gained or lost from each asset
- Whether you sold the asset in the tax year and any capital gains or losses from the sale
Turning to the form itself, you’ll see that Form T1135 has two parts—Part A and Part B. You’ll need to fill out only one of these parts.
Part A (Simplified reporting method)
You’ll be completing Part A if the total cost amount of your foreign assets total less than $250,000 throughout the tax year. It’s called the simplified reporting method for a good reason: You’ll only need to check the boxes for the types of foreign property you own, plus list the top three countries in which you’re holding these assets, based on the maximum cost amount.
Part B (Detailed reporting method)
On the flip side, if your international asset holdings are on the complicated side—that is, you own foreign assets with a total cost amount of $250,000 or more—you’ll need to fill out Part B. Called the detailed reporting method, this part requires you to provide more in-depth information about each foreign asset according to property type, including details regarding maximum costs during the year and any capital gains or losses.
When do you file Form T1135?
Don’t let the deadline for filing Form T1135 sneak up on you: Make sure to file the form by the same date you’re required to file your income tax return. For most people, that would be April 30 of the year following the tax year in question.
What happens if you don’t file T1135?
Skipping out on filing Form T1135 does, unfortunately, have its consequences. The penalty for failing to file a T1135 on time is the greater of a minimum $100 fine or $25 for each day the return is late, up to a maximum of $2,500.
For example, if you file your T1135 two days late, you’d be looking at a penalty of $100. Extend your late filing to 10 days, and your fine would be $250. Filing four months past the deadline? You’ll pay the maximum of $2,500 (even though you’re late by more than 100 days).
How does the CRA check foreign income?
You may be wondering how the CRA ensures compliance when it comes to your foreign property and income. It turns out, they definitely have their ways! Here are a few:
- Army of auditors. In recent years the CRA has invested in hiring more experts to scrutinize tax filings. More auditors means more eyes checking the tax numbers.
- Wealth watch. The CRA keeps a keen watch on high-net-worth Canadians. (After all, everyone should be paying their fair share.)
- Tax-scheme busters. Some taxpayers try to sweeten their finances with dubious tax schemes. The CRA actively targets schemes that are designed to evade or aggressively avoid taxation.
- Data-driven detection. Leveraging data through high-end analytics lets the CRA better identify who might be hiding income outside of Canada
Do you need to file T1135 every year?
You’re required to file T1135 for a given tax year if the total cost amount of your foreign assets exceeds $100,000 at any point during that year. So if you go over this $100,000 threshold every year, then, yes, you’ll need to file a T1135 every year.
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