Over the past year or so, the Canada Revenue Agency has been cracking down more and more on individuals who fail to file form T1135, Foreign Income Verification Statement. Since the penalties can be punitive, it’s important to consider whether you have a requirement to file form T1135.
Who must file a T1135?
Form T1135 must be completed by any individual who owns foreign property which has a total aggregate cost of more than CAD $100,000 at any point during the year.
What information is disclosed on the T1135?
Form T1135 discloses information on the general types of foreign property you own and their values as well as the total income reported on your tax return relating to your foreign assets. The specific values of each foreign asset are not required, however you will need to disclose the most appropriate range in value for each foreign asset class. For example, you will need to disclose whether your shares of non-resident Corporations has a cost over $1 million, over $700,000, over $500,000, over $300,000, over $100,000 or less than $100,000.
What property is considered foreign property?
Some of the most common items that are considered foreign property include:
1) Bank accounts or funds held outside of Canada
2) Shares or stock of non-resident corporations– this would include stock such as Apple, Toyota, IBM, Microsoft, etc.
3) Interests in non-resident trusts
4) Real Property, such as rental properties, held outside of Canada
5) Indebtedness owed by non-residents to you
6) Other Property held outside of Canada
What property is not considered foreign property?
Generally speaking, the following is not considered “foreign property” for T1135 purposes:
1) Mutual funds that are registered in Canada that invest in foreign stocks
2) Vacation Properties held outside of Canada that you use primarily for personal use
When does form T1135 need to be filed?
The T1135 is due on or before April 30th of the year in which you file your personal tax return. This date is extended for self-employed individuals to June 15th, aligning the T1135 deadline with the deadline of their Canadian tax return.
Are there penalties for not filing form T1135 or for filing it late?
The penalties for late filing this form is $25 per day up to a maximum $2,500 penalty.
Need to get caught up on filing your T1135?
If you have not filed T1135’s and think you should have, we recommend that you consult a Canadian tax consultant as to potential solutions to help minimize or remove potential late filing penalties through the CRA Voluntary Disclosure Program.
Need help getting caught up on T1135’s? Give Tony Theaker at Hutcheson & Co. a call at 250-381-2400.