New T1135 – Foreign Income Verification Statement
In an attempt to crack down on international tax evasion and tax avoidance, the Canada Revenue Agency (CRA) has implemented a new T1135 form (Foreign Income verification form) that will be put into place for the 2013 taxation year.
Form T1135 is required to be completed individuals who hold foreign property with an accumulated cost exceeding $100,000. If this threshold is met, you are required to complete form T1135 which now includes additional information that will make the form more onerous and timely to complete.
What’s new with the form?
Originally the form required an individual, who held foreign property, to select a range in which different assets cost fell into. They were also required to disclose the total income reported on their tax return relating to the assets mentioned.
The new T1135 requires additional information including:
- The name of the financial institution or other entity where any foreign funds are held.
- For funds held outside Canada, the maximum funds held during the year, the funds held at year end and any income/loss from each account will need to be recorded.
- One of the most onerous parts will be reporting the sale of non-resident corporation shares as well as including the maximum cost during the year, the cost at year end as well as any income earned or gains/losses incurred as a result of dispositions during the year.
The disclosures required are becoming increasingly similar to US reporting forms TDF 90-22.1 (FBAR) and form 8938.
It’s important to note that form T1135 excludes amounts that are reported on T5 or T3 tax slips. These would generally relate to foreign investments that are held through Canadian financial institutions or Canadian brokerage houses.
Please see the link for a fillable PDF form T1135
When is the form due?
Form T1135 must be filed on or before the due date of your income tax return. For partnerships, the due date for form T1135 would be the due date of the partnership.
What happens if I don’t file form T1135 ?
There are many potential penalties that exist as a result of non compliance with form T1135. The basic penalty for not filing is a penalty of $25 per day that form T1135 is late up to a maximum penalty of $2,500.
Other penalties relating to failing to furnish foreign based information exist and can be especially harsh for those people who knowingly or with great negligence exclude information or fail to file this form.
For more information on the penalties that exist, please see the following link:
What happens if you were unaware of your filing requirements of form T1135?
As the CRA wants to promote compliance with Canadian tax laws, there may be options of filing previously late T1135’s without (or with reduced) penalties and interest under the voluntary disclosure program. For more information, we request that you review Information Circular IC00-1R3 or consult a Canadian income tax specialist.
How is this form filed?
Currently form T1135 cannot be filed electronically. Paper copies of completed T1135’s will need to be sent to the following address.
Ottawa Technology Centre
Data Assessment and Evaluations Program
Foreign Reporting Unit
875 Heron Road
As information, filing requirements and addresses change over time, we recommend that you use the information in this article for informational purposes only.
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