Canadian residents are required to report their worldwide income on their annual tax returns. This includes income and assets held outside Canada. To ensure transparency and compliance, the Canada Revenue Agency (CRA) requires certain taxpayers to file Form T1135 – Foreign Income Verification Statement. This detailed guide explains when and why you need to use Form T1135, what types of foreign property and income must be reported, how to complete the form, and the consequences of non-compliance.
What Is Form T1135?
Form T1135 is an information return used to disclose specified foreign property held by Canadian residents during the tax year. Its purpose is to help the CRA detect unreported foreign income and assets, prevent tax evasion, and ensure taxpayers comply with their obligations.
Who Must File Form T1135?
You must file Form T1135 if all three of the following apply:
- You are a resident of Canada for tax purposes.
- You owned specified foreign property at any time during the tax year.
- The total cost amount of all specified foreign property exceeded CAD 100,000 at any time during the year.
Specified foreign property includes a wide range of assets, even if they do not generate income.
Types of Specified Foreign Property to Report
Specified foreign property includes, but is not limited to:
- Funds or cash held outside Canada
- Shares of non-resident corporations (including foreign stocks)
- Indebtedness owed by non-residents (such as bonds or notes)
- Interests in non-resident trusts
- Real estate outside Canada (excluding personal-use property)
- Other property situated outside Canada, such as rental property
- Property held in foreign accounts, including those in foreign banks
What Does Not Need to Be Reported?
- Property used exclusively in an active business carried on outside Canada
- Personal-use property such as cars or vacation homes (unless rented out)
- Shares in a foreign affiliate corporation, reported on other forms
- Foreign property held in Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs)
When Is Form T1135 Due?
The filing deadline for Form T1135 is the same as your income tax return, typically April 30 of the year following the tax year. Self-employed individuals have until June 15 to file their return, but any tax owing is still due by April 30.
How to Complete Form T1135
The form has two reporting methods depending on the total cost amount of foreign property:
- Detailed Reporting: Required if the cost amount of specified foreign property exceeded CAD 250,000 at any time during the year. You must report detailed information about each property including maximum cost amount, cost at year-end, income earned, and gains or losses.
- Summary Reporting: Available if the total cost amount was more than CAD 100,000 but did not exceed CAD 250,000. In this case, you can report aggregate amounts by category of property instead of detailed listings.
The form requires information such as:
- Description of the property
- Country where the property is held
- Maximum cost amount during the year
- Cost amount at year-end
- Income or gains from the property
Penalties for Non-Compliance
Failing to file Form T1135 when required, or filing it late or with incomplete information, can result in significant penalties:
- Base penalty of $25 per day, up to a maximum of $2,500
- Additional penalties if the failure is repeated or involves gross negligence
- In cases of deliberate non-compliance, penalties can escalate significantly, including fines and prosecution
Promptly correcting any missed filings can reduce penalties.
Tips for Managing Your Foreign Property Reporting
- Keep accurate records of all foreign property acquisitions and dispositions
- Maintain details of cost amounts, income earned, and year-end values
- Use CRA’s Auto-fill My Return feature where applicable
- Consult tax professionals for complex foreign investment situations
- File on time and ensure complete and accurate disclosure
Conclusion
Form T1135 is a critical part of Canada’s tax compliance framework for taxpayers with foreign property. Understanding when you must file this form, what to report, and how to comply helps you avoid costly penalties and maintain good standing with the CRA. If you own or have interest in foreign assets exceeding the CAD 100,000 threshold, be sure to review your obligations carefully and seek professional advice if necessary to complete Form T1135 accurately and timely.
