US shares in a regular brokerage account, a bank account in another country and a condo abroad that you rent out for profit all count toward the same limit. Once their total cost goes over $100,000 at any point in the year, you have to file Form T1135, Foreign Income Verification Statement.
Who has to file
Canadian resident individuals, corporations and certain trusts file it if, at any time in the year, they owned specified foreign property costing more than $100,000. Certain partnerships file too. A few details catch people out.
- The test is cost, generally your adjusted cost base, not market value.
- You add up all your foreign property. A $75,000 holding and a $35,000 bank account together come to $110,000, so you file.
- It's any time in the year. If you crossed $100,000 and then sold, you still file and report everything you held that year.
- A mortgage doesn't lower the cost. A $500,000 property bought with $50,000 down still counts at $500,000.
- Property you received as a gift or inheritance has a cost equal to its fair market value when you received it.
In the year you first become a resident of Canada, you don't file. After that, the cost of property you brought with you is its fair market value on the day you became resident. If you leave Canada partway through a year, the CRA only needs information for the part of the year you were resident (see moving abroad mid-year).
What counts and what doesn't
Specified foreign property includes:
- money or intangible property held outside Canada, such as a foreign bank account
- tangible property outside Canada, including land that earns nothing
- shares of non-resident corporations, even when held through a Canadian broker
- debts owed by non-residents, such as foreign government and corporate bonds
- interests in non-resident trusts acquired for consideration, and foreign insurance policies
- precious metals, gold certificates and futures contracts held outside Canada
It does not include:
- personal-use property, like a vacation home you use mainly yourself. The CRA reads "primarily" as more than 50%. A condo rented out eight months a year for profit is reportable. One rented for part of the year with no expectation of profit, just to cover some of the costs, is treated as personal-use.
- property used or held only in an active business
- shares or debt of a foreign affiliate
- foreign property held inside an RRSP or TFSA
- Canadian mutual fund trusts and mutual fund corporations, even if they hold foreign investments
Simplified or detailed reporting
If you have to file but your total cost stayed under $250,000 throughout the year, you can use Part A, the simplified method. You tick the types of property you held and name your top three countries. If the total reached $250,000 or more at any time, you must use Part B and give details for each property. Property held in an account with a Canadian registered securities dealer or Canadian trust company can be reported as one total for each country, in category 7 of the form.
When it's due
Form T1135 is due on the same date as your income tax return: April 30 for most individuals, or June 15 if you or your spouse or common-law partner carried on a business. It's due even if you don't otherwise have to file a return. Our list of tax due dates has the rest of the year's deadlines.
Penalties
Filing late costs $25 a day for up to 100 days, with a minimum of $100 and a maximum of $2,500. Failing to file knowingly or through gross negligence costs $500 a month for up to 24 months (up to $12,000). After 24 months, the penalty becomes 5% of the property's cost, less penalties already charged. A false statement or omission made knowingly or through gross negligence costs the greater of $24,000 and 5% of the property's cost. If the form was late or wrong and you also left income from that property off your return, the CRA gets three extra years to reassess that year. Relief can be requested under the taxpayer relief provisions, and the Voluntary Disclosures Program may be available if certain conditions are met. If you missed the form in earlier years, our post on catching up on back filings is a good place to start.
The income is taxable either way
T1135 is an information form. It doesn't calculate tax. Canadian residents report all income from foreign property on their return, whatever its cost. If you paid foreign tax on that income, you may be able to claim a foreign tax credit using Form T2209 (federal) and Form T2036 (provincial). In most cases the federal credit is the lesser of the foreign tax you paid and the Canadian tax on your net income from that country. A tax treaty can affect it. Foreign income and tax are converted to Canadian dollars using the Bank of Canada rate for the day, or the average annual rate when payments came in through the year.
How we help
Money or property held abroad is one of the things we help with alongside your personal return. Investments take extra work, so they're quoted on top of the base return, and you get the number before any work starts. With your authorization, we can also answer CRA letters about it for you.