Form T1135: Reporting Foreign Property Over $100,000

Who has to file Form T1135?

According to the CRA, Canadian resident individuals, corporations and certain trusts must file Form T1135 if, at any time during the year, they owned specified foreign property with a total cost of more than $100,000. Certain partnerships have the same obligation. The test is on the total of all your specified foreign property, not each item separately.

The CRA’s own example: shares in a non-resident corporation costing $75,000 plus $35,000 in a US bank account add up to $110,000, so the form is required even though neither holding exceeds $100,000 on its own. The threshold also applies at any time in the year: if you crossed it in March and sold everything in June, you still file for that year.

Non-residents do not file. New immigrants are excused for the year they first became resident; from then on, the cost of property they brought with them is its fair market value when they became resident.

Cost amount, not market value

The threshold uses cost amount, which for most investments is the adjusted cost base: what you paid, plus commissions and reinvested distributions. A portfolio bought for $90,000 that is now worth $150,000 is below the threshold; a $500,000 foreign rental property bought with a $50,000 down payment is above it, because the mortgage does not reduce cost. Property received as a gift or inheritance has a cost equal to its fair market value when you received it.

Worked example: you hold US shares that cost $85,000 in a non-registered account at a Canadian broker and keep $20,000 in a US bank account. Total cost is $105,000, so you must file. Because the total stayed under $250,000 all year, you can use Part A.

What counts as specified foreign property

Section 233.3 of the Income Tax Act defines specified foreign property. The CRA lists the main categories as:

• Funds or intangible property situated, deposited or held outside Canada, including foreign bank accounts.
• Shares of non-resident corporations, even if held through a Canadian broker, and shares of Canadian corporations held by an agent outside Canada.
• Interests in non-resident trusts acquired for consideration, including foreign-listed ETFs and mutual funds.
• Debts owed by non-residents, such as foreign government or corporate bonds and mortgages.
• Tangible property outside Canada, such as a rental property abroad, and precious metals or gold certificates held outside Canada.
• Interests in foreign insurance policies and in partnerships that hold specified foreign property.

What you do not have to report

Several common holdings are outside the T1135 regime, which is why many people with foreign investments never need to file:

• Anything held inside an RRSP or TFSA.
• Units of Canadian mutual fund trusts and corporations, including Canadian-listed ETFs that hold US or international stocks.
• Personal-use property, such as a Florida condo used mainly by you and your family. The CRA treats “primarily” as more than 50%; renting it out for profit most of the year makes it reportable.
• Property used or held exclusively in an active business, and shares or debt of a foreign affiliate (reported on Form T1134 instead).

Do I need to file a T1135? Common situations

Applying the CRA’s questions and answers to typical portfolios shows how often the answer turns on where the property is held rather than on how much it is worth:

Simplified Part A vs detailed Part B

If the total cost of your specified foreign property was more than $100,000 but less than $250,000 throughout the year, you can use Part A, the simplified method: you tick a box for each type of property you held during the year instead of giving the details of each property. If the total reached $250,000 at any time, you must use Part B and list each property by category, country, maximum cost during the year, year-end cost, income and gain or loss.

Holdings at a Canadian registered securities dealer or Canadian trust company can be reported in aggregate by country in category 7 of Part B, rather than security by security. Report gross income, and report capital gains (not taxable capital gains) separately for each property.

Deadline, filing and penalties

Form T1135 is due on the same date as your income tax return: April 30 for most individuals, June 15 if you or your spouse carried on a business. Individuals can file it electronically with NETFILE or EFILE for the 2017 and later tax years; paper forms go to the Winnipeg Tax Centre by the due date. The CRA’s table of penalties sets out what happens if it is late or wrong:

• Late filing (s. 162(7)): $25 a day for up to 100 days, minimum $100, maximum $2,500. Filing 40 days late costs $1,000.
• Knowingly or with gross negligence (s. 162(10)(a)): $500 a month for up to 24 months (maximum $12,000), less penalties already charged; $1,000 a month if you ignore a demand to file.
• After 24 months (s. 162(10.1)): an additional penalty of 5% of the cost of the foreign property, less penalties already charged.
• False statements or omissions (s. 163(2.4)): the greater of $24,000 and 5% of the cost of the property concerned.

Extended reassessment period and fixing past years

Filing late also keeps your return open longer. If you did not report income from specified foreign property and the T1135 was not filed on time or was inaccurate, the CRA can reassess that year for three extra years beyond the normal period.

If you missed past years, file the forms for each year, using the version of the form in effect or the current one. The CRA accepts requests for penalty relief under the taxpayer relief provisions (Form RC4288) and says the Voluntary Disclosures Program may be available to people who did not file or left information out, if certain conditions are met and the disclosure is valid.