Did you know that if you own foreign property worth more than CAD$100,000 you’re required to report this to the CRA?

You’re required to report the foreign property you own via filing out Form T1135. In this blog post we will cover when you’re required to fill out Form T1135, for what type property, and who needs to fill it out.

When do you need to complete a T1135?

Form T1135 is required if you own or hold Specified Foreign Property with a total cost (not market value) of more than CAD $100,000 at any point in the tax year.

What is Specified Foreign Property?

• • Cash held in foreign bank accounts
  • Foreign stocks and bonds held in a non-Canadian brokerage account
  • Foreign mutual funds and ETFs
  • Real estate located outside Canada (except for personal use properties – see the exceptions below)
  • Shares of foreign private companies
  • Interests in foreign trusts
  • Derivatives and options based on foreign investments
  • Debts and loans you have given to non-residents
  • Debentures from foreign governments
  • Life insurance coverage from foreign insurers

What is excluded from the T1135?

You might own property worth more than CAD $ 100,000 but if does not meet the required of being Specified Foreign Property, you do not need to report it. 

Examples include:

• • Foreign investments held inside a Canadian-registered account (e.g., TFSA, RRSP, RRIF, RESP)
  • Real estate used for personal purposes (e.g., a vacation home or condo abroad that is not rented out)
  • Shares of Canadian mutual funds or ETFs that hold foreign securities.
  • Personal-use assets (e.g., jewelry, cars, boats abroad)

Who needs to complete Form T1135?

If applicable, Form T1135 needs to be completed by all Canadian:

• • Resident individuals
  • Companies/corporations
  • Trusts 
  • Partnerships

How do you determine if you’re over the CAD $100,000 limit?

The threshold is based on the original cost, not market value. If the cost of all your specified foreign properties combined exceeds CAD $100,000 CAD at any point in the tax year, you are required to complete Form T1135. 

What happens if you don’t file Form T1135? 

The penalties for not filling out Form T1135 Failing to file are hefty. The basic penalty is $25 per day, up to a maximum of $2,500. For repeated failure or negligence, you could face additional penalties of $1,000 month with a maximum of $24,000 per year.

How do you fill out Form T1135?

There are two main T1135 parts as follows:

Part A: Simplified Reporting Method

Who uses Part A?

If the total cost amount of all your specified foreign property is more than $100,000 but less than $250,000 throughout the year.

What do you report in Part A?

You report the types of property held (e.g., funds held outside Canada, shares of non-resident corporations, indebtedness owed by non-residents, etc.).

For each type, you indicate:

• • The maximum cost amount during the year
  • The cost amount at year-end
  • The total income earned from all properties in that category
  • The total capital gain (or loss) realized from all properties in that category
  • You do not need to provide detailed information for each individual property.

Part B: Detailed Reporting Method

Who uses Part B?

If the total cost amount of all specified foreign property is $250,000 or more at any time during the year.

What do you report in Part B?

You must provide detailed information for each specified foreign property, including:

• Description of the property
• Country where the property is located or held
• Maximum cost amount during the year
• Cost amount at year-end
• Income earned from the property
• Capital gain (or loss) realized from the property
• For certain properties (e.g., funds held outside Canada), the name of the institution and account number

Part B requires a line-by-line breakdown for each property, which can be time-consuming but is mandatory for larger holdings.

A Reminder:

Even if you do not have to file Form T1135 (e.g., your foreign property is under $100,000), you must still report all foreign income on your Canadian tax return.

Do you need help to file Form T1135 or have any questions? Let us help you. Get in touch with us here or sign up to get more accounting and tax tips in our newsletter here.

The accounting and tax information provided in this post does not constitute advice and is meant to be for general information purposes only. The information is current as at the date of this post and does not reflect any changes in accounting and/or tax legislation thereafter. Moreover, the information has been prepared without considering your company or personal financial/tax circumstances and/or objectives.