Australia
USA
UK
Ireland
What Is Form T1135, and Who Needs to File It?
The Foreign Income Verification Statement is the T1135 form. It is a form used to monitor foreign property, not to determine the amount of tax to be paid on foreign property. It informs the Canada Revenue Agency about income from assets held outside Canada, ensuring you report income from these assets.
You must file this form if you are a Canadian resident and if the cost of the foreign property you owned was valued over $100,000 CAD (based on the total cost amount of specified foreign property at any time during the year) at any time during the year. Some trusts and partnerships must file it as well.
It doesn’t matter whether you’re wealthy or not or running a business in another country; this rule still affects you. You might need to file this form if you have a bank account in your home country or have gradually built a stock portfolio in the U.S.
How Does the $100,000 T1135 Threshold Work?
The $100,000 rule is based on the cost, not the value of your property today. That’s where people usually get tripped up.
Cost is the amount that you actually paid in Canadian dollars for the property, based on the exchange rate on the day you purchased it.
So if you put in $85,000 and it’s now worth $150,000, you still don’t need to file, since you never paid more than $100,000. But if you put in $110,000 and it drops to $70,000, you still need to file, because your cost was over $100,000.
Also, under this rule, there is a requirement for activity “at any time in the year.” If you deposited $120,000 in a foreign account in March and withdrew most of that money by August, you will still have to file for that year. At some point, you must have spent more than $100k, even if only for a short period.
All amounts are in Canadian dollars at the rate applied on the day of the purchase and/or addition. If you didn’t add any more money, your total can change just because of currency changes.
What Foreign Assets Must Be Reported on T1135?
The list of things you may need to report is long. It usually includes:
- Money in foreign bank accounts
- Shares in foreign companies, like U.S. stocks in a regular (non-registered) account
- Foreign mutual funds or ETFs
- Real estate outside Canada, unless it’s mainly for your own use
- Money owed to you by someone who lives outside Canada, like foreign bonds
- A paid-for share in a trust based outside Canada
- Foreign life insurance with cash value
- Gold, silver, or other metals held outside Canada
- Even Canadian company shares, if held through a foreign broker
One thing that surprises people: it’s not just about where the company is based. It’s about where you hold it. If you keep Canadian stocks in a foreign brokerage account, they may still count.
What Foreign Property Is Excluded From T1135?
You don’t need to report some foreign property. This includes:
- Business premises only used for carrying on active business purposes.
- Shares in a foreign company in which you have a significant interest.
- Items primarily used for personal purposes, such as a vacation house or vehicle.
- Capital invested in an RRSP, RRIF, TFSA, or RESP account within Canada.
- Mutual funds that invest in foreign stocks within the fund.
That’s the one that fools people. If you buy foreign stocks yourself, you may need to report them. Usually, you don’t when you purchase a Canadian fund that contains those same stocks since you’re buying a Canadian product, not the stock.
T1135 Part A vs. Part B: What Is the Difference?
Once you decide to file, you have to choose the right part of the form.
Part A is the simplified version. If the total cost of your foreign property is more than $100,000 but less than $250,000 throughout the year, you can use Part A. You simply tick off a box for every type of property you hold, such as bank accounts, shares, etc. You don’t have to list every item.
Part B is the detailed version. If you had one or more foreign properties that cost $250,000 or more at any time during the year, use it. It asks for details: what the item is, where it’s located, the highest cost during the year, the cost as of year-end, and any income or gains.
Two important nuances people miss:
- Using Part A is always optional; you can choose to file Part B even if you qualify for the simplified method.
- If your cost crossed $250,000 at any time during the year, even for just a few days, you must use Part B for that entire year, even if the balance was much lower for most of the year.
If you’re unsure which bracket you fall into, or your cost fluctuated near $250,000 during the year, use Part B to be safe.
Do You Need to File T1135 Form? 4 Common Examples
1. You have a U.S. brokerage account. You bought U.S. stocks and paid $130,000 CAD. That’s over $100,000, so you need to file.
2. You have a home for rent in another country. You purchased a condo for rent in another country for $180,000 CAD. Since you rent it out and don’t use it as your own getaway spot, it counts as foreign property. You must report the rent as income and file a return.
3. They are foreign investments you inherited. A relative leaves you shares and cash from overseas. For inherited property, the amount you consider your “cost” for T1135 will be the fair market value of the asset (in Canadian dollars) at the time of the death of your relative, not when it was purchased. Let’s say the shares are worth $60,000 CAD and the cash is worth $55,000 CAD when you receive them; the total cost is $115,000 CAD, which is more than $100,000 CAD, so you would have to file. You can only add up what you receive; it’s easy to under-total an inheritance or miss the amount.
4. Your foreign stocks are held in your RRSP. You have $200,000 worth of U.S. stocks, but they are all in your RRSP. No matter how large this account becomes, RRSPs don’t count, so you don’t need to file for this account.
What Happens If You Forgot to File T1135?
It’s more common than people realize, particularly if you’re self-employed or recently immigrated to Canada. It is fixable, but the fines increase with time.
- Filing late: $25 a day, with a minimum fine of $100 and a maximum fine of $2,500.
- The CRA assumes that you intended to skip up to $500/month, up to $12,000.
- You still don’t file after the CRA asks you to: Up to $1,000 a month for up to 24 months, up to $24,000.
- Not filed within 24 months: Additional fine up to 5% of the value of your foreign property.
Apart from the fines, a late or missing T1135 will allow the CRA an additional three years to review your entire tax return for that year.
If you find you were late on a previous year’s form, you don’t want to submit it quietly under the radar. The CRA’s Voluntary Disclosures Program may reduce or eliminate fines for those who self-disclose first, rather than the CRA discovering or investigating first. This is only effective if you apply before receiving a call from the CRA or before they begin reviewing your file, so it is best to act fast.
When Is Form T1135 Due?
T1135 will be due on the same day as your tax return. Does not have a dedicated date.
- For people who file their own taxes, it’s April 30 of the next year, or June 15 for those who are self-employed (but must still pay any tax due April 30).
- For corporations, the deadline to file T1135 is six months after the end of the corporation’s tax year.
You file the form separately from your return, but with the same due date. If you missed your tax return deadline, you most likely missed your T1135 deadline as well.
When Should You Get Professional Help With T1135?
Some situations, such as a clear history with one U.S. account, are easy to manage on their own. This is complicated when:
- You own assets in more than one country, currency, or buy date.
- You’ve received foreign assets and are not sure how to calculate their cost.
- You’ve diversified your investments into various kinds of accounts
- Not certain whether it is personal use or an investment
- You just learned you didn’t file last year. You only just discovered that you did not file in a previous year.
- Other income from your foreign property must also be reported separately.
In such instances, it is possible that a minor error in your property sorting or monetary conversion could result in an invalid T1135, which also could be the cause of a fine if you filed on time. When you need assistance from someone who does this type of filing, it can save you a costly repair job later.
Get Help With Your T1135 Filing
Foreign property reporting should not be a guessing game. If you cannot tell whether your assets are over $100,000 or need help choosing the best option, our staff can review your assets, complete your application, and guide you accordingly.
Learn more about how we’re able to manage your Canadian or foreign tax returns, or about our bookkeeping services if you’re looking for year-round management of your foreign accounts.
Need Extra Capacity for T1135 Filings?
Extend your firm’s capacity with experienced accounting professionals who can support foreign asset reporting, documentation, reconciliation, and T1135 preparation.
Frequently Asked Questions
Q1: Do I need to file T1135 if I have a U.S. bank account?
Yes, if the total value of your foreign property, including this account, exceeded $100,000 CAD at any time during the year. One individual may not be enough to cause it to be filed, but it will count toward the total if you own other foreign property.
Q2: Does a foreign brokerage account count toward the $100,000 T1135 threshold?
Yes. A brokerage account outside Canada and the contents of that account typically constitute foreign property. All items listed in that account are totaled to see whether they reach $100,000.
Q3: Is T1135 based on the cost amount or current market value?
It is based on the cost (what the property cost when bought) in Canadian dollars. However, its current value is not a key factor in deciding whether to file, although it will factor into some aspects of the filing process.
Q4: What should I do if I forgot to file T1135 in a previous year?
Don’t ignore it. Review the CRA’s Voluntary Disclosures Program, which may reduce fines for voluntary disclosure before the CRA contacts you. A tax expert can look back at past years, calculate what should have been reported, and file it properly.
