Filing of Form T-1135 –Foreign Income Verification Statement

What is form T1135 and who needs to file?

When you file your income tax return each year, one of the questions that you need to answer is whether you hold (own) asset/s outside Canada in excess of $100,000 at any time during the year. Canada Revenue Agency (CRA) wants to keep a track on those taxpayers who are holding assets outside Canada and generating income out of such assets.  

This requirement applies to all the types of entities namely individual, partnership, corporation and trust.

What is the deadline for filing this form?

This form needs to be filed along with the individual tax return (T1) and the latest date to file is April 30 each year.

What is the penalty for not filing or late filing?

The failure to file this form is per day penalty of $25 up to a maximum of 100 days (maximum $2,500)

What does this form contain?

Mainly following assets require disclosure:

1)      Funds held outside of Canada

2)      Shares of non-resident corporations

3)      Indebtedness owed by non-resident

4)      Interest in non-resident Trusts

5)      Real property outside of Canada

6)      Other property held outside Canada

This form also contains the disclosure of information such as cost at the end of the year, maximum      amount outstanding at the year end and income generated out those assets. Please take a look at the below mentioned link

https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/E/pbg/tf/t1135/t1135-16e.pdf

How do you determine the cost of assets for this form?

When you enter Canada and own the assets outside of Canada, the fair market value of asset as on the date of entry needs to be regarded as cost for the purpose this form. In case if you are already a permanent resident and subsequently become the owner of the asset outside of Canada by purchasing asset, the cost to acquire such asset is considered for reporting for this form. In case if you become the owner of an asset by any other means such as inheritance from the parents, grandparents etc. The fair market value of such asset as on the date of inheritance should be regarded.

Methods of Reporting:

Please note that the requirement to file this form applies when you own assets outside of Canada, the total of which exceeds $100,000 and not when each asset is exceeding $100,000. Figures are to be expressed in Canadian Dollars in this form.

There are two methods of reporting 1) Simplified reporting method 2) Detailed reporting method.

When you own assets the total of which is between $100,000 and $250,000, simplified reporting method can be adopted. Under simplified method of reporting, you need to report only the different kind of assets held, income and gains or losses generated out of such assets. You do not need to report the total cost of such assets held.

Detailed Method of Reporting:

Under this method, each individual asset held needs to be reported along with its cost at the end of the year, maximum outstanding during the year, country where such asset is held and the income or gain (or loss) from such asset.

Staring the year 2015, this form can be e-filed to CRA.

Exclusions from the reporting:

There are some exclusions from the above reporting the most prominent ones being, one personal vacation property and any asset held outside Canada in carrying out active business. 

Filing of this form is very important when the global standards of information sharing are changing each day due to the information sharing treaty taking place between Canada and rest of the world.

Disclaimer: Any discussion on this blog relating to tax matters is purely for educational purposes and not taking any specific actions based the general tax rules described therein. Your tax situation could be different and as a result there may be different tax strategies applicable in your case. We do not claim the tax situations described above to be exhaustive or conclusive. In case of any specific tax situations or problems, you are advised to seek professional advice.