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Personal tax

Reporting foreign income and property to the CRA

If you live in Ontario and own an account, investment or property outside Canada, two separate obligations can apply. The income it earns goes on your Canadian return, in Canadian dollars. And if the total cost of certain foreign property passes a threshold, you also file an information form, Form T1135. Many people know about one and miss the other. This article explains how each works, which property counts, what the penalties look like and how to put your records in order before you file.

Sora Accounting & Tax · General information · Editorial policy
Updated · 7 min read

Foreign holdings trigger two separate duties

Owning property abroad splits into reporting the income in Canadian dollars, claiming credit for foreign tax and filing Form T1135 when cost passes $100,000.

Visual labels: Report the income; Convert to CAD; File Form T1135; Claim foreign tax credit.

What to take away

  • A Canadian resident reports income from foreign property in Canadian dollars whatever the property cost; the $100,000 test only decides whether Form T1135 is also required.
  • Form T1135 is based on the cost of specified foreign property at any time in the year, not on its value at year-end, and it is due when your return is due.
  • Foreign tax paid on foreign income may be claimed as a credit on Form T2209, limited to the lesser of the foreign tax paid and the Canadian tax on that income.

Two obligations, not one

Reporting income and reporting property are different requirements. If you were a resident of Canada, income you earn from foreign property is included in your Canadian income, regardless of how much the property cost. The CRA states this directly in its questions and answers on Form T1135. Interest from a foreign bank account, dividends from a foreign company and rent from a property abroad all belong on your return.

Form T1135, the Foreign Income Verification Statement, is an additional information return. It tells the CRA what foreign property you held so it can check that the related income was reported. It does not calculate tax. Filing it when you owe nothing extra is normal, and skipping it because the income was small is a common and expensive mistake.

What counts as specified foreign property

The CRA’s definition of specified foreign property is broad. It includes funds held outside Canada, such as bank accounts, tangible property outside Canada, shares of non-resident corporations, shares of Canadian corporations held outside Canada, debt owed by a non-resident, an interest in a foreign insurance policy, and precious metals or futures contracts held outside Canada. An interest in a non-resident trust acquired for consideration is also included.

Some property is excluded. Property used or held exclusively in carrying on an active business is not specified foreign property, and neither is personal-use property. CRA’s examples treat a vacation condominium used primarily by you or a related person as personal-use property, and read “primarily” as more than 50 percent. A condominium rented out for eight months with a reasonable expectation of profit would not qualify for that exclusion and would be reported. If you rent out only part of the year just to recover some of the costs, with no reasonable expectation of profit, the CRA treats it as personal-use property. These are fact questions, so write down how the property is actually used.

The $100,000 test works on cost, not value

You must file Form T1135 if the total cost of your specified foreign property was more than $100,000 at any time in the year. The cost is generally the adjusted cost base, not what the property is worth today. Add the properties together: the CRA’s own example combines shares costing $75,000 with $35,000 in a foreign bank account and concludes that the form is required.

Three points surprise people. A mortgage does not reduce cost, so a $500,000 property bought with a $50,000 down payment counts at $500,000. Property you sold before year-end still counts if the cost passed the threshold at any time during the year. And for property received as a gift or inheritance, the cost is its fair market value when you received it. New residents do not file the form for the year they first became resident, and their cost for later years is the fair market value on the day they arrived.

Simplified or detailed reporting

Form T1135 has two tiers. Part A is a simplified method for people who held specified foreign property costing more than $100,000 but less than $250,000 throughout the year. You tick the types of property you held instead of listing each one. Part B is the detailed method and applies if the cost was $250,000 or more at any time in the year. It asks for more detail about each property, so keep property-level records.

For individuals the form is due on the same date as the income tax return, which is generally April 30, or June 15 if you or your spouse or common-law partner carried on a business. For 2026 income, filed in 2027, those dates are April 30, 2027 and June 15, 2027. Individuals can file it electronically with tax software. If your notice of assessment carries a reminder to file the form, that is generated automatically when you indicate on the return that your foreign property cost more than $100,000. It does not mean the form was missed.

Converting foreign amounts to Canadian dollars

Foreign income and foreign taxes must be reported in Canadian dollars. The CRA says to use the Bank of Canada exchange rate in effect on the day the amount arose. If you received a monthly pension or a series of payments at different times, you can use the average annual rate. The Bank of Canada publishes daily and average rates.

In practice, keep the foreign statements as issued, and keep a simple schedule showing each amount, the date, the rate used and where you found it. Using the same method every year makes your return easier to defend and easier to prepare. Do not convert at whatever rate your bank applied to a transfer; that rate may not match the CRA method.

Claiming the foreign tax credit

If you paid income tax to another country on income you also report in Canada, you may be able to claim the federal foreign tax credit using Form T2209, entering the result on line 40500. In most cases, for each country, you can claim the lesser of the foreign income tax you actually paid and the Canadian tax otherwise payable on your net income from that country. Ontario residents also complete Form T2036 for the provincial credit, which is carried to Form ON428.

A tax treaty can change the picture. If you deducted an amount on line 25600 because a treaty makes the income non-taxable in Canada, the CRA says to leave that income and any tax withheld on it out of the credit calculation. If you paper file, you attach the T2209, official receipts for the foreign tax and a note of your calculation, and U.S. taxpayers also attach items such as the W-2, the U.S. 1040 and a tax account transcript. Documents in another language need an acceptable translation.

Penalties and the extended reassessment period

CRA’s table of penalties lists the ones that can apply to Form T1135. The general late-filing penalty is $25 per day for up to 100 days, with a minimum of $100 and a maximum of $2,500. If the failure is knowing or amounts to gross negligence, the penalty is $500 per month for up to 24 months, to a maximum of $12,000, less penalties already charged. A false statement or omission made knowingly or through gross negligence can bring a penalty that is the greater of $24,000 or 5 percent of the cost of the foreign property involved.

There is a longer reassessment period too. The CRA can reassess three additional years if you failed to report income from specified foreign property and the form was not filed on time, or if it contained a false statement or omission. Relief from penalties may be requested in writing under the taxpayer relief provisions. If you find that past forms or foreign income were missed, ask about the Voluntary Disclosures Program before the CRA contacts you, because the CRA says the program may be available to people who did not file Form T1135 or gave incomplete information.

What to gather and what to ask

Collect statements for every foreign account for the full year, purchase records that show the original cost and date, any foreign tax slips or assessments, and the exchange rate schedule. Note how each property was used during the year, especially a second home that is sometimes rented out. If you hold investments through a foreign broker or a family arrangement, tell your accountant, because the filing may depend on who holds the property.

Useful questions are these. Did the cost of all my foreign property pass $100,000 at any point? Which tier applies? Is any of it excluded as personal-use property? Has foreign tax been paid that I can claim? Are there prior years to correct? The new-to-Canada guide and the personal tax checklist may help organize the documents, and the notice of assessment article explains how to read the reminders on your assessment.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.