T1135 (Foreign Income Verification Statement)

What counts and what does not

Specified foreign property includes funds held outside Canada, foreign shares, foreign real estate that is not personal-use property, debts owed by non-residents, and shares of Canadian corporations held outside Canada. It can include property that earns no income, such as vacant land. It excludes property used exclusively in an active business, personal-use property and shares or debt of a foreign affiliate. Specified foreign property held in an RRSP or TFSA is also excluded.

A vacation home used primarily for personal enjoyment, which the CRA reads as more than 50 percent, generally does not count. The CRA’s example of a unit rented out eight months a year with a reasonable expectation of profit does count.

The $100,000 cost test and the two parts

The threshold is based on cost amount, generally the adjusted cost base, not fair market value. Add all your foreign property together: $75,000 of foreign shares and $35,000 in a U.S. bank account total $110,000, so the form is required. If you hold more than $100,000 at any point, you report every foreign property held during the year, even one you sold before year-end. Inherited or gifted property takes its fair market value at that time as its cost.

Part A is a simplified method for a total cost above $100,000 but under $250,000 throughout the year, where you tick a box for each type of property. Part B is the detailed method, required if the total reached $250,000 or more at any time. Property held through a Canadian registered securities dealer can be reported in aggregate by country.

Deadline and consequences

The form is due with your return. For individuals that is generally April 30, or June 15 if you or your spouse or common-law partner carried on a business. A corporation files within six months of its fiscal period end. There are significant penalties for filing late or leaving out information, and missing the form can extend the CRA’s reassessment period by three years where foreign income was also unreported. A taxpayer-relief request may be considered, but it is not automatic.

Common mistakes and what to ask your accountant

The main mistake is thinking the form decides taxation. Foreign income is taxable whether or not you file it, and being below $100,000 does not remove the duty to report income. People also overlook U.S. shares bought through a Canadian broker, or an inherited account abroad. If you missed earlier years, ask about the Voluntary Disclosures Program before the CRA contacts you.

Ask your accountant for your cost totals by country, how to value inherited property and whether a property is personal-use. Bring statements, purchase records and the dates you acquired each property.