Filling Form T1135 is a Must for Canadians

In the past couple of decades, Canadian citizens were required to disclose all information about whether they own some property in a foreign country as part of their annual tax returns. Filling the form T1135 was required if the Canadian person owns or holds a foreign property that is valued at over one hundred thousand Canadian Dollars.

Although this question seems relatively simple, there are many questions about what exactly a foreign property is and what exactly should be reported to the tax authorities. Sometimes there are situations that are a bit tricky or too complex to answer, especially in the period when people file their taxes. A good example would be the following – a Canadian person keeps his financial investments in a brokerage firm. Included in the investment that is non-registered are shares bought in an American company that cost over hundred thousand dollars. Every year that person gets his T5 slip in which he reports the dividends received from the shares, which he or she includes in his or hers income.

So the main question is whether filing T1135 form required? The answer is yes. The aforementioned person holds shares which constitute a foreign property. It does not matter that the income is annually reported in the T5 slip and the personal tax return. It also does not matter that those shares are held on a brokerage account. The form must be filled.

The main thing is that T1135 can sometimes be very complex. People are doing some sophisticated planning today, so sometimes reporting this can become problematic. An example for that would be when one of the married partners transfers his or hers shares in a foreign country to the other spouse for a value that is less that is currently on the market. So the main question is who of the partners has to report the income of this foreign investment.

Failing to file T1135 form in timely manner may lead to penalties for up to $25 per day you are late, up to maximum amount of $2,500. If CRA finds out that your failure to report the income is because of a gross negligence, then the penalties can climb up to $500 per month, up to $12,000. However, if you can file the form under the Voluntary Disclosure Program, then you can avoid being penalized so harshly.


Leave a Reply