In the last few years you have probably noticed a question on your Canadian income tax return asking if you owned any foreign property:
“Did you own or hold specified foreign property where the total cost amount of all such property at any time, in the tax year, was more than $100,000 CAD?”
What Is The Foreign Property Question About?
The Canada Revenue Agency asks this question because the government wants to keep track of whether or not you might have some foreign assets that may be earning income that should be reported on your Canadian income tax return. As you probably know, if you are a tax resident of Canada, you must report all income from all worldwide sources on your Canadian income tax return, and be taxed on it.
Tax residents of Canada must report all income from all worldwide sources on a Canadian income tax return and be taxed accordingly.
What Is Specified Foreign Property?
The term specified foreign property refers mostly to property that is owned primarily for the purpose of generating income, i.e., investments of some sort. This is to distinguish such property from foreign assets you may own whose main purpose is simply your own personal enjoyment.
Learn More: Is that foreign real estate an investment, or personal?
While we usually think of property as real estate, foreign property can also be in the form of cash in an foreign bank account, or shares in a foreign corporation. So for example if you have an investment portfolio, you might have some shares in foreign corporations whose cost (the total amount paid to purchase the shares) at some point during the year adds up to more than $100,000CAD.
If you say yes to this question about foreign property, you are required to file form T1135, also known as a Foreign Income Verification Statement. On this form you report all the foreign property that you have that adds up to this $100,000 or more in cost. You’ll have to include some details about that property as specified by the form. Form T1135 is due at the same time as your income tax return.
Filing form T1135 does not trigger any additional tax.
It’s important to note that filing the T1135 does not trigger any additional tax. If you have been reporting the income from your foreign investments on your Canadian income tax return as is required by law, then all tax on that income has already been taxed properly.
Learn More: CRA’s Information Page about the Foreign Income Verification Statement (T1135)
Why File The Foreign Income Verification Statement (T1135)?
But while there are no tax implications for filing T1135, there are steep penalties for failing to file it. If your failure to file is unintentional, the penalties are $25 a day to a maximum of $2,500 for every day the T1135 is late. On the other hand, if the Canada Revenue Agency determines that the failure to file was an intentional omission, the penalty jumps to $500 per month to a maximum of $12,000.
Learn More: CRA’s FAQ about the Foreign Income Verification Statement (T1135)
What if I Didn’t File My Foreign Income Verification Statement (T1135)?
If you have neglected to file the T1135, there are some steps you can take. You may be able to file it under the Voluntary Disclosure Program to avoid penalties.
If you have to complete a T1135 and you’re not feeling confident about it, or if you are late and you want to file it now and possibly avoid penalties, get in touch and we can probably help you with that.
Why are you referring to the “value”(I think of fair market value) as opposed to the “cost” (I think of adjusted cost base)? If you refer to the official CRA section (below), it clearly says “cost amount” not “fair market value”.
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html#h2
Cost amount and the $100,000 reporting threshold
9. Is the $100,000 threshold based on the fair market value of the property?
No, it is based on the cost amount. The cost amount is defined in subsection 248(1) of the Income Tax Act and generally is the adjusted cost base and not the fair market value.
Good catch! You’re absolutely right, and the text has been fixed now.
If i have a holiday home in an overseas country that is solely for my enjoyment and not generating money, do i have to declare it
I can’t give specific tax advice here, but based on what you’re saying, your home may be considered personal property, which would make it exempt from the T1135 being discussed in this article. Please refer to this article, Learn More: Is that foreign real estate an investment, or personal? to confirm that your property meets the criteria.
Hi inherited a property which has been sold few month after for more than 100k, however I was co-owner if this property, my part was only 1/4 of it. Should I still fill the form ?
Not in that case, no. First off, it’s not the sale price that matters, but the cost (to you) which in the case of an inherited property would be the fair market value (FMV) as of the time when you inherited. If your portion was worth less than $100k when you inherited it, you don’t have to file the form.
You will, however, need to pay capital gains on your quarter of the sale — which is part of a regular Canadian income tax return, not the special T1135 Foreign Income Verification Statement.
Hi my personal houshold last year income in canada 100000k and last year I sell my property in India for $250000k as cash payments and I not paid any taxes in India . All money I received in canda from money transfer services . My question is can I pay tax in canda on that money I received as cash payments.
If you are a tax resident of Canada, all your worldwide income is reportable and potentially taxable in Canada. Part of any profit you made on the property in India may be included in this. If the other amounts you received were payments for goods or services you rendered, they may be taxable, but if they’re gifts they are not taxable. If you have further questions, please use our contact form to send us a message and we’ll see if we can set you up with a consultation.
I have a condo in Thailand that I paid $87,000 Canadian for 6 years ago. I’m trying to sell it for $105,000 Canadian. If I sell for more y to than the $100,000 Canadian are their tax issues.
Hi Terry. Since the condo cost less than CA$100,000, you don’t have to report it on a T1135. But if you sell it for a profit, that profit must be reported on your Canadian tax return. If you pay tax on that capital gain in Thailand, you can use that tax amount to apply for a foreign tax credit on the Canadian side. If you need help with that, please don’t hesitate to get in touch with us!