What is the Foreign Income Verification Statement (Form T1135)?

Many of you found out about Form T1135 when you filed your 2013 tax return.  The Foreign Income Verification Statement, is used to disclose all specified foreign property held by Canadian Residents in non-registered accounts.  Please see form T1135 for the 2013 and prior years as well as review the changes for the 2014 and later tax years  and related form T1135 for the 2014 and later tax seasons.

You will be required to file this form if you hold (alone or jointly) specified foreign property (as defined in subsection 233.3(1) of the Income Tax Act) with an aggregate cost in excess of $100,000 at any time during the year.

In the 2013 tax year, the 2013 Transitional Reporting Method and the T3/T5 reporting exception was available to taxpayers.  For the 2014 and later tax years changes have eliminated the above method and exception for 2014 and later tax years.

“The CRA has implemented changes to Form T1135 for the 2014 and later tax years. The changes will allow taxpayers to report aggregate amounts for specified foreign property held in accounts with registered securities dealers and Canadian trust companies rather than providing the detail of each such property. This reporting method requires taxpayers to provide the aggregate fair market value of the property in these accounts by country. In addition the T3/T5 reporting exception has been eliminated.”

Shares held – Do you know which of your Securities are considered Foreign Property?

An issuer’s securities may be traded on the TSX and have headquarters in Canada, but it may be incorporated in the US (or other country).  If this is the case, it is considered foreign property and must be considered when deciding with your accountant if you are required to file Form T1135.

Foreign property held in your registered plans, such as RRSP or TFSA are excluded from the reporting requirements of Form T1135.

A Canadian mutual fund trust (as defined in theIncome Tax Act) is excluded from the definition of “specified Canadian entity,” so it does not have to file form T1135.  Also, the investor does not have to report their investment in a Canadian mutual fund trust because it is not a “specified foreign property.”

The same applies to Canadian mutual fund corporations (as defined in theIncome Tax Act).

CRA has several Questions and Answers located on their website as well as the stiff table of penalties for failure to comply

We encourage you to contact your tax professional for more information.

Disclaimer:

This information is provided as an information service only and is not intended to substitute for competent professional advice. Details should be confirmed with your financial advisor and tax preparer and no action should be initiated without consulting a professional advisor.
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