The purpose of this document is to make you aware of disclosure requirements if you own certain property outside of Canada.
It is important that you advise us if you do own such property since there are significant penalties for failing to report such ownership on your personal income tax return, and for failing to complete and file Form T1135 Foreign Income Verification Statement by April 30th.
If you are not sure if these requirements apply to you, please contact us to discuss your situation.
Does this apply to you?
Canadian resident individuals and trusts, as well as partnerships, who owned certain property outside Canada with a total cost of more than $100,000 at any time in the tax year, have to disclose the holdings on the tax return for the year and file Form T1135.
What type of property must be reported?
1. Funds held outside Canada
Funds outside Canada include money on deposit in foreign bank accounts and money held with a foreign depository for safekeeping or held by any other institution. For this reporting requirement, funds include negotiable instruments such as cheques and drafts.
2. Shares of non-resident corporations, other than foreign affiliates
These are shares of non-resident corporations whether or not they are listed on a stock exchange or are physically held inside or outside Canada. Do not report shares in a corporation that is your foreign affiliate.
3. Indebtedness owed by non-residents
These are amounts owed to you by a non-resident person. Include all promissory notes, bills, bonds, commercial paper, loans, mortgages, and indebtedness issued by a non-resident person.
4. Interests in non-resident trusts
Any interest in a non-resident trust (other than a trust that is your foreign affiliate), including a non-resident trust deemed to be a resident by section 94 of the Act. You do not have to report your interest in the following types of trusts:
- a trust that is governed by a U.S. Individual Retirement Account (IRA);
- a non-resident trust that neither you nor a person related to you had to pay for in any way; and
- a non-resident trust principally providing superannuation, pension, retirement or employee benefits primarily to non-resident beneficiaries, that does not pay income tax in the taxing jurisdiction where it is resident.
5. Real property outside Canada
Any real estate holdings that you have outside of Canada, other than real estate used in an active business or for personal use, must be disclosed. For example, if you have a rental property outside Canada it should be included in this area. However, a vacation property used solely by you or your family is not reported.
6. Other property outside Canada
Other property includes the following:
- precious metals or bullion (e.g., gold and silver) situated outside Canada;
- precious stones situated outside Canada;
- shares in corporations resident in Canada held by you or for you outside of Canada;
- commodity or future contracts, options or derivatives that constitute a right to acquire, or an interest in, specified foreign property; and
- any other right to acquire, or interest in, specified foreign property.
What type of property is NOT reported?
You do not have to report information about property held for personal use. This includes vacation property used by you primarily as a personal residence (and not earning rental income), as well as listed personal property such as works of art, jewelry, rare folios, rare manuscripts, rare books, stamps, and coins.
You do not have to report foreign investments held by a mutual fund trust if the trust is resident in Canada.
Voluntary disclosures
We encourage you to voluntarily correct any deficiencies in your past tax affairs. If you owned foreign property in the past and did not disclose this on your tax return, please let us know.
If you have any questions with respect to the above or any other income tax matters, please contact Joseph A. Truscott, Chartered Accountant at (905) 528-0234 or email Joe at [email protected].
July 2012
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