Foreign Investment Reporting Guide

Form T1135: Foreign Income Verification

Who Must File

• Canadian resident individuals
• Corporations and trusts
• Partnerships (in some cases)
• Total cost of specified foreign property over $100,000 at any time in the year

Filing Deadline

• Same as your tax return
• April 30 for individuals
• June 15 for self-employed (but interest from April 30)
• File even if no income earned

What Is Specified Foreign Property?

Included Property

• Foreign bank accounts
• Shares of foreign corporations (non-Canadian)
• Foreign bonds and debentures
• Interest in foreign trusts
• Foreign real estate (not personal use)
• Precious metals held outside Canada
• Cryptocurrency on foreign exchanges (potentially)

Excluded Property

• Property used in active business
• Personal-use property (vacation home)
• Shares of Canadian mutual funds holding foreign investments
• Property in RRSP, TFSA, RRIF, RESP
• Canadian dollar accounts at foreign banks

T1135 Filing Methods

Simplified Method ($100,000 to $250,000)

If total cost is between $100,000 and $250,000:

• Check boxes for property categories held
• No specific property details required
• Still report total income

Detailed Method (Over $250,000)

If total cost exceeds $250,000:

• List each property
• Report cost, income, and gain/loss
• Specify country of property
• More detailed reporting required

Calculating Cost for T1135

• Use cost amount, not fair market value
• For shares, total purchase cost
• For foreign currency, cost in CAD when acquired
• Include all specified foreign property you own

Penalties for Non-Filing

Late Filing Penalty

• $25/day (minimum $100, maximum $2,500)
• Even if no tax owing

Failure to File

• $500 to $24,000 per year
• Gross negligence: Up to 5% of highest cost
• Extended reassessment period (to 6 years)

Foreign Tax Credits

How It Works

• Foreign countries may tax your income
• Canada allows credit for foreign taxes paid
• Prevents double taxation
• Claim on your Canadian return

Calculating the Credit

The foreign tax credit is the lesser of:

• Foreign taxes actually paid
• Canadian tax on the foreign income

Reporting Foreign Tax Credit

• Complete Form T2209
• Need proof of foreign taxes paid
• Different pools for business vs non-business income

US Investments and W-8BEN

W-8BEN Form

• File with your US broker
• Certifies you're not a US person
• Reduces US withholding to treaty rate (15%)
• Without it: 30% withholding

US Dividends in Different Accounts

• Non-registered: 15% withheld, claim FTC
• TFSA: 15% withheld, no credit (lost)
• RRSP: No withholding (treaty exemption)

Foreign Property Gains and Losses

Currency Conversion

• Convert to CAD at transaction dates
• Use Bank of Canada rates
• Currency gain/loss is separate from investment gain/loss

Reporting Capital Gains

• Report on Schedule 3
• Same rules as Canadian investments
• 50% inclusion rate
• Track ACB in Canadian dollars

Foreign Rental Property

Reporting Income

• Report on Statement of Real Estate Rentals
• Convert income and expenses to CAD
• Same deductions as Canadian rentals

T1135 Considerations

• Include if not personal-use property
• Cost is purchase price in CAD
• May exclude if primarily personal use

Foreign Pensions

• Generally taxable in Canada
• Report on Line 11500 or 11600
• May be covered by tax treaties
• Claim foreign tax credit for foreign taxes

Common Compliance Issues

Not Filing T1135

• Most common mistake
• Many don't realize threshold exceeded
• US stocks in TFSA don't count (exempt)
• But US stocks in cash account do

Wrong Cost Calculation

• Using FMV instead of cost
• Not converting to CAD at purchase date
• Forgetting to include all properties

Voluntary Disclosure

If you've missed filing T1135:

• Consider Voluntary Disclosure Program
• May reduce or eliminate penalties
• Must disclose before CRA contacts you
• Professional help recommended

Tax Treaties

Canada has tax treaties with many countries:

• Reduce withholding tax rates
• Prevent double taxation
• May exempt certain income
• Check treaty for each country