What is Specified Foreign Property?
Specified Foreign Property are assets held outside of Canada. The threshold for reporting to the CRA on a T1135 form is if the property that you have held during the relevant tax year costs over $100,000 CAD. The $100,000 threshold is based on the cost paid for the property, not the fair market value today. Canadians are required to report income that they have earned both from Canadian and foreign sources.
According to the Canada Revenue Agency, specified foreign property includes:
- Bank accounts held abroad
- Shares of foreign corporations and debt securities
- Real Estate
- A life insurance policy issued by a foreign issuer
- Other tangible and intangible properties located outside of Canada.
Personal Use Property and a T1135 Form
Some types of foreign property, despite their high value, are not classified as specified foreign property. For instance, it does not include property acquired mainly for personal use, such as cottages, jewelry, automobiles, and valuable collections, such as rare books, stamps, coins, etc. It also does not include property held or used exclusively in the course of carrying on an active business. Furthermore, specified foreign property held in registered plans, such as registered retirement savings plans (RRSPs) or tax-free savings accounts (TFSAs), do not have to be reported on a T1135, even if their cost is higher than the threshold.
T1135 Form Requirement
If you have a specified foreign property, you have to file a T1135 form for each year that you held the property for any amount of time. Even if you sold the property in the middle of a year, you still have to file a T1135 for that year.
In 2015, the form was redesigned to include a two-tier information reporting structure for specified foreign policy. The first part is for taxpayers reporting specified foreign policy with a total cost of less than $250,000 throughout the year. It involves a simpler reporting method. The second part applies to taxpayers who, at any time in the year, held specified foreign property with a total cost of $250,000 or more. This part requires the taxpayer to report far more details regarding each property.
The specified foreign property thresholds do not apply to income that is earned from the property. Canadians must report all income that is generated from property abroad, no matter the property’s cost. The $100,000 threshold only means that some Canadians do not need to report the ownership of foreign property on a T1135.
If you have specified foreign property that you have not reported to the CRA, you may correct the situation through a voluntary disclosure.
If you have any questions about how to fill out Form T1135, “Foreign Income Verification Statement”, or you have not reported your specified foreign property to the CRA, call us today! We can help!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.