Foreign Property: What you need to know…

In 2013, the Federal Government announced a new initiative to combat the problem of international tax evasion and aggressive tax-avoidance as part of their Economic Action Plan 2013. To this end, they have made significant changes to the form T1135, Foreign Property Verification Statement.

Starting with the 2013 taxation year, Canadian taxpayers who hold specified foreign property with a cost amount of over $100,000 (Canadian dollars) in total, at any time in the taxation year, are required to provide additional information to the Canada Revenue Agency (CRA). The criteria for those who must file Form T1135 have not changed; however, the new Form has been revised to include more detailed information on foreign property.

Specified foreign property that must be reported to the CRA includes:

  • Funds held outside Canada;
  • Shares of non-resident corporations (other than foreign affiliates);
  • Indebtedness owed by non-residents (other than from foreign affiliates);
  • Interests in certain non-resident trusts;
  • Real property situated outside Canada (other than personal use property and real property used in an active business); and
  • Other types of foreign property such as intangible property not used in a business and certain rights under contract.

In addition, taxpayers subject to the reporting requirement must identify the country code that is applicable for each specified foreign property, the maximum and year-end cost amounts of the property, the income or loss, and capital gain realized from each property during the taxation year.

The Revised Form T1135 applies to 2013 and subsequent taxation years.  The new Form was released on June 25, 2013 and applies to taxation years ending after June 30, 2013. Form T1135 must be filed with the CRA on or before the filing due date of the related tax return in the case of a T1, T2 or T3 return, or the filing due date of the T5013 Partnership Information Return in the case of a partnership. The old Form T1135 will still be accepted for taxation years that ended prior to July 1, 2013.

For more information, consult the CRA’s reference page for T1135 here.

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