The CRA has taken several steps over past few years to strengthen the tax reporting standards and increase transparency. This is in-line with the international movement to curtail tax avoidance which is being spear headed by the G20 nations.
Foreign Property Reporting is one such area where CRA has introduced new reporting requirements in 2013-2014 budget and has been following it up with stringent action against the defaulters.
Who needs to be worried? – Investors and Immigrants
It is very often the case that the first generation immigrants that moved to Canada have properties like land and building, bank accounts and shares in the country of origin. A lot of times the income generated by these properties will not make significant difference to your income tax return but if the assets in total are valued above $100,000, the CRA needs to know. Whether you have that vacation home in Florida that you have been renting out or your farm in India, if it is valued at more than 100,000 and you have not been reporting it to CRA, it is a cause of worry.
CRA means Business:
The CRA has set the penalty for not reporting the foreign property at $25 a day and upto a maximum of $2500 per year plus interest cost. The numbers can multiply quickly if you have not reported a property for a few years. Also, CRA has made it mandatory for all the banks and financial intermediaries to report all Electronic Funds Transfers of $ 10,000 or more and they have recently introduced a new whistle blower bill too. CRA is taking strong steps and individuals involved in tax evasion will have to face tough times ahead.
What needs to be reported?
Any “ Specified Foreign Property” that was valued more that $100, 000 at any time of the year needs to be reported using form 1135.
Specified Foreign Property includes money held in foreign bank accounts, shares of foreign corporations, land and buildings and all tangible and intangible properties located outside Canada. However, a property is exempt from reporting if its is a vacation home, a car or any other property that is held only for personal use or or in the course of carrying an active business,
What if you have not reported foreign property for a few years ?
Do not worry !
If you hold assets outside Canada and have not reported them, you should seek expert advise from professionals such as Softron Tax who can represent you with the CRA and declare your past information in programs like Voluntary Disclosure Program to minimize your risk of being penalized. Also expert advise should be sought when filing taxes to avoid any unpleasant situation in the future.