Tax Insights: More details needed on Foreign Income Verification Statement (Form T1135): Ensure you comply

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Issue 2013-08

Taxpayers required to file Form T1135, “Foreign Income Verification Statement,” must include additional information on foreign property, starting taxation years ending after June 30, 2013. Ensure you comply with the new requirements to avoid penalties.

Starting 2013 taxation years, the Canada Revenue Agency (CRA) had expanded the information requirements for Canadian taxpayers holding specified foreign property with a cost amount exceeding $100,000 in total, at any time in the taxation year. This information must be reported in Form T1135, “Foreign Income Verification Statement.”

On June 25, 2013, the CRA further revised Form T1135 to require even more detailed information. On July 31, 2013, the CRA stated that this revised form must be filed for taxation years ending after June 30, 2013.

You or your investment advisor must collect and report the additional information now required, making Form T1135 more onerous and costly to file.

Disclosure for each foreign investment must include:

  • the name of the specific foreign institution or other entity holding funds outside Canada
  • the name of the specific investment and the specific country to which the foreign property relates
  • the income or loss and capital gain or capital loss realized from the foreign property during the taxation year
  • the highest cost amount during the year and the cost amount at year end

If the taxpayer received a T3 or T5 from a Canadian issuer in respect of the foreign property, that property will be exempt from the detailed reporting requirement. If several properties are held in one investment account, only those properties for which a T3 or T5 was issued for the taxation year would be exempt from detailed reporting in that year.

Each foreign property must be evaluated in each taxation year to determine if the exemption applies. A property that is exempt in one year may not be in the next, depending on whether it earned income for which a T3 or T5 was issued.