T1135 Form (The Low Down)

After 30 or so hours of getting my taxes ready for filing this year and feeling pretty smug for finishing ahead of schedule, I found out that I needed to complete the T1135 form. Or else I would face a hefty T1135 late filing penalty or worse yet, a T1135 penalty for not reporting my foreign property. This was the first year I that filed the T1135 form. This post will go over what the T1135 form is, what the T1135 filing deadline is, and how the T1135 form works and when you would need to complete the form and file it to avoid the dreaded T1135 late filing penalty.

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CRA T1135 Form

What is the T1135 CRA form?

The T1135 is Foreign Income Verification Statement is a form that you must file if you have foreign investment property over $100,000 CAD on a cost basis at any time during the tax year.

This doesn’t include personal use property (for example if you have a vacation home in Hawaii that you don’t use as a rental property).

Th $100,000 CAD is not fair market value and it is considered the ACB of your property (adjusted cost base).

Here’s a link to the T1135 form.

You’ll find out the reason why I had to fill this form out later in this post.

When you do DIY investing, you learn a number of things, including the criteria for filing T1135 and what information you need to provide. I suppose you would probably learn about the T1135 on your own accord even if you had a financial advisor in many unfortunate cases where you pay over 2.35% MER commission but just have diminishing returns and the occasional phone call check in to show for it.

T1135 Foreign Property

What is considered T1135 foreign property? There are a few things that are considered foreign property. For example, if you have securities that are US companies OUTSIDE of your RRSP and TFSA or other registered accounts, these are to be counted towards the $100,000 threshold and are considered foreign property.

Other examples of securities and ETFs or foreign property that counts towards the $100,000 threshold.

• Any US based or foreign based company in US dollars in a non-registered account even if they are held in Canadian brokerage accounts. For example, Visa (V), Verizon (VZ), and Walgreens (WBA) would be examples.
• Any US based ETF or fund. For example, a big fan favourite is the VTI ETF and I have been loading up on this in my non-registered account in recent years.
• US based bank accounts with US dollar deposits. For example, if you have a US dollar cross border account based in the United States.
• Rental property in the United States, even if you rent it only just 8 months of the year and use it for yourself the rest of the time. The key word is “predominantly” used for non-personal reasons.
• Precious metals and gold held outside of Canada also count.
• Foreign life insurance policies are considered foreign property

Now you might be starting to worry, what about your VGRO ETF that holds US companies or your ex-Canada ETF, does that count?

Foreign property that does not count towards the $100,000 minimum are Canadian listed securities and ETFs even if the underlying companies are American or foreign.

Examples of securities and ETFs or foreign property that do not count towards the $100,000 T1135 threshold include:

• Canadian listed foreign ETFs or securities. One that comes to mind would be an ex-Canada ETF like VXC or XAW. Even though this entire exchange traded fund has no Canadian companies and is completely foreign, it doesn’t count towards the $100,000 threshold.
• Foreign companies that are in registered accounts. For example, you could have $100,000 CAD equivalent in Altria in your RRSP, but that doesn’t count. If you had it in non-registered at ANY point in the year before you transferred to your RRSP though, that counts towards the $100,000 minimum for that year.
• Personal property a vacation home that you use only for yourself.
• Personal property that you rent out just a bit in order to cover the costs of the HOA fees or strata fees. Fortunately this can still be considered personal use property if you have nominal rent to just cover the minimum.

T1135 Reporting Methods

To complicate things even more, there are two methods to report your T1135 form.

One is the Simplified Reporting Method and the other is the Detailed Reporting Method.

T1135 Simplified Reporting method (PArt A)

If the total cost of your foreign property was more than $100,000 CAD and less than $250,000 CAD at any time throughout the year, you can use the Simplified Reporting Method.

For the Simplified Reporting Method you need to report:

• The country in which the foreign property is from
• Total income from all foreign property
• Total gain or loss from the sale of all foreign property

Detailed Reporting method (PArt B)

If you own over $250,000 CAD in foreign property you have to be much more detailed with the information you share with your friends, the Canada Revenue Agency.

For the Detailed Reporting Method, you need to share:

• Funds held outside Canada in foreign banks
• Shares of non-Canadian corporations
• Rental property outside Canada
• The country which the foreign property is located (and will need to figure out the country code)
• Any income or loss capital gains or losses incurred throughout the year
• The maximum fair market value of this property during the year and the fair value at the end of the year in Canadian dollar equivalent

How to Make It Easier to File the T1135

As alluded to above, there is specific information that you need in order to file the T1135 with your tax return.

This added about another 10 hours of data collecting on my part to my prepare my taxes, so it pays to be more organized about your investments and your taxes, especially if you are foraying into the non-registered accounts territories.

Especially if you anticipate that you will have over $250,000 CAD in foreign property, you should keep this information below handy and start to track it to prevent anticipated late nights with a glass of wine to soothe yourself from your own self-imposed tax headache.

If you have US companies or funds in your non-registered accounts you will need to know the:

• Date of purchase (and if you dollar cost average this is going to be a bit of a handful to collect the information- imagine if you dollar cost averaged every week or every day, hats off to you!)
• The number of shares you purchased and the total shares you have
• The purchase price and sell price
• The commission you paid
• This is to calculate your Adjusted Cost Base
• The country which the foreign property is located
• Any income or loss capital gains or losses incurred throughout the year
• The maximum fair market value of this property during the year and the fair value at the end of the year in Canadian dollar equivalent

Many financial advisors or full(er) service brokerages can have this information easily provided to you, unfortunately Questrade is a discount brokerage and they are not one of them (and they don’t intend to provide this service any time in the future- I asked). Questrade is great, but you do get what you pay for. Here’s my review of Questrade.

Scotia iTrade provided this information easily and automatically (this is the joint account online brokerage my husband and I use). Here’s my Scotia iTrade review. We took advantage of the online brokerage new account promotion and have been very happy with the free trades, since with have our Scotiabank Ultimate account.

T1135 Filing Deadline

What is the filing deadline for the T1135?

The filing deadline for the T1135 is the same as your individual tax return, it is April 30. However, if you are self-employed, you have until June 15 to file your T1135 before the T1135 late penalties start kicking in.

Taxpayer Category	T1135 Filing Deadline
Self-employed	On or before June 15
All other individuals	On or before April 30
Corporations	Not more than 6 months after the end of the corporation’s fiscal period
Trusts	December 31 and 90 days
Trusts that are Estates	If the date of death is between January 1 and October 31, file the tax return by April 30 of the next year. If the date of death is between November 1 and December 31, deadline is 6 months after death to file.
All partners that are individuals	No later than March 31 after the fiscal period of the partnership ended
Partnerships: all partners that are corporations	No later than 5 months after the end of the fiscal period

T1135 Penalty (For Late Filing)

The penalties are very high if you fail to comply with filing your T1135 on time.

What happens if you don’t file your T1135 on time?

Here are the penalties according to the Income Tax Act.

If you fail to file your T1135 it is called failure to comply and the fine is $25 per day up to 100 days (minimum fine is $100 and maximum fine is $2500).

If you KNEW you had to file the T1135 and you still didn’t file it they call you negligent as “failure to furnish foreign based information” and this fine is $500 a month up to 24 months, for a maximum of $12,000.

If CRA found out you did not file your T1135 and you just ignored their ask to file the T1135, you will be fined $1000 a month up to 24 months, for a maximum of $24,000.

So basically the T1135 penalty for late filing is anywhere from $100 to $24,000 and up (if you extend past 24 months of not filing the T1135 form), but typically it is from $100 to $2500 if were late with your T1135 filing.

The T1135 Boo Boo	Minimum T1135 Penalty	Maximum T1135 Penalty
Fail to file the T1135	$100 ($25/day)	$2500 (up to 100 days)
Ignored filing the T1135 when you knew you should	$500/month	$12,000 (up to 24 months)
CRA asks you to file the T1135 and you just ignore them	$1000/month	$24,000 (up to 24 months)

T1135 Joint Account

If you have joint accounts with your spouse with US based non-registered investments, remember to count these towards your T1135- this was my mistake when I was happily filing my taxes, forgetting to account for our joint accounts.

The ownership for these joint accounts is typically 50/50 ownership therefore you would typically count 50% of the assets under these joint accounts towards your own personal T1135.

For example, if you have $50,000 CAD equivalent in $BABA, for each spouse, that’s $25,000 CAD equivalent to count towards your T1135 threshold.

If you have $75,000 CAD equivalent in shares of VTI on cost basis in your individual account, that means you would need to file the T1135 because you hit the $100,000 CAD equivalent anytime in the year, even though right now the fair market value of these investments might be $60,000 CAD equivalent added together.

The T1135 doesn’t care about your current market value it cares about your cost or book value.

The reason that I hit the T1135 minimum foreign property limit and didn’t realize was because assets that are joint assets and foreign property still count, as it would be considered towards a T1135 threshold.

Hope that this post helped you navigate the tricky and somewhat confusing world of the T1135.

For further information here is CRA’s page on the T1135 form with common questions and answers.

You might also be interested in:

• Tax Efficient Investing in Canada
• Paying CRA Taxes with a credit card
• Free Tax Filing Software in Canada
• How are dividends taxed in Canada
• Capital Gains tax rate in Canada
• Blogging Tax Deductions in Canada

Have you every had to pay the T1135 late filing penalty?

Was it as hefty of a fine as you thought it would be?