Who Needs To File A T1135 and When?

Criteria & Circumstances that Require You to File a T1135

Canadian tax residents are taxable on their worldwide income. First, it’s important to know that tax residence has nothing to do with immigration status. You can be a Canadian citizen and be a non-resident for tax purposes, or you can be a visitor to Canada and become a tax-resident. Second, it’s essential to understand how the Canada Revenue Agency (“CRA”) determines if and how much income taxpayers earn from offshore sources.

The CRA has a number of tools at its disposal, including obtaining information from foreign governments and banks. However, one method the CRA uses involves looking to the taxpayer. 

The Foreign Investment Verification form, or T1135, is a form that must be filled out and filed with the CRA by any taxpayer who, during a tax year, owns foreign property with a combined value exceeding $100,000 Canadian. 

This doesn’t mean that the property’s value has to exceed $100,000 for the entire year. Rather, if at any time during the year, even if only due to currency fluctuations, the value of foreign property exceeds $100,000 Canadian, the form must be filed. 

Form T1135 is due on the same date a taxpayer’s income tax return is due. Failing to file the T1135, or filing it with incomplete or inaccurate information, will result in the CRA assessing penalties.

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Penalties for not filing a T1135

Failing to file a T1135 results in an automatic penalty, regardless of whether the taxpayer was aware of their filing obligations. 

The penalty starts at a minimum of $100 but is calculated at $25 per day for up to 100 days. The maximum penalty for each tax year is $2,500. In addition to this automatic penalty, the CRA may also choose to assess gross negligence penalties against a taxpayer. These are much harsher, at $500 per month for a maximum of 24 months, or a total of $12,000. 

Penalties can increase further if you’ve been contacted by the CRA and received a demand to file a return. The penalties at this point rise to $1,000 per month for a maximum of 24 months, or a total of $24,000. 

The penalty for making false statements or failing to report required information on a T1135 is not automatically applied, but rather in situations where the taxpayer is grossly negligent. The penalty amount is the higher of 5% of the cost of the specified foreign property or $24,000.

Important Details to Keep in Mind

Only the value of income-earning property is counted towards the $100,000 threshold for the T1135. In other words, personal property, like a vacation home, is not included. 

There are, however, certain properties that must be reported on a T1135, even if they do not meet the $100,000 threshold. These are referred to as “specified foreign properties” and include foreign bank accounts, shares, and intellectual property. 

Also included are interests in partnerships or joint ventures that hold specified foreign properties, as well as properties that are convertible into or exchangeable for specified foreign properties. However, this does not include properties used exclusively in carrying on an active business or a few other types of properties. 

The value threshold of $100,000 is in Canadian dollars. This means that you need to convert the foreign currency or currencies into Canadian dollars, taking into account currency fluctuations throughout the year.

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Adjusted Cost Base (ACB) and Undepreciated Capital Cost (UCC)

The $100,000 threshold is based on either the adjusted cost base (ACB) of the property or, if the property is depreciable, the undepreciated capital cost (UCC) of the property. Generally, ACB is the original cost of the property, plus any costs of acquiring it, and UCC is the residual value of the property after tax depreciation is taken. 

In other words, the historic cost paid for the property or the residual value of the property, and not the property’s current fair market value. This means you don’t have to worry about appreciating property prices. 

The only exception to using fair market value is if you received the property as a gift, inheritance, or bequest. This is because the cost to you of such property is the fair market value of the property at the time you received the gift, inheritance, or bequest. Any appreciation in value after this date is not considered.

Completing Form T1135

The T1135 form itself uses a two-tiered structure. If your foreign property exceeds the $100,000 limit but the total value is less than $250,000, you only need to complete the simplified reporting structure in Part A of Form T1135. Simple reporting involves checking off the types of property, eliminating the need to provide details about each type. 

If, however, the total value in the year exceeds $250,000, then you must use the more detailed reporting structure in Part B of Form T1135. Part B requires a detailed description of each foreign property owned by the taxpayer. Again, currency fluctuations can push you from Part A to Part B, or back, if the foreign property value is close to the $250,000 dividing line. If the $250,000 threshold is crossed at any point in the year, then the more onerous reporting requirements apply even if the value of the properties falls below it at the end of the year.

📄 Looking for another form? Check out our list of CRA Tax Forms

Filing Procedures, Frequently Asked Questions & Tips

Form T1135 can be filed electronically through certified tax software when submitted with your income tax return, or separately via the CRA’s “Submit Documents” portal. Paper filing remains an option, but electronic submission is strongly recommended for faster processing and easier record management.

Frequently Asked Questions:

• When is the deadline? Form T1135 is due on the same date as your income tax return; typically April 30 for individuals and six months after year-end for corporations.

• What happens if I miss the deadline? Late filing can result in penalties of up to $2,500, with more severe consequences if non-compliance is deemed willful.

• Do I need to file if I only held foreign securities in a Canadian brokerage account? Yes, if the underlying assets qualify as specified foreign property, the reporting requirement applies regardless of the account’s location.

Practical Tips:

• Keep detailed annual records of foreign investment holdings, including acquisition costs and country-specific details.

• Use the simplified reporting method if you qualify, but ensure all criteria are clearly met.

• Consult a tax advisor if you’ve ever owned foreign property jointly, or if you’ve disposed of assets during the year; the reporting obligations can be more complex in these cases.

Being proactive about compliance helps reduce audit risk and avoid the onerous penalties detailed above. 

CRA’s Voluntary Disclosures Program – A Lifeline for Fixing Previous T1135 Mistakes

If you failed to file or filed incorrect or incomplete T1135 forms in the past, all is not lost. You can use the CRA’s Voluntary Disclosures Program to make up for past shortcomings and avoid penalties that would otherwise apply. There are specific preconditions that must be met to access this program and benefit from the penalty relief it offers.

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