T1135 Foreign Income Verification: A Canadian's Guide to Reporting Foreign Assets

If you are a Canadian tax resident with significant assets outside Canada, you likely have a reporting obligation that many people miss entirely: Form T1135, Foreign Income Verification Statement. Missing or incorrectly filing this form carries some of the steepest administrative penalties in Canadian tax law — up to tens of thousands of dollars, plus additional penalties for each year of non-compliance.

The good news is that T1135 is an information return, not a tax payment. Filing it does not mean you owe extra tax. But failing to file it — even if all your income is properly reported — can trigger substantial penalties.

What Is Form T1135?

Form T1135 is an annual disclosure form filed with the CRA by Canadian tax residents who, at any point during the tax year, held specified foreign property with a total cost of more than $100,000 CAD (as of writing — verify the current threshold with CRA). The form requires you to identify each foreign property, report its cost, and disclose any income earned from it.

The form is filed alongside your T1 personal income tax return (or corporate return, as the case may be), due by the same deadline — generally April 30 of the following year, or June 15 if you or your spouse had self-employment income (verify current deadlines with CRA).

What Is "Specified Foreign Property"?

The definition is deliberately broad. Specified foreign property includes:

• Funds held in foreign bank accounts
• Foreign shares — shares of corporations resident outside Canada, whether publicly traded or privately held
• Foreign bonds, debentures, and fixed-income investments
• Foreign real estate not used exclusively in a business carried on by you (a condo you own in Florida for personal use counts; a property owned by your Canadian operating company and used in its business may not)
• Foreign partnership and trust interests
• Intangible property held outside Canada (certain patents, copyrights, and similar rights)
• Loans to non-resident persons

What Is NOT Specified Foreign Property?

Equally important is what the form does not capture:

• Property used exclusively in carrying on an active business in Canada
• Foreign pension plans in certain circumstances (the rules on pensions are nuanced — verify your specific plan with a tax professional)
• Personal use property abroad (your vacation home is in — but the personal-use exclusion applies to property used principally in a business, not to vacation homes)
• Shares of foreign affiliates reported elsewhere in the Canadian tax system
• RRSPs, RRIFs, and registered pension plans — these are domestic registered plans even if they hold foreign securities

The $100,000 Threshold: How It Is Calculated

The threshold is based on the cost of the foreign property, not its current market value. This matters because:

• Property you bought for $80,000 that is now worth $150,000 is below the threshold (based on cost)
• Property you bought for $110,000 that has declined in value to $60,000 is above the threshold (based on cost)

The threshold is aggregate — you add up the cost of all specified foreign property you held at any point during the year, not just at year-end. If your total foreign holdings exceeded $100,000 at any moment in the year, T1135 is required.

Two Reporting Methods: Simplified vs. Detailed

T1135 offers two methods depending on the aggregate cost of your foreign property:

Method 1 (Simplified): Available when the aggregate cost of specified foreign property is under $250,000 (as of writing — verify threshold with CRA). You can report property by country or category rather than asset by asset.

Method 2 (Detailed): Required when the aggregate cost is $250,000 or more. You must report each property individually: description, country, cost, maximum cost during the year, income earned, and gain or loss on disposition.

Penalties for Non-Compliance

The CRA takes foreign asset reporting seriously. Penalties include:

• Late filing penalty: a per-day penalty for each day T1135 is filed late, up to a statutory maximum (as of writing — verify the current penalty structure with CRA)
• Failure to file: a flat penalty plus additional amounts if the failure is knowing or continued
• False statements: penalties for knowingly or negligently making false statements, which can be substantial multiples of the regular penalty
• Extended reassessment period: if T1135 is not filed, or is filed with omissions, the CRA's normal reassessment limitation period is extended, meaning the CRA can go back further than usual to audit your returns

Voluntary disclosure (through the CRA's Voluntary Disclosures Program) is available for taxpayers who come forward before the CRA contacts them. It can reduce or eliminate penalties and interest in certain circumstances.

Practical Steps if You Think You Might Owe T1135

1. Identify all foreign property you held at any time during the past year — bank accounts, brokerage accounts, real estate, and any other foreign investments.
2. Calculate the aggregate cost (not market value) in Canadian dollars.
3. If the total exceeds $100,000, gather the cost, income, and other information required for the form.
4. File on time with your T1 return. If you have missed prior years, speak with a cross-border tax professional about the Voluntary Disclosures Program before the CRA contacts you.

Frequently asked questions