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Foreign Asset Reporting - Form T1135 Foreign Income Verification Statement
Income Tax Act s. 233.3
When foreign investment property or properties (specified foreign property) with a total cost amount (usually the adjusted cost base, not fair market value, but see below re depreciable property) of more than $100,000 Canadian is owned at any time in the year, form T1135, Foreign Income Verification Statement, must be filed with the tax return. This form must be filed by Canadian resident individuals, corporations and trusts, as well as many partnerships.
Foreign Asset Reporting Topics
T1135 - Penalties For Not Filing
Specified Foreign Property That Must Be Reported on the T1135
Canadian Exchange-Traded Funds (ETFS) Holding Foreign Investments
Capital Improvements To Foreign Property
Cryptocurrencies Such as Bitcoin
Property Not Included in Specified Foreign Property
Depreciable Specified Foreign Property
Canadian Companies Traded on Foreign Stock Exchanges
Foreign Companies Traded on Canadian Stock Exchanges
Current Methods of T1135 Foreign Asset Reporting
Simplified Method of Foreign Asset Reporting
Tracking the Canadian $ Cost of Your Foreign Investments
Country of Residence / Country Code for T1135
American Depositary Receipts (ADRs) - Country Code
Joint Ownership
If two people are joint owners of specified foreign property, they would determine if the $100,000 has been exceeded based on their share of the cost amount of the property.
T1135 - Penalties For Not Filing
It is important to ensure that this form is filed as required, as the penalties are onerous, $25 per day for failing to file a return (minimum $100, maximum $2,500) and $500 per month for knowingly not filing or for gross negligence, to a maximum of $12,000. Other penalties are possible - see the CRA Table of Penalties.
If you are using an accountant to do your taxes, make sure that this form is filed - you the taxpayer are ultimately responsible to ensure that your taxes are filed correctly, even when you are paying someone else to do them for you!
T1135 Due Date
The due date for the T1135 is the same as the due date for your personal or corporate income tax return.
This form is required for taxation years starting after 1997. If this form should have been filed for previous years but was not (perhaps you or the person doing your taxes missed doing it), you may be able to do a Voluntary Disclosure, and thus avoid penalties. Canada Revenue Agency (CRA) indicated in Technical Interpretation 2015-0572771l7 from September 2015 an assessment of a penalty for a late-filed T1135 must be made within the normal reassessment period, meaning that it would not be necessary to file a full 10 years when using the Voluntary Disclosure route. See the article on Voluntary Disclosure to determine if you qualify.
Form T1135 was revised for the 2014 taxation year, and simplified for the 2015 taxation year for some taxpayers.
Specified Foreign Property That Must Be Reported on the T1135
Foreign investment property that must be reported on the T1135 includes:
 | amounts in foreign bank accounts, but not US$ funds in a Canadian financial institution (banks, credit unions, brokerages, etc.) |
| intangible property situated, deposited or held outside Canada |
| shares in foreign companies, even if held in a Canadian brokerage |
| shares of corporations resident in Canada held outside Canada (e.g., in a brokerage account in another country) |
| interests in non-resident trusts |
| bonds or debentures issued by foreign governments or foreign countries |
| life insurance policies issued by a foreign issuer - CRA's "Questions and Answers" indicates that the "adjusted cost basis" of an interest in a life insurance policy as defined in subsection 148(9) of the Income Tax Act can be considered as a reasonable approximation of the cost amount of the property for the purpose of Form T1135. |
| a property that is convertible into, exchangeable for, or confers a right to acquire a property that is specified foreign property (e.g., a call option which has been purchased). See below regarding put options and short sales. |
| interests or units in offshore mutual funds |
| real estate situated outside Canada (unless mainly held for personal use and enjoyment) |
| other income-earning foreign property |
If the total cost of all the above properties owned at any time of the year exceeds $100,000, then the T1135 must be filed, reporting all specified foreign properties held during the year, even if some or all of the property was sold before the end of the year.
Canadian Exchange-Traded Funds (ETFs) Holding Foreign Investments
According to the Investment Industry Association of Canada (IIAC), "In Canada, ETFs are legally organized as a mutual fund trust with the trust units listed and traded on stock exchanges like an individual stock."
In CRA's Questions and answers about Form T1135 - Reporting responsibility, the question "Does specified foreign property held in a Canadian mutual fund trust have to be reported on Form T1135?" is answered. The answer states:
"A Canadian mutual fund trust (as defined in the Income Tax Act) is excluded from the definition of "specified Canadian entity," so it does not have to file Form T1135. Also, the investor does not have to report their investment in a Canadian mutual fund trust because it is not a "specified foreign property".
The same applies to Canadian mutual fund corporations (as defined in the Income Tax Act)."
Thus, Canadian ETFs holding foreign investments would not be considered specified foreign property, and would not have to be reported on a T1135.
Tax Tip: Canadian ETFs holding foreign investments don't belong on the T1135.
Capital Improvements To Foreign Property
With property such as real estate, it is important to remember that if capital improvements are made to the real estate, thus increasing the cost amount above the $100,000 limit (in Canadian $), then a T1135 will have to be filed.
Cryptocurrencies Such as Bitcoin
It is probably wise to report your cryptocurrency on a T1135, if it puts you over the $100,000, according to an article by Jamie Golombek, CPA, CA, CFP, CLU, TEP. It could be considered intangible property located outside Canada. It doesn't cost anything to report it, and would save very expensive penalties that would be incurred if it is not reported but later deemed by CRA to be reportable.
See also: Crypto assets - Canadian or foreign - it matters! by John Oakey, CPA, CA, TEP, CC, National Tax Director for Baker Tilly Canada
Property Not Included in Specified Foreign Property
Foreign investment property does not include:
| property held in a registered account such as an RRSP or TFSA, |
| any property used mainly for personal use and enjoyment, such as a vehicle, vacation property, jewellery, artwork, or any other such property, and |
| assets used only in an active business, such as a business inventory or the equipment and building used in a business. |
| US$ cash held in a Canadian financial institution |
Note that vacant land or an unoccupied building may be considered specified foreign property if they do not fit any of the exclusions above. See Technical Interpretation 2015-0614371E5 - Specified foreign property - Form T1135.
Put Options / Short Sales
No clear guidance has been provided by CRA regarding put options which have been sold. However, the seller of a put option has an obligation to purchase a property at the option of the buyer. Since the sale of a put option does not confer on the seller the right to acquire a property, it is logical that this would not be included as specified foreign property. The same treatment would logically apply to short sales, which also confer an obligation, not a right. When shares are sold short, they are not owned at the end of any day.
Depreciable Specified Foreign Property
Where the specified foreign property is depreciable property, as per s. 248(1) of the Income Tax Act, the cost amount is the undepreciated capital cost (UCC) of the property, i.e., the original cost.
Foreign Real Estate Questions
If you are unsure if your real estate in a foreign country must be reported, see the Canada Revenue Agency (CRA) real property questions.
Canadian Companies Traded on Foreign Stock Exchanges
There are many Canadian companies traded on foreign stock exchanges. Make sure you don't include these as foreign investments (specified foreign property). Just because an investment is held in a US$ brokerage account doesn't mean that it is a foreign investment. For instance, some people may want to hold Barrick Gold or Thomson Reuters in a US$ broker account because their dividends are paid in US$, although they are traded on the Toronto Stock Exchange (TSX) and are Canadian corporations. They are not foreign investments. The stock exchange that the shares are traded on will not affect the eligibility of dividends for the dividend tax credit. The company may also provide shareholders the option to receive their dividends in Canadian $. Otherwise, if the shares are held in a Canadian $ account, the brokerage will convert the dividends to Canadian $.
However, shares of a Canadian corporation which are held in a brokerage account outside of Canada are considered specified foreign property.
Foreign Companies Traded on Canadian Stock Exchanges
There are also foreign companies listed on Canadian stock exchanges. TMX.com has a downloadable Excel workbook which includes 2 worksheets with lists of US Companies that are listed on the TSX and TSXV (TSX Venture Exchange). As of February 2021 there were 50 US companies on the TSX and 65 on the TSXV.
Current Methods of T1135 Foreign Asset Reporting
Your brokerage will provide a summary by month of the market value of foreign property owned during the year, as well as the gross income during the year. They will also provide a summary which shows maximum book value (cost) and maximum market value during the year.
Tax Tip: If you have foreign property in 2 or more non-registered accounts, the total of all must be used for the $100,000 threshold and for reporting on the T1135.
For 2015 and later taxation years, if the total cost of a taxpayer's specified foreign property is more than $100,000 and less than $250,000 throughout the year, the taxpayer can report these assets to CRA under a new simplified foreign asset reporting system, in Part A of the T1135.
Taxpayers with specified foreign property that has a total cost of $250,000 or more at any time during the year must complete Part B of the T1135. The T1135 filing requirement is based on total Cdn$ cost. In Part B Categories 2 to 6 the maximum cost amount during the year and the cost amount at year-end are reported. In Part B Categories 1 and 7 it is the market value of the foreign property that is reported.
See the T1135 Foreign Income Verification Statement on the CRA website.
Simplified Method of Foreign Asset Reporting - T1135 Part A
This method is Part A of the T1135. It can only be used if the total cost of specified foreign property is less than $250,000 Cdn during the year.
With the simplified method, the taxpayer must indicate on the T1135 form, in Canadian $:
| with a tick mark on the form, the type of property, |
| the top 3 countries (by indicating country code) based on the maximum cost amount of specified foreign property held during the year, |
| total income during the year from all specified foreign property, and |
| the amount of gain or loss from the disposition of all specified foreign property. |
Individuals can file the form electronically. The T1135 for a corporation can also be filed electronically with the tax return.
Note that your brokerage will provide a summary by month of the market value of foreign property owned during the year, but this is only useful for Categories 1 and 7 of Part B of the T1135, which require input of the maximum market value.
The fillable T1135 form will expand if more rows of input are required.
Tracking the Canadian $ Cost of Your Foreign Property
Taxpayers with specified foreign property that has a total adjusted cost base of $250,000 or more at any time during the year must complete Part B of the T1135. The simplified method (see above) can be used when the maximum total cost of specified foreign property at any time during the year is less than $250,000.
The Canadian $ cost is used for categories 1 to 6 of Part B of the T1135. Most investors will be reporting foreign shares and EFTs in categories 2 (shares of non-resident corporations) and 4 (interests in non-resident trusts - for instance, the ETF with ticker symbol SPY is considered a trust).
In order to know whether the Canadian $ cost of your foreign investments exceeds $100,000 at any time in the year, you'll have to keep good records. If your foreign stocks are in a US$ brokerage account, you must keep records of the cost converted to Canadian $ using the US exchange rate from the date of the purchase. You will want to set up a worksheet (electronic or on paper) where you record these purchases using the Canadian $ cost, so that you can see at any date if your cost has exceeded $100,000. If you use a software program such as Quicken to track your stocks, investments held in a US$ account are shown in US$, but you can produce a report that will show the holdings in Canadian $. Make sure you are using Canadian currency for the report, and that "Transaction Exchange Rate" is ticked, in order to get the correct cost in Canadian $. This report should be done each time foreign purchases are made in a non-registered account, to check the total cost.
Your brokerage may provide you a report at year end that you can use for your T1135, but this will not include information needed to track the Cdn$ cost of each US$ investment. See TaxTips.ca Resources below for help on this.
Tax Tips:
Your brokerage may provide a summary at year end with the required market value information for your T1135.
Your US$ brokerage statements will show you the US$ ACB of your investments, but not the Cdn$ ACB. That calculation is your responsibility.
Tracking the Canadian $ Market Value of Your Foreign Investments With a Canadian Registered Securities Dealer
This is an optional method, not required unless you want to report your specified foreign property in category 7 of Part B of the T1135. Instead, you can report the property in categories 1 to 6 of Part B using the maximum cost amount during the year.
Once you're over the $100,000 Canadian $ cost of foreign investments which could be reported in category 7, if you want to report in that category you'll also need to know the maximum market value in Canadian $ during the year for your foreign securities with each securities dealer. As indicated previously, the maximum during the year may be based on the maximum month-end market value. On Form T1135 it indicates that the average exchange rate for the year should be used to calculate the highest market value during the year, and the year end exchange rate should be used for the year end market value. In order to complete the form easily each year, set up a worksheet (electronic or on paper) where you record the month-end market value in US$ during the year. Then at year end, apply the average rate for the year to each of these month-end values to determine the highest market value in Canadian $. For the year end value, use the year end exchange rate, to convert to Canadian $. You can get the average and year-end exchange rate for conversion from either the Bank of Canada or the Pacific Exchange Rate Service.
It is also acceptable to calculate the highest market value during the year by applying the month-end exchange rate to convert to Canadian $, or if your brokerage statements report the market value in Canadian $, to use those amounts. This is noted in the Q&A (question 71) for a webcast on T1135s presented through CPA Canada in November 2014, which is available at no charge to CPA members and non-members. Registration is required to view the webinar and the Q&A.
Tax Tip: Your brokerage may also provide the required market value information for category 7 of Part B of your T1135.
Country of Residence / Country Code for T1135
Sometimes it is not evident what country code should be used for a foreign based trust or corporation. The instructions on the T1135 indicate that it is the country of residence. Logically, this would be the country where the business is based. To quote from Question 83 of the CPA Canada T1135 Questions and Answers re country reporting, "Investments within a Canadian mutual fund are not relevant to Form T1135. The residency of the mutual fund or exchange traded fund itself is the country of the investment". As with American Depositary Receipts, If you are not sure of the country code, your brokerage should hopefully be able to provide this information.
The country of the underlying security issuer can often be found in J.P. Morgan's ADR website, by looking up the ADR using it's ticker symbol or company name.
Once you know the country, you can look it up on the Wolters Kluwer Country Codes list.
American Depositary Receipts (ADRs) Country Code
One of the questions addressed in the above-mentioned T1135 webinar is the country code to use for ADRs, which trade on the US stock exchanges, but represent shares of a non-US corporation. The CRA response was "An ADR should be reported as a security of the underlying non-resident corporation in either category 2 or, if applicable, category 7. Where the residency of the underlying non-resident corporation cannot be determined after exhausting all reasonable efforts, it is acceptable to use "Other" as the country code." The country code should hopefully be able to be provided by your brokerage. If the information is not available from the brokerage, and you are not able to find the information elsewhere, the country code of "other" would be permitted.
TaxTips.ca Resources
Voluntary DisclosuresTable of historical US$ - Cdn$ average and year-end exchange rates
Tax treatment of shares in foreign corporations
Foreign non-business income tax and foreign tax credit
Canada Revenue Agency (CRA) Resources
T1135 Foreign Income Verification StatementT4061 - NR4 - Non-Resident Tax Withholding, Remitting, and Reporting - See Appendix A for country codes to be used on the T1135 for 2014 and later years
Questions and answers about form T1135
Questions and answers about form T1135 - real property
Foreign income verification statement information - who has to report, what to report, normal filing deadline
Interesting Article on Wolters Kluwer website:
Canadian T1135 reporting for part-year residents
Tax Tips:
You are responsible to ensure the T1135 form is filed when necessary - don't assume it is being done for you.
Use the fillable Form T1135 from CRA.
Make sure you track the Canadian $ cost of your foreign investments, preferably in a worksheet where you can see the total cost amount at any time of the year. It's possible for the market value to be under $100,000 and the cost over $100,000.
Revised: October 26, 2023