In June 2013, the Canadian Revenue Agency (CRA) released a new version of the Foreign Income Verification Statement Form (Form T1135). The revised T1135 form is applicable to the year 2013 tax filings and requires Canadians who hold “specified foreign property” at any time in the year valued at over $100,000 to provide additional information to the CRA.
The criteria for those who must file Form T1135 have not changed; however, the new form has been revised to include more detailed information on foreign property and requires more disclosure. This has resulted in the Canada Revenue Agency (CRA) extending the filing deadline this year from April 30th to July 31st.
The biggest misunderstanding people have relates to the term “foreign property” and what is included and excluded. A lot of people do not quite understand what “specified foreign property” is and think that it is only real estate, which is only one category. In the midst of this confusion, an accountant is invaluable in providing guidance in complex areas such as these.
The types of property that must be reported on the T1135 include, but are not limited to:
• Funds held in foreign bank accounts outside of Canada. This includes (a) money in foreign bank accounts, and (b) prepaid debit or credit cards and negotiable instruments such as cheques and drafts.
• Shares of non-resident corporations should be reported, regardless of whether the shares are physically held inside Canada or outside Canada, as well as options and warrants to acquire US shares.
• Indebtedness owed by non-residents includes things like promissory notes, bills, bonds, etc. US treasury bills would also fall under this category.
• Real property situated outside of Canada. Real property would include rental properties and vacant land, but would not include vacation property used primarily as a personal residence.
• Other foreign property could include intangible foreign property such as patents and copyrights, interest in a foreign insurance policy, futures contracts held outside of Canada, etc.
Things that do not constitute specified foreign property include:
• A USD or other foreign currency bank account that is held in a Canadian bank.
• Units of a Canadian mutual fund trust regardless of whether or not the mutual fund itself invests in foreign property.
• Specified foreign property that is held in registered plans (i.e. RRSP, TFSA, RRIF, etc.)
• Property that is mainly held for personal use or enjoyment such as a vehicle, vacation property, jewelry and artwork.
These changes to the reporting of specified foreign property will affect a large number of individual taxpayers and the filing of their 2013 tax returns. Many individuals who prepare their own income tax returns are likely to be unaware of the new requirements and/or the penalties for not complying. The deadline to file Form T1135 has been extended to July 31, 2014 for all taxpayers.
Quon and Associates can assist you in completing and submitting your 2013 Form T1135. Call us or visit our website for more information. 403-250-5111.