Form T1135: Foreign Property Reporting for Canadian Taxpayers

Canadian taxpayers with foreign investments are subject to a complex but essential filing requirement known as Form T1135 – Foreign Income Verification Statement. In this article, we’ll walk through the purpose of the form, who needs to file it, what must be reported, and how one taxpayer—Desmond Smith—navigated his 2023 filing. If you’re an investor with foreign holdings, this guide will help ensure you remain fully compliant with the Canada Revenue Agency (CRA).

Introduction

Foreign investments can be a great way to diversify your portfolio, but they also come with a legal obligation to disclose your holdings to the CRA. This is where Form T1135 comes in. In 2023, Jones Leeson held over CAD $7.5 million in U.S. stocks and options. His case provides a valuable blueprint for how to report complex holdings and avoid costly penalties.

What is Form T1135 – Foreign Income Verification Statement?

Form T1135 is used by Canadian residents to report their specified foreign property when the total cost amount exceeds $100,000 CAD at any time during the year. It helps the CRA track offshore investments and ensures that foreign-generated income is being properly taxed in Canada.

The form is mandatory, and the penalties for failing to file or for filing incorrectly can be severe. It’s not about how much your investments are worth today, but how much you paid for them initially.

Who Needs to File Form T1135?

If you’re a Canadian resident (individual, corporation, or trust) and at any point during the year the total cost of your specified foreign property exceeds CAD $100,000, you must file Form T1135. This includes properties held outside Canada or even foreign stocks held through Canadian brokerage accounts.

Examples of individuals who must file:

• Investors in U.S. or overseas stocks.
• Holders of offshore bank accounts.
• Participants in foreign partnerships or trusts.

Types of Property That Must Be Reported

You need to report the following types of specified foreign property:

• Funds or bank deposits located outside Canada.
• Public company shares (e.g., U.S. stocks, ADRs).
• Real estate (excluding personal use or property used solely in an active business).
• Foreign partnerships, trusts, and interest-bearing debts owed by non-residents.
• Options and derivatives linked to foreign markets.

Note: Properties in registered plans (RRSP, TFSA) are exempt from T1135 reporting.

Real-World Example: Jones Leeson’s 2023 T1135 Report

Jones Leeson is a Canadian taxpayer who held substantial U.S.-based assets in 2023. Using Interactive Brokers Canada, his investments included a wide variety of stocks and options across major U.S. companies.

Here’s a breakdown of his holdings:

Companies reported included ADP, AMZN, BABA, DIS, PEP, PYPL, and many more. Due to the total foreign property cost exceeding $250,000, Jones was required to use the Detailed Reporting Method.

Simplified vs. Detailed Reporting Methods

Depending on your total foreign property cost, the CRA allows two reporting options:

1. Simplified Method

• Used when foreign property is $100,000–$250,000.
• Summarized by type and country.

2. Detailed Method

• Required if the total cost exceeds $250,000.
• Each property must be listed separately, along with details like:
  • Max cost during the year
  • Year-end cost
  • Max market value
  • Year-end market value
  • Income earned
  • Gains or losses

Jones, due to his investment size, reported each option and stock separately.

Step-by-Step Guide to Filing T1135

If you’re ready to report your foreign property, follow these steps:

1. Collect all documentation from financial institutions (brokerages, banks).
2. Assess the cost amount of each property and total them.
3. Determine your reporting method based on the $250,000 threshold.
4. Fill out Form T1135 accordingly.
5. Include all required information, especially if using the detailed method.
6. Submit the form electronically via CRA’s MyAccount or NETFILE-certified tax software.
7. Keep backup documentation in case of an audit.

Filing Deadline:

• April 30 (for individuals)
• June 15 (if self-employed)

Common Mistakes to Avoid

Many taxpayers unknowingly make errors when completing their T1135. Watch out for the following:

• Omitting foreign stocks held through Canadian brokerages.
• Underreporting the cost amount instead of current market value.
• Failing to report foreign income or taxes paid.
• Missing the deadline, which triggers automatic penalties.

Penalties for Not Filing T1135

The CRA imposes harsh penalties, including:

• $25/day up to $2,500 for late filing.
• Gross negligence penalties can reach $12,000 or more.
• Possible audit triggers for incorrect or omitted entries.

Why Accurate Reporting is Crucial

Form T1135 is about transparency and compliance. The CRA collaborates with international financial institutions, so unreported accounts or investments may still surface during audits. Filing accurately:

• Protects you from penalties.
• Ensures peace of mind.
• Helps maintain financial clarity, especially for global investors.

How BOMCAS Canada Can Help

At BOMCAS Canada, our team of accountants and tax advisors has deep expertise in cross-border tax compliance, investment reporting, and Form T1135 filings. We ensure your report is complete, accurate, and audit-ready.

Contact us today:
📞 780-667-5250
📧 info@bomcas.ca
🌐 Visit our website

We handle everything from preparing your T1135 to advising on tax strategies for your U.S. or global investments.

Final Tips for Investors

• Always track cost base and acquisition date for each foreign property.
• Don’t rely solely on brokerage market values—cost value is what counts.
• Ensure foreign income is reported on both your T1 return and T1135.
• Keep detailed records for at least six years.
• Seek help from professionals for complex portfolios or U.S. holdings.