New reporting requirements for filing CRA Form T1135
On June 25, 2013, the Canada Revenue Agency (CRA) announced the launch of a new version of the Foreign Income Verification Statement (Form T1135) as a result, in particular, of the measures provided for in Economic Action Plan 2013 to crack down on international tax evasion and aggressive tax avoidance. The federal budget tabled on March 21, 2013 also included a number of measures to combat tax evasion in order to return to fiscal balance, among other things. The amendment of Form T1135 is in line with these objectives.
Starting in the 2013 taxation year, Canadian residents who hold foreign property with a cost of over $100,000 will be required to provide additional information to the CRA. The criteria for those who must file a Form T1135 have not changed. However, the form has been revised so that more detailed information on foreign property can be included.
The new reporting requirements relate to the following:
- the name of the foreign bank or entity holding the funds;
- the country where the property is located;
- the income received from the foreign property.
Revised Form T1135 must be used for taxation years ended after June 30, 2013, and the old Form T1135 will still be accepted for taxation years that ended prior to July 1, 2013.
Who is subject to the requirements?
Individuals, corporations and trusts residing in Canada that, at any time in the year, held specified foreign investment property (“SFIP”) for which the cost indicated is over $100,000 must file a Form T1135.
Partnerships that hold SFIPs outside Canada and for which the share of the partnership’s income or losses attributable to non-resident members for the year is less than 90% are also subject to these measures.
Which property is subject to the requirements?
SFIPs subject to the requirements include foreign bank accounts, shares in foreign corporations, bonds issued by a government or a company outside the country and land or buildings located outside Canada. However, Canadians are not required to report property held for personal use (for example a vacation property that does not generate any rental income or works of art not held for resale), nor property used or held exclusively in carrying on an active business is also not required.
When is the filing deadline?
The filing deadline is the same as the deadline for filing an income tax return. However, the new Form T1135 cannot be electronically filed for the time being. A paper copy of the form must be mailed to the Ottawa Technology Centre.
What are the penalties if I fail to comply with the regulation?
The penalty for failing to file a return is $25 a day for up to 100 days (minimum $100 and maximum $2,500). Additional penalties apply when the failure to file is done knowingly or under circumstances amounting to gross negligence, when there is failure to comply with a demand to file, and when a taxpayer makes false statements on the form.
Alexandre Bouffard, CPA, CGA
Member of the Order’s Technical Working Group on Taxation and Commodity Taxes