Jan 19, 2022
As we advised in Tax Tip 20-04 , significant additional disclosure and filing requirements for trusts were announced in the 2018 Federal Budget and are scheduled to apply for trust’s 2021 and subsequent tax years.
“The level of detail required has been vastly expanded.”
In a press release dated June 25, 2013, the Canada Revenue Agency (“CRA”) released an expanded Foreign Income Verification Statement (“T1135”) in an effort to deter international tax evasion and aggressive tax avoidance as announced in the 2013 Federal Budget.
Click here to download the new expanded version of Form T1135 from the CRA website.
The determination of who must file the T1135 has not changed from the previous version that was discussed in Tax Tip 10-05. The form must still be filed by taxpayers who held at anytime in the taxation year Specified Foreign Property with a total cost of more than CAN $100,000. Specified Foreign Property includes funds held outside Canada, shares of non-resident corporations (including those held in Canadian brokerage accounts), debts owed by non-residents (such as bonds issued by non-resident corporations and governments), interests in non-resident trusts, real property outside of Canada and other property outside Canada.
There continue to be specific exclusions from the requirements to file a T1135. A welcome addition to the specific exclusions is the exception where a taxpayer has been issued T3 or a T5 by a Canadian issuer in respect of specified foreign property. This foreign property is excluded from the detailed reporting requirements on the form but the taxpayer must still indicate that the property exists by “ticking” the appropriate box.
Where the taxpayer is required to file the T1135, the level of detail required has been vastly expanded. The T1135 will require a taxpayer to include details with respect to each Specified Foreign Property owned including the country where the investment is located, maximum cost amount held during the year, and income received and any gains or losses realized from the investment during the year.
This new level of detail will undoubtedly cause a significant increase in the amount of time and effort required to compile such information. It is recommended that taxpayers who are required to submit a Form T1135 begin preparing for the new requirements as soon as possible.
The 2013 Federal Budget proposes to extend the normal reassessment period by three years, for any taxation year where a taxpayer has failed to report income from a foreign property on their income tax return and a Form T1135 is either not filed, was filed late, or filed with inaccurate or incomplete information concerning a foreign property, While this proposal has not yet been passed by Parliament, it is expected to be approved later this year. When the new expanded information requirements are considered in conjunction with the Budget change the implications of non-compliance with become even more severe.
The T1135 must be filed by the due date for the taxpayer’s income tax return for the year. The new reporting requirements apply to 2013 and later taxation years, including corporate taxpayers with taxation years ending at any point in 2013.
If you have any questions regarding the expanded foreign reporting requirements and Form T1135 please contact your TSG representative.
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The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.
TAX TIP is provided as a free service to clients and friends of Cadesky Tax.
The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.