What do you have to report if you have foreign assets or income?

What do I have to report if I have foreign assets or income?

Under Canada's self-assessment tax system, it is up to you to report and file your taxes on time. This obligation extends to any foreign income you earn and assets you hold. A taxpayer must report and include all income they earned, even from foreign property. If you own more than $100,000 of specified foreign property, you must additionally file a Form T1135 Foreign Income Verification Statement.

It may seem bizarre to disclose foreign assets you own just to pay more taxes to the CRA. However, the CRA has become more aggressive in offshore compliance in recent years, particularly against international tax evasion and tax avoidance. Even if you do not report, the CRA may be able to access the information directly from foreign countries under various tax treaties. Worse still, failure to report foreign assets or income will likely result in substantial gross negligence penalties under subsection 163(2.4) of the Income Tax Act.

Form T1135:

In the first year an individual is a resident of Canada, they do not have to file Form T1135. After that, Form T1135 should be filed at the same time as the regular income tax return.

The $100,000 threshold is based on the original cost amounts of the properties converted into Canadian currency. If you hold a total cost amount between $100,000 and $250,000 CDN, you can report using the simplified method in Part A, ticking off boxes for the type of property you held. If your total property exceeds $250,000 CDN, you will have to complete Part B and provide details of each specified foreign property you own.

Specified Foreign Property:

For the purposes of Form T1135, specified foreign property includes:

foreign bank account funds and investments, such as stocks or government bonds;
real estate, even if it does not produce income; and even
life insurance policies from a foreign insurer.

There are some notable exceptions, including:
foreign property held in a Canadian-based mutual fund;
property held for personal use and enjoyment (at least 50% of the time); and
foreign property in registered plans like RRSPs, RRIFs, and TFSAs.


Voluntary Disclosure Program:

Taxpayers may have a chance to avoid penalties and interest under the CRA's Voluntary Disclosure Program. This is one last chance to come forward before the CRA has caught and assessed you for not reporting foreign assets and income. If you have not disclosed yet, now might be the right time. Contact us today, and we can help you with your application.