InnovativeBusinessClub.com

Building your business, as easy as I B C

Foreign Assets

 

Home
News
Why Join?
Member Services
Resources
Broker Forms
Site Contents

Hit Counter

 

BDO Fast Facts
February 1999
Release No.99-03

Reporting Foreign Assets - Does Form T1135 Apply To You?

Do you have investments assets located outside of Canada? If the answer is yes, you may have to file a new form with Revenue Canada. And it's important to comply - the penalties for not reporting your foreign investments to the government are severe.

You may have heard of this new reporting requirement (FormT1135) before. And if you've looked at the 1998 personal tax return, you will have noticed that the government specifically asks you if you have foreign investment assets. The requirement to file Form T1135 was initially announced in the 1995 Federal budget and was to have applied to all taxation years beginning after 1995. However, due to pressure from Canadian taxpayers, the reporting requirement was delayed until the Auditor General could review it and determine whether this type of reporting was appropriate. Last June, the Auditor General endorsed Form T1135 - Revenue Canada announced shortly after, that the reporting requirements would go ahead, but with a simplified version of the original form. Recently Form T1135 was finally released by the Department. For individuals, Form T1135 must be filed for the first time for 1998.

Who Has To File Form T1135?

If you own certain foreign property, the total cost of which exceeds $100,000 (Canadian funds) at any time during the year, you will be required to file Form T1135. Note that it is the cost of your foreign assets that is relevant in determining whether you have to file and not their fair market value. You don't have to file Form T1135 for the first year that you are a resident of Canada.

Individuals aren't the only ones affected. Corporations, trusts and partnership potentially have to file this form as well, for taxation years beginning after 1997.

What Is A Foreign Investment Asset?

Our tax rules define what a foreign investment asset is for purposes of determining whether you have to file Form T1135. A couple of points you should note first. Foreign property does NOT include assets held in your RRSP or other pension plans - these assets do not have to be reported. It also doesn't include business assets or personal-use property, such as a Florida condominium. However, it does include, but is not limited to, the following:

bullet

Foreign bank accounts;

bullet

Shares and debt of foreign corporations, even if they are held in a Canadian brokerage account (note that shares and debt of a foreign affiliate, which is a company in which you have a significant interest, are not included on Form T1135 - however, there is a separate filing requirement for these assets);

bullet

Debt of foreign governments such as US treasury bills;

bullet

Foreign rental properties (this could include a foreign vacation property that you rented for part of the year);

bullet

Loans receivable from non-residents of Canada (including loans made to family members).

What Has To Be Included on Form T1135?

Form T1135 is in a check-the-box format. Basically you have to check a box, indicating the type of foreign asset that you own, where they are located and their approximate cost (by indicating the range in which the cost falls). You also have to report the income that you've earned from these assets and reported on our Canadian tax return.

When Is Form T1135 Due?

For individuals, the filing deadline for Form T1135 is the same as the due date for their personal tax return. Therefore, for 1998, Form T1135 must be filed by either April 30, 1999 or June 15, 1999 (the filing deadline for individuals reporting business income). Corporation, trusts and partnerships will have to file the form by their normal filing deadlines.

Penalties

If you don't file Form T1135 on time, the consequences are severe. You may be charged a penalty of $500 per month, up to $12,000. If you still haven't filed 24 months after the deadline, you can be charged 5% of the cost of the assets that should have been reported. less the $12,000. However, for the next couple of years, Revenue Canada will not impose the 5% penalty. If your failure to file is inadvertent, a lesser penalty will apply.

As you can see, the government is very serious about ensuring that Canadians comply with these new reporting requirements.

Other Reporting Requirements

The government also has a separate form which must be filed if you own shares in a foreign affiliate (a non-resident company in which you have a significant interest). In addition, there are reporting requirements if you have transferred or loaned property to, or received a distribution from, an offshore trust. These requirements have been in existence for all taxation years beginning after 1995.

 
Send mail to  ibcmail@rogers.com with questions or comments about this web site.
Copyright © 2003 Innovative Business Club
Last modified: June 08, 2006