A Form T1135 Primer – How to complete and file Form T1135

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Possible Updates!! Note that this was written in July of 2019. You should use this as a guide but make sure to work with the current rules (they have likely changed).

This is the third post in my series of posts about Canada’s Foreign Asset reporting requirements. The first post described the range of Foreign Asset reporting requirements. The second post discussed the conditions which trigger the requirement to file Form T1135. This third post focuses on how to complete and file Form T1135.

For many individuals, the threshold question of WHETHER you are required to file Form T1135 will be more difficult than HOW to file Form T1135.

This post ASSUMES that you have met the reporting threshold and focuses on:

1. A review of whether Form T1135 is required

2. What information is required to be reported on the T1135

3. How to complete Form T1135

4. Where/how to file Form T1135

Form T1135 is available on the Canada Revenue Agency site here.

I have also uploaded the form.

t1135-17e

You should print the form and have it available while you read this post. Form T1135 has broken the different categories of assets into seven different categories of foreign property.

Here we go …


1. A review of whether Form T1135 Is Required

The first step is to identify foreign property that is NOT “specified foreign property”. This means (at a minimum) that you would exclude: Personal use property, property that is used to carry on a trade or business and foreign property held in Canadian mutual funds, RRSPs and TFSAs. (Please be very careful to ensure that excluded property meets the exclusion criteria!

The second step is to identify your specified foreign property. (In general this would be all foreign property less statutory exclusions.)

The third step is (by referencing the cost base of your specified foreign property) to determine whether the aggregate of your specified foreign property has a cost base of $100,000 or more. (In determining cost base, you should use the exchange rate in effect on the day the property was purchased.) If the cost basis of your foreign property is $100,000.00 CDN or more, you are required to file From T1135.

The fourth step (assuming the cost base is $100,000 or more is to determine whether the cost base is less than $250,000. If the cost base is less than $250,000 you are entitled to (but not required) use the simplified reporting in Part A of Form T1135.

The fifth step is the actual completion of Form T1135.

2. What information is required to be reported on the T1135

Let’s begin by reading Form T1135 as developed by the Canada Revenue Agency. According to the Canada Revenue Agency, Form T1135 specifically requires (this should not be understood to be an exclusive list):

What property do you have to report?
You are required to report all specified foreign property in accordance with subsection 233.3(1) of the Act which includes:

• funds or intangible property (patents, copyrights, etc.) situated, deposited or held outside Canada;
• tangible property situated outside of Canada;
• a share of the capital stock of a non-resident corporation held by the taxpayer or by an agent on behalf of the taxpayer;
• an interest in a non-resident trust that was acquired for consideration, other than an interest in a non-resident trust that is a foreign affiliate for the purposes of section 233.4 of the Act;
• shares of corporations resident in Canada held by you or for you outside Canada;
• an interest in a partnership that holds a specified foreign property unless the partnership is required to file Form T1135;
• an interest in, or right with respect to, an entity that is a non-resident;
• a property that is convertible into, exchangeable for, or confers a right to acquire a property that is specified foreign property;
• a debt owed by a non-resident, including government and corporate bonds, debentures, mortgages, and notes receivable;
• an interest in a foreign insurance policy; and
• precious metals, gold certificates, and futures contracts held outside Canada.

Each of the above will fit into one of the seven categories described in the “Detailed Reporting Method” on Form T1135. Once you place the asset into the appropriate category, you will understand what to do with it. Different information (highest balance, year end balance, cost, etc.) is required for each of the Seven categories of property.

Those who own specified foreign property with an aggregate cost basis of less than $250,000 are entitled to use a simplified reporting method. For the purposes of this post I will assume that your cost in specified foreign property is $250,000 or more. This means that we are required to use the “Detailed reporting method”. The required information depends on the kind/category of asset (because different kinds of assets have different tax consequences).

Note that those with aggregate costs less than $250,000 are entitled to (but not required) to use the more complex reporting method.)

The information required by Form T1135 may be categorized as follows:

Always required

Income generated: In all cases the form requires that the gross income (not taxable income) from the asset class be disclosed. For example, you must disclose the full amount of the capital gain even though only 50% of the gain is taxable.

Sometimes Required

Maximum value in year and/or value at end of the year: This is required with respect to Category 7 (property held a Canadian securities account) and Category 1 (cash held in foreign banks). In determining these values please note that: On Form T1135 it indicates that the average exchange rate for the year should be used to calculate the highest market value during the year, and the year end exchange rate should be used for the year end market value.

Maximum cost amount during year and/or at year end: This is required in Categories 2 to 6.

Note that there is a difference between “cost” and “value”!

A special rule for Property held in an account with a Canadian registered securities dealer or a Canadian trust company

This (generally) would refer to foreign stocks held in a Canadian brokerage account. A Canadian resident would receive a T3 or T5 reporting the income (which would also be received by the Canada Revenue Agency). Hence, one wonders:

1. Why should there be a requirement to report this property at all?

2. Assuming the property is required to be reported, shouldn’t there be some sort of simpler way to report the account?

Ask, and you will receive (sometimes). Here is what the instructions to Form T1135 say:

7. Property held in an account with a Canadian registered securities dealer or a Canadian trust company
A taxpayer who held specified foreign property with a Canadian registered securities dealer (as defined in subsection 248(1) of the Act) or with a Canadian trust company (as determined under paragraph (b) of the definition of restricted financial institution in subsection 248(1) of the Act) is permitted to report the aggregate amount of all such property in this category.

The table for this category should be completed as follows:
• all of the property held with a particular securities dealer or trust company should be aggregated on a country-by-country basis;
• it is also acceptable to provide aggregate totals for each particular account on a country-by-country basis;
• refer to the “country code” instructions above to determine the appropriate country for each property; and
• the maximum fair market value during the year may be based on the maximum month-end fair market value.

3. How to complete Form T1135

After having placed each piece of “specified foreign property” in each of the seven categories you need to follow the reporting rules specific to that category.

4. Where/how to file Form T1135
As of the date of this post, the instructions for how to file Form T1135 are found on the form itself and direct that:

Filing by internet (EFILE or NETFILE)

Individuals and corporations can file Form T1135 electronically. Individuals can file Form T1135 electronically (Efile or Netfile) for the 2014 and subsequent taxation years.

Corporations can Efile Form T1135 electronically for the 2014 and subsequent taxation years. Trusts and partnerships are required to file a paper copy of this form.

• EFILE – Your EFILE service provider, including a discounter, can complete and file your Form T1135 for you if prepared with tax preparation software certified by the CRA for the internet filing of Form T1135. For more information or to file your Form T1135, go to EFILE at canada.ca/efile.

• NETFILE – You can file your Form T1135 by Internet if prepared with tax preparation software certified by the CRA for the internet filing of Form T1135. Most individuals are eligible to NETFILE. For more information or to file your Form T1135, go to NETFILE at canada.ca/netfile. Form T1135 can be attached to your income tax return, or partnership information return, and mailed to your tax centre. Alternately, Form T1135 can be mailed separately to the following address:

Winnipeg Taxation Centre
Data Assessment & Evaluation Programs
Validation & Verification Section
Foreign Reporting Returns
66 Stapon Road
Winnipeg MB R3C 3M2

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John Richardson – Follow me on Twitter @Expatriationlaw

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