In 2013, the CRA announced the launch of a strengthened Foreign Income Verification Statement (Form T1135), one of the Economic Action Plan 2013 measures to better target international tax evasion and aggressive tax avoidance.
Starting with the 2013 taxation year, Canadian taxpayers who hold specified foreign property with a cost amount of over $100,000 in total, at any time in the taxation year, are required to provide additional information to the Canada Revenue Agency (CRA). The criteria for those who must file Form T1135 have not changed; however, the new Form has been revised to include more detailed information on foreign property.
Taxpayers must provide the following additional information:
- whether the form is an amended return;
- whether the taxpayer or the taxpayer’s spouse (or both) are self-employed;
- where the form is prepared by a partnership, the nature of the partners (individuals, trusts, or corporations) must be disclosed;
- whether foreign income received by the taxpayer is reported on a T3 or T5 from a Canadian issuer in respect of a specified foreign property;
- the name of the bank or other entity holding funds outside of Canada;
- if foreign shares are held by the taxpayer, the name of the corporation issuing the shares;
- a description of any indebtedness owed to the taxpayer by a non-resident;
- the name of any non-resident trust in which the taxpayer holds an interest;
- a description of all real property outside of Canada (except for personal use property and real estate used in an active business); and
- a description of all other property held outside of Canada.
In addition, taxpayers subject to the reporting requirement must identify the country code that is applicable for each specified foreign property, the maximum and year-end cost amounts of the property, the income or loss, and capital gain realized from each property during the taxation year. The web-based fillable form contains tables that are expandable based on the number of properties to be reported for the taxation year.
Revised Form T1135 excludes certain property from the detailed reporting requirement. The reporting exclusion provides that where the taxpayer has received a T3 or T5 from a Canadian issuer in respect of a particular specified foreign property, the details of that particular specified foreign property do not have to be disclosed in one of the tables on Form T1135. Whether the reporting exclusion applies must be determined for each specified foreign property and for each taxation year during which the property was held. For example, if there are numerous properties held in one investment account, only those properties for which a T3 or T5 was issued for a particular taxation year would be subject to the reporting exclusion in that particular year.
A specific property may be subject to the reporting exclusion in one year and not in another year depending on whether it earned income for which a T3 or T5 was issued.
The taxpayer is still required to file Form T1135 by the filing due date even if a T3 or T5 was issued in respect of all specified foreign property held during the taxation year. In this case, the taxpayer would complete the identification information and check the reporting exclusion box on Form T1135. The reporting exclusion is administrative and is not contained in the applicable provisions of the Income Tax Act.
The Revised Form T1135 applies to 2013 and subsequent taxation years. The new Form was released on June 25, 2013 and applies to taxation years ending after June 30, 2013. Form T1135 must be filed with the CRA on or before the filing due date of the related tax return in the case of a T1, T2 or T3 return, or the filing due date of the T5013 Partnership Information Return in the case of a partnership. The old Form T1135 will still be accepted for taxation years that ended prior to July 1, 2013.
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