In the recent years, every country has been passing stringent laws to monitor foreign investments by their country’s citizens/taxpayers to prevent tax evasion through foreign investments. The Canadian government introduced Form T1135 a few years ago to prevent Canadian taxpayers from evading taxes, and since then, Canada Revenue Agency has been in a continuous process of improving Form T1135 filing.
On the 9th of December, 2015, the Canada Revenue Agency (CRA) released a new version of Form T1135 for reporting of specified foreign property above Canadian $100,000. This new and upgraded form will simply the reporting process for taxpayers who own specified foreign property costing between $100,000 to $250,000.
Here is a brief overview of the updated Form T1135 prepared by AG Tax analysts to update Canadian taxpayers about the changes and reporting required.
Overview of Form T1135, Foreign Income Verification Statement
Form T1135 is a Canadian tax reporting requirement for Canadian taxpayers to report property and income from specified foreign property, such as: foreign bank accounts, interests in certain non-resident trusts, foreign investments like bonds, stocks, mutual funds, real estate, etc. costing more than CAD $100,000.
For the 2015 tax year, the Canada Revenue Agency (CRA) modified Form T1135 to make the reporting more detailed.
(For more information on Form T1135, read: Increased Foreign Property Reporting for Canadians (Form T1135), Form T1135: Foreign Income Verification Statement Turns Out As Detailed As the U.S. FBAR)
Form T1135 From Tax Year 2016 Onwards
The new Form T1135 includes two section: Part A and Part B.
- Part A would be used by Canadian taxpayers to report specified foreign property costing between $100,000 and $250,000. The taxpayer would simply need to check the right box for the type of foreign property, and provide details of the country(ies) of the foreign investment, total income generated from the foreign property, gain or loss incurred from the disposition of any foreign property, and maximum value of the investment during the year, reported in summary.
- Part B is to be used by Canadian taxpayers to report foreign property costing more than CAD $250,000, or those who elect out of Part A. The rest of the information to be reported remains the same, but is reported in detail, as opposed to the summary of part A.
These changes have been brought in to simply the reporting process for taxpayers with less than $250,000 of foreign assets who do not hold their foreign investment assets with a Canadian Registered Securities Dealer. Earlier, these taxpayers needed to report each of the foreign property separately; making it quite a time-consuming process for taxpayers who needed to provide every detail related to the foreign asset, and for tax preparers who spent significant hours trying to get such intricate details from the taxpayers.
Unfortunately for taxpayers with specified foreign assets worth more than $250,000 during the year, there are no special changes and they would need to report their foreign assets as they did in the previous tax years.
That being said, although the reporting of foreign assets has been simplified for certain Canadian taxpayers, there are still various aspects to be improved and worked upon to reduce the preparation cost, and time consumed in these tax reporting requirements. Nonetheless, the new form is definitely a progressive step in the right direction, and one can only expect the CRA to further improve and ease various tax reporting requirements.
AG Tax LLP Can Help
If you have any questions regarding the above law or any other tax-related queries or need assistance with tax planning or filing please call our office. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle even your most complex tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and Corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
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