Foreign Assets Reporting – Have You Reported Your Foreign Assets?

Foreign Assets Reporting

Tax season is upon us once again, and despite the pandemic and lockdowns, it is your duty to voluntarily assess, report, and file your taxes on time. This requirement extends not just to your assets and income in Canada, but also overseas.

Foreign Assets reporting is necessary to ensure:

1. Increased awareness of, and compliance with, tax laws regarding income from foreign-sources
2. To provide a more accurate picture to CRA of all assets and income sources from overseas
3. Target international tax evasion and avoidance

In recent years, the CRA has become extremely aggressive in pursuing offshore compliance, with heavy penalties and punishments for not reporting, due to tax treaties with many countries globally – this may result in your assets being reported to CRA and lead to negligence penalties under the Income Tax Act.

 

Who Needs to Report & File?

Reporting of Foreign Assets is done through the Foreign Income Verification Statement (Form T1135), and must be filed by all of the following if they, at any time during the year, own specified foreign property costing more than CAD100,000* :

• Canadian resident individuals,
• Corporations
• Certain trusts and partnerships

* Subsection 248(1) of the Income Tax Act defines the property value to be the adjusted cost base and not fair market value.

 

What Constitutes Foreign Property?

Under subsection 233.3(1) of the Income Tax Act, the specified foreign property includes:

1. Funds (bank accounts or investments) situated, deposited, or held outside Canada
2. Tangible property situated outside Canada
3. Patents, Copyrights, Intellectual Property(or other intangible property) situated, deposited or held outside Canada
4. Shares of stock of a non-resident corporation
5. Shares of corporations that are resident in Canada, but the shares are held outside Canada
6. An interest in a non-resident trust that was acquired for consideration
7. Precious metals, gold certificates, and futures contracts held outside Canada
8. An interest in a partnership that holds a specified foreign property unless the partnership is required to file Form T1135
9. A property that is convertible into, exchangeable for, or confers a right to acquire a property that is specified foreign property
10. A debt owed by a non-resident, including government and corporate bonds, debentures, mortgages, and notes receivable
11. An interest in a foreign insurance policy

As per the CRA, the specified foreign property does not include:

1. Amy property used or held exclusively in carrying on an active business
2. Any personal-use property as defined in section 54
3. Share of stock or debt owned of a foreign affiliate
4. Foreign property in registered plans like (Registered Retirement Savings Plan) RRSPs, (Registered Retirement Income Fund) RRIFs, and (Tax-Free Savings Account) TFSAs.
5. Any interest in a trust described in paragraph (a) or (b) of the definition of exempt trust in subsection 233.2(1) of the Income Tax Act
6. An interest in, or a right to acquire, any of the above-noted excluded foreign property

 

How to File Form T1135

Individuals can file Form T1135 electronically (through EFILE or NETFILE) for the 2015 tax period and later tax years.

Corporations can file Form T1135 electronically (through EFILE) for the 2014 tax period and later tax years.

Partnerships can file Form T1135 electronically (through EFILE or NETFILE) for the 2017 tax period and later tax years.

Once the form is filed, you will receive a confirmation number at once to tell you that the Canada Revenue Agency (CRA) has received form T1135. For your records, you should save the confirmation number.

Currently, the electronic filing of Form T1135 is not available to trusts.

It is imperative to note that the T1135 form has to be filed separately and not with the regular annual income tax return.

Filing deadlines for the 2020 Tax Year

Category	Filing Date	Tax Payment Date
Individuals	April 30th, 2021	April 30th, 2021
Self Employed Individuals (and their cohabiting spouse or common-law partner)	June 15th, 2021	April 30th, 2021
Corporations	06 months after the end of the corporation tax year	Generally, corporations pay their taxes in installments
Trusts	90 days after the end of the tax year	90 days after the end of the tax year
Charities	06 months after each tax year	Not Applicable

Form T1135 Deadlines

1. Individuals, Corporations and Trusts – Form T1135 is due on the same date as an income tax return.
2. Partnerships – Under Section 229 of the Income Tax Regulations, Form T1135 is due on the same date as the Partnership Information Return (or what would be the due date for this return if the partnership had to file one).

Individuals or Self Employed Individuals should file their taxes on time in order to receive the benefits, refunds, or credit payments they may be entitled to receive from CRA.

For any individuals (employed or self-employed) that are deceased, the CRA has specific guidelines and grants of extensions for reporting and filing taxes (as a humane gesture to the family of the deceased).

For any of the above situations, we at Taxvisors are here to help and guide you in every way we can, so that your tax reporting is expertly managed and submitted on time.

We have been providing complete personal/corporate tax, bookkeeping, and accounting services to Mississauga and The Greater Toronto Area for over 20 years – and can deal with Canada Revenue Agency (CRA) to provide resolution for Tax Reporting, Filing, Reviews, Compliance Checks, and Audits & Appeals.