There are a lot of people who consider themselves the average tax payer, that have the luxury of filing just a basic tax return. At the same time several of these individuals own property outside of Canada, as a second home perhaps, or maybe as an investment to help pad their nest egg when they reach their senior years. So many say because this is property outside of Canada it really is not Canada’s business. Those that reiterate this are very wrong, at least according to the CRA.
What you have to determine is the value of your foreign property investment. This is on an adjusted cost base and not fair market value. If the answer is that it’s over $100,000 Canadian at any time during the taxation year then you are responsible for filling out the T1135 form. This is not something that you can use the excuse that you forgot about as the question regarding foreign investment property is right on your tax form. The reporting of this if it’s over the $100,000. is mandatory for both personal tax filers as well as business filers.
Also be aware that this is not just referencing real estate property but includes stocks and cash, or U.S. bank accounts. It also encompasses a home that you perhaps still own in another country, or an overseas inheritance. You also have to take a close look at shares in a non-resident corporation if they were over 10% as you may need to file for these as well.
Don’t take this responsibility lightly:
Don’t assume that the CRA is not going to detect your foreign investment. The penalties that can occur because of not filing properly concerning this area of the tax law are very substantial. You could end up paying a penalty up to $2,500, for each year that you were required to file the form and you didn’t. This is not a new tax law, it has been in existence since 1998. If you are in a position where you need to come clean about your foreign investment but are now afraid to do so then make use of the Voluntary Disclosure Program, and you may want to do this with the assistance of your accountant.
You may want to check out our T1135 educational video for more information. The best advice is to not ignore your foreign investments. Make sure that you have addressed them properly in regards to your tax obligations. You would do well to utilize the services of a quality and experienced accountant to assist you with this.