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Canadian Tax Filers: Report Your Foreign Property Annually—Or Else

Cardinal Point Wealth Management & Cardinal Point Capital Management


Canadian Tax Filers: Report Your Foreign Property Annually—Or Else A lot has been made of the IRS’ onerous foreign-account and property-reporting requirements, and understandably so. But largely overshadowed by that discussion is a similar requirement that the CRA has in icted on Canadian tax lers. As part of its efforts to address tax noncompliance involving foreign property, CRA, in 2013, introduced a revised Form T1135 Foreign Income Veri cation Statement. Form T1135 now requires signi cantly more detailed information regarding foreign property owned by Canadian residents.

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Canadian Tax Filers: Report Your Foreign Property Annually—Or Else What’s more, the form must be led by the taxpayer’s  income tax return due date (generally April 30), and no extension is available. Taxpayers who fail to comply with the ling requirements face stiff penalties—up to $2,500 for late ling. Form T1135 is similar to the U.S. Form 8938, Statement of Speci ed Foreign Financial Assets. To assist our clients, we’ve put together the following Q&A summary about the T1135: Q: Who is required to le Form T1135?A: Any Canadian resident who, at any time during the year, owned speci ed foreign property with a total cost in excess of $100,000 is required to le Form T1135 for that taxation year. Individuals who immigrate to Canada are not required to le Form T1135 in the taxation year in which they rst become Canadian tax residents (unless they were previously Canadian tax residents). However, Form T1135 must be led for all subsequent taxation years, including a taxpayer’s year of departure from Canada. In addition to Canadian individual residents, Form T1135 must also be led by corporations and trusts resident in Canada.

Cardinal Point Wealth Management & Cardinal Point Capital Management


Canadian Tax Filers: Report Your Foreign Property Annually—Or Else

Q: What is speci ed foreign property? A: The de nition of speci ed foreign property is quite broad. It includes most  non-Canadian assets, such as funds held outside of Canada, shares in non-Canadian corporations, indebtedness owed by a nonresident, an interest in a nonresident trust that was acquired for consideration, as well as real property situated outside of Canada. Speci ed foreign property excludes personal-use property, such as a vacation home.

Cardinal Point Wealth Management & Cardinal Point Capital Management


Canadian Tax Filers: Report Your Foreign Property Annually—Or Else

Speci ed foreign property also includes most non-Canadian investments (i.e. U.S.-traded securities) held in Canadian non-registered brokerage accounts. Thus, in certain cases, taxpayers whose assets are all physically located in Canada may still be required to le Form T1135. Q: What is new about the revised Form T1135?A: It requires lers to disclose signi cantly more information regarding foreign assets. For each foreign asset, the revised form requires the following information to be disclosed on a perasset basis:

Cardinal Point Wealth Management & Cardinal Point Capital Management


Canadian Tax Filers: Report Your Foreign Property Annually—Or Else ame of the foreign entity holding the funds, name of the foreign N corporation or foreign trust, or description of the foreign property;  Country where the foreign asset is located;  Maximum cost of the foreign asset during the year;  Cost of the foreign asset at year-end;  Amount of income (or loss) related to the foreign asset; and  Amount of any capital gain (or loss) realized on the disposition of the foreign asset. Q: Does the revised Form T1135 provides any reporting exemptions?A: Yes, an exemption is available for reporting speci ed foreign property for taxpayers who have received Canadian tax slips related to such foreign property (e.g., a T3 or T5 slip). In these instances, no additional disclosure related to such foreign assets is required. However, while this relief may exclude speci c reporting for foreign assets held in a Canadian brokerage account for which income has been reported on a T3 or T5 slip, it would not exclude foreign securities held in the same Canadian brokerage account for which there was no income to be reported on a T3 or T5 slip. In addition, each stock or bond held in a foreign investment portfolio is required to be reported separately on Form T1135. This will require taxpayers to compile a signi cant amount of additional information. Q: How is Form T1135 led?A: Taxpayers should begin collecting the necessary information to complete the T1135 early in the new year, rather than waiting until April 30, when the form is due. Form T1135 currently cannot be led electronically. Taxpayers who electronically le their income tax returns should forward a signed copy of Form T1135 to the CRA by the due date.

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Canadian Tax Filers: Report Your Foreign Property Annually—Or Else Need Help Managing Your Cross-Border Lifestyle? Whether you are transitioning residency between Canada and the U.S. or you have already made the move but continue to hold investment assets or nancial interests in both countries, a cross-border nancial plan will assist in reducing taxes and maximizing your estate. Receive further insight with our free white paper, "Manage your Canadian and U.S. Cross-Border Lifestyle." Click to download below. Click to Download

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Cardinal Point Wealth Management & Cardinal Point Capital Management


Canadian Tax Filers: Report Your Foreign Property Annually—Or Else "Cardinal Point" is the brand under which the dedicated professionals within the independent Cardinal Point Group of Companies collaborate to provide nancial and investment advisory, risk management, nancial planning and tax services to selected clients. Cardinal Point comprises two legally separate companies: Cardinal Point Wealth Management, LLC, a U.S. registered investment advisor and Cardinal Point Capital Management Inc., a U.S. registered investment advisor and a registered portfolio manager in Canada. Advisory services are only offered to clients or prospective clients where the independent Cardinal Point rms and its representatives are properly licensed or exempt from licensure. Each rm enters into client engagements independently. This eBook/white paper is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Tags: cross border wealth management, cross border nancial planning, canadians living in U.S., canadians living in america, canada us nancial planning, canada us tax planning

Cardinal Point Wealth Management & Cardinal Point Capital Management

Canadian Tax Filers: Report Your Foreign Property Annually—Or Else  

We help Canadian and American Expats, Temporary Guests and Snowbirds with assets on both sides of the U.S.-Canada border — optimally structu...

Canadian Tax Filers: Report Your Foreign Property Annually—Or Else  

We help Canadian and American Expats, Temporary Guests and Snowbirds with assets on both sides of the U.S.-Canada border — optimally structu...

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