Canada Revenue Agency requires all Canadians to disclose information on foreign properties owned with their tax return. The rules only apply to certain categories of foreign property with a cost in excess of $100,000 CAD.
When do you need to report?
Any assets considered “Specified Foreign Property,” with an aggregate cost exceeding $100,000 CAD at any time during the year, must be declared on Form T1135 – the Foreign Income Verification Statement. Therefore, individual assets with a cost base of less than $100,000 CAD must be considered.
What is considered Specified Foreign Property?
Specified Foreign Property, along with the most common examples, includes:
- Funds held outside Canada:
- Foreign bank accounts
Does not include Canadian bank accounts denominated in a foreign currency
2. Shares of non-resident corporations:
- Stocks of publicly traded non-resident corporations, whether held in a Canadian or a foreign brokerage account
- Options to purchase stocks in non-resident corporations
- Shares of private non-resident corporations
Does not include shares of non-resident foreign affiliates (corporations in which you have more than a 10% interest). These investments are subject to separate foreign reporting rules.
3. Foreign debt instruments:
- Publicly traded bonds of non-resident corporations or foreign government bonds
- Promissory notes from non-resident taxpayers
Does not include amounts owed by a non-resident foreign affiliate
4. Interests in non-resident trusts:
- Interests in non-resident mutual funds or investment funds
Does not include interests in Canadian funds that invest in foreign securities
5. Real property outside Canada:
- Foreign rental property
- Foreign vacation property which is rented out for most of the year
Does not include property that is used primarily for personal use (e.g.: vacation homes)
Does not include real estate used in an active business (e.g.: warehouse or factory building)
6. Other property outside Canada:
- Forward contracts and futures
- Interests in non-resident partnerships
- Cryptocurrency held through a foreign exchange or wallet located in a foreign country
Specified Foreign Property does not include investments held in a registered account, such as an RRSP, RRIF or TFSA.
Foreign property between $100,000 and $250,000 CAD
Relief from complex reporting has been extended to individuals who owned foreign property with a total cost in excess of $100,000 CAD but less than $250,000 CAD throughout the year. Taxpayers who qualify for this relief are not required to disclose the details of specific holdings. However, the following general details still need to be included regarding foreign property, in aggregate:
- Types of foreign property owned in the year
- Top three countries based on maximum cost amount in the year
- Total income from foreign property
- Total gain/loss from disposition of foreign property
Foreign property in excess of $250,000 CAD
If at any time during the year, the total cost of your foreign property was $250,000 CAD or more, each asset must be disclosed separately:
- The name of each of the specific assets owned
- The country where each asset is located
- The maximum cost base of each asset during the year
- The year-end cost base of each asset
- The total income (loss) derived from each asset during the year (e.g.: dividends, interest)
- Any capital gains or losses from disposition in the year
Assets held with a Canadian registered securities dealer
There is some reporting relief to individuals who own foreign publicly traded securities in an account that is both managed and held with a Canadian registered securities dealer. In these cases, the CRA will permit an individual to report their foreign investments:
- Grouped by securities dealer with further groupings by country; and
- Based on the highest fair market value of those investments at the end of any month during the year and at year-end, rather than the cost.
It’s important to note that if you hold investments in a non-Canadian registered securities dealer account, each security must be tracked separately and reported using the above rules. While your tax advisor can sort the information required to prepare the requisite forms in those circumstances, the time involved will significantly increase your accounting fees.
Your investment advisor can access the details of your investment information quickly and easily. Have them provide you with summary reports with all of the necessary reporting information.
For more information about your foreign property declaration, contact your accounting professional today.
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