All of Canadians’ worldwide income is subject to taxation. To add to that, all Canadian residents are required by law to submit a Form T1135, Foreign Income Verification Statement (also known as the foreign property reporting) to the CRA every year.

Residents who have “specified foreign property” worth more than $100,000 Canadian dollars must submit the form. The amount is indexed to inflation and increased every year in accordance with the Consumer Price Index (CPI).

Excess cash held in a foreign bank account is considered a property, funds/investments kept outside of Canada, outstanding debts receivable from non-resident corporations, life insurance policies issued by a non-native issuer and interest in a foreign organization.

Individuals, trusts, and corporations should file their tax returns using T1135 forms. Individuals, trusts, and corporations that need to file their tax returns on or before April 15 must do so using this form. The due date for filing partnerships’ T1135 paperwork is usually the same as the deadline for submitting the partnership information return.

Tax Accountant Toronto team state that it’s critical to note that, even if the taxpayer has no tax liability for the year, foreign property reporting is still carried out. This will result in a penalty of $100-$2500, depending on how serious your errors/omissions are and whether or not they were caused by gross negligence.

What Are The Recent Modifications In Foreign Property Reporting?

In the 2013 federal budget, the government acknowledged that Canada has a considerable problem with international aggressive tax avoidance and evasion through offshore accounts.

Tax Accountant Toronto experts explain that the Government enacted these two changes in 2013, when they linked foreign property reporting with the CRA’s ability to unmask and combat this issue:

1. When a taxpayer fails to record earnings from a particular foreign property on their income tax return and when Form T1135 is either not filed, late filed, or has incorrect information inserted about the external asset, there’s an extension of the usual reassessment period by three years.
2. Revisions to Form T1135 so that it can include comprehensive information specification in every section of a specified foreign property. This includes the correct name of the particular overseas organization, its location, and its foreign financial earnings.

What Other Measures Has The CRA Adopted?

The CRA now has access to those two tools as well, allowing them to spot global tax evasion and aggressive tax elusion more effectively. They are as follows:

1. International Electronic Funds Transfer (EFTs): Beginning in 2015, banks were required by the CRA to disclose EFTs of $10,000 or more in order for the government agency to utilize this data to implement Canadian tax law.
2. Offshore Tax Informant Program (OTIP): Beginning in 2013, the CRA gives financial incentives to people who give information about egregious global tax non-compliance.

Can You Correct Your Tax Affairs?

Yes, you can. If you forget to file T1135 or fail to take into account foreign income, it will be necessary to establish whether you qualify for the Voluntary Disclosure Program before making any adjustments or providing missing information to your records because it is still under the CRA.

Tax Accountant Toronto team affirms that if the CRA accepts your VDP, no penalties will be imposed. You will nevertheless have to settle any outstanding taxes with compound interest.