Foreign Income Verification Reporting – Form T1135 (Part 2)

Last week we covered Foreign Income Verification Reporting, Form T1135 in general along with the basic requirements of foreign holdings reporting.  This week we’ll look at the form in detail and cover some of the specific reporting requirements.

(Read Part 1 of the article here)

Form T1135 Foreign Income Verification Statement is designed as an “information only” form tied with the personal tax return.  While it is not actually part of the tax return, the due dates coincide with the due dates of tax returns, thereby tying it to the T1 return.  When filing their tax return, the taxpayer identifies the need for filing the T1135 by their answer to the question “Did you own or hold foreign property at any time in 2014 with a total cost of more than CAN$100,000?” on page 2 of the T1.

Parts 1, 3, 5, and 6

In general, any individual, partnership, corporation, or trust which holds a foreign asset, is a beneficiary of a foreign holding or has a right to acquire a foreign holding is required to file the information return if the aggregate cost of the asset or holding exceeds $100,000.   Reporting requirements for Parts 1, 3, 5, and 6 consist of the following information requirements:
• The country where the asset is held
• The maximum cost during the year of the holding
• The cost at the end of the year and,
• The amount of any income earned or lost on the holdings

“T” Slip Exclusion No Longer Available
In 2013, taxpayers had the option of using the “T” slip exclusion option.  This consisted of the ability to not report individual holdings if there was a Canadian T5 or T3 slip issued for the income earned on the investment.  This option is not available for 2014.

Part 2 – Shares of non-resident corporations (other than foreign affiliates)
This is one of the most difficult areas of form T1135 to complete; simply because accurate records of the information are difficult to obtain.  This section no longer includes shares that are managed by a Canadian Registered Securities Dealer or Canadian Mutual Fund.  These assets are now included in Part 7.

Include in this section any foreign share holdings that the taxpayer purchased on their own, either on-line or on a foreign stock exchange.  Report both the cost and any income earned on the investment.

Next week: Part 3 of this article will explore interests and non-resident trusts, investments and filing deadlines