Foreign Income Verification Reporting – Form T1135 (Part 3)

This is the final instalment of a three-part series on Foreign Income Verification.

In Part 1, we discussed Form T1135 in general along with the basic requirements of foreign holdings reporting. Read the article here.

In Part 2, we discussed the form in detail and cover some of the specific reporting requirements. Read the article here.

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Part 4 – Interests in non-resident trusts

Taxpayers who have a beneficial interest in a non-resident trust are required to report their interest in the trust, even though, technically, they may not own the foreign property.  In addition, beneficiaries of a foreign trust are required to report the capital paid to them in the year.

Part 4 does not require the reporting of a Canadian mutual fund trust regardless of the underlying investments held with the trust.  Since the mutual fund trust will be required to file their own T1135 and to report the investments held within the Trust.

Part 7 – Property held in an account with a Canadian registered securities dealer or a Canadian trust company

Investments held in portfolios with a Canadian registered securities dealer or a Canadian trust company now require the following reporting:

• Name of the securities dealer or trust company

• Country code of the Investment

• Maximum fair market value (FMV) during the year

• FMV at the end of the year

• Income earned including any Gain or Loss on disposition

Financial and Investment Advisors should have ready access to this information.

Filing Deadlines

Form T1135 is not filed with the taxpayers’ tax return but is currently filed separately either electronically or by mail to the CRA Ottawa Technology Centre.  Most professional tax software will allow for electronic filing of T1135 this tax season.  Form T1135 is due on the same date as the entity’s federal tax return is due.

As with most areas involving government reporting requirements it is best to be proactive, therefore financial, investment and tax professionals should act now in order to pull together the information that will be required and to educate their clients about their responsibilities.