What’s New for Foreign Income Verification Statement


On June 25, 2013, CRA launch of a new T1135 – Foreign Income Verification Statement as part of the Government’s measures to crack down on international tax evasion and aggressive tax avoidance. The updated form will require additional details to be reported which may be time consuming and onerous.

Filing Requirement

The updated form must be used beginning with the 2013 taxation year. The filing requirement remains unchanged and is triggered if a Canadian resident taxpayer, at any time during the year, held more than $100,000 (cost) in Specified Foreign Property.

Changes to the form Functional Currency Reporting
While the old form was silent on the use of functional currencies, the new form can be completed with amounts reported in a functional currency, other than Canadian dollars, if an election under paragraph 261(3)(b) has been made. If no election is made, all amounts must be converted using rates in effect at the time of the transaction for asset purchases and income received. Where the income was received throughout the year, an average rate for the year can be used.

Location of properties held outside Canada
With the exception of the United States and the United Kingdom, the current T1135 form requires indicating the region where the property was held without identifying the a specific country. The new form will require identifying the country where the property is held, with no exceptions.

Additional details
Prior to the changes, Canadian resident taxpayers were required to classify the type of foreign property and identify the properties’ value without indicating the exact amount for each individual property, and income from all assets was combined in one box for reporting purposes.

The new form will now require Canadian resident taxpayers to identify all individual assets, the location of the asset (e.g. Bank, Corporation, Trust, or any other entity), the description of the asset, the maximum cost during the year, the cost at the end of the year, the income or loss for the year and any gain or loss on disposition. The new disclosure requirements are now much more similar to the United States Internal Revenue Service FBAR filing requirement.

Form exclusions
The new T1135 reporting requirements exclude foreign investments where a T3 or T5 was received by the Canadian resident taxpayer from a Canadian issuer. This exception would normally apply to taxpayers that hold foreign investments through their Canadian brokerage accounts with a Canadian financial institution.

The dollar amount of those investments must be considered however when determining the taxpayers total foreign assets and resulting T1135 filing requirement.

Other considerations
According to CRA’s website, for the year 2013 and subsequent taxation years the budget proposes extending the normal reassessment period by three years if the taxpayer failed to report income from a specified foreign property on their income tax return; and if the form was not filed on time, a specified foreign property was not identified, or was improperly identified.

In order to improve the process, the CRA also notes that it will provide taxpayers, who previously filed form T1135, a reminder of the T1135 obligation on their Notices of Assessments.

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