Canadian taxpayers with foreign assets are subject to strict reporting requirements. One of the most commonly overlooked obligations is filing Form T1135, the Foreign Income Verification Statement.
Failing to file this form can result in significant penalties — even where no tax is owed.
The Canada Revenue Agency (CRA) has increased its focus on foreign asset reporting, making compliance more important than ever.
Who Needs to File T1135?
You are generally required to file Form T1135 if:
- You are a Canadian resident, and
- You own specified foreign property with a total cost amount exceeding $100,000 CAD at any time during the year
Specified foreign property may include:
- Foreign bank accounts
- Shares of non-resident corporations
- Foreign investment accounts
- Certain real estate held outside Canada (excluding personal-use property)
Importantly, the reporting threshold is based on the cost amount, not the current market value.
Failure-to-File Penalties
Standard Penalty
- $25 per day
- Up to a maximum of $2,500 per year
Gross Negligence Penalty
If the CRA determines the failure was intentional or due to gross negligence:
- $500 per month
- Up to $12,000 per year
These penalties may apply even if all income from the foreign assets was properly reported.
Extended Reassessment Risk
Failing to file a T1135 can also extend the CRA’s reassessment period.
This means:
- The CRA may reassess your return beyond the normal limitation period
- The review may extend beyond foreign income and apply to other areas of your return
This can significantly increase long-term audit exposure.
Common Mistakes
T1135 penalties frequently arise from misunderstandings, including:
- Assuming foreign assets held through Canadian brokers do not require reporting
- Believing no foreign income means no filing obligation
- Miscalculating the $100,000 reporting threshold
- Overlooking inherited or jointly held foreign assets
These issues are common even among experienced investors.
What If You Haven’t Filed?
If you have missed filing a T1135:
- It may still be possible to correct the issue
- The CRA’s Voluntary Disclosures Program (VDP) may reduce or eliminate penalties
- Timing is critical — once the CRA initiates contact, relief may no longer be available
Key Takeaway
Form T1135 is a reporting requirement, but the consequences of non-compliance can be serious. Penalties, extended reassessment periods, and increased audit exposure may arise even where no tax is owed.
Addressing foreign reporting issues early and ensuring proper compliance is essential.
Protect Yourself From Costly Foreign Reporting Penalties
If you are facing T1135 filing issues, foreign asset reporting concerns, or CRA penalty assessments, obtaining professional advice early can make a significant difference.
HLG Tax Law assists clients with:
- T1135 compliance and reporting issues
- CRA penalty disputes
- Voluntary Disclosures Program (VDP) applications
- Foreign asset reporting risk assessments
Early action can help reduce exposure and protect your rights.