Declaring Foreign Property on your Tax Return

Declaring Foreign Property on your Tax Return

Declaring Foreign Property on your Tax Return

 

foreign-properties

Declaring Foreign Properties

Declaring Foreign Property on your Tax Return

Canada taxes individuals based on their residency. Therefore all residents of Canada are required to pay tax on worldwide income earned in a particular calendar year. For income tax purposes, residents of Canada include individuals who permanently reside in Canada, whether as citizens or landed immigrants of Canada.

 There are certain CRA rules regarding declaration of foreign property in a Canadian Tax return. As a resident of Canada – Citizen or Permanent Resident, you will need to declare any foreign property you own when it comes time to file your year-end Canadian taxes. When you own foreign investment property (ies) / specified foreign properties with a total cost amount / Adjusted Cost Base – Not the fair market value of more than $100,000 CAD at any time in the year, form T1135, Foreign Income Verification Statement http://www.cra-arc.gc.ca/E/pbg/tf/t1135/t1135-16e.pdf  , must be filed at the same time as the tax return. The same form T1135 must be filed by Canadian resident individuals, corporations, trusts and partnerships. Form T1135 requires detailed information about your foreign property, including income generated, location, and maximum cost during the year. The taxpayers have to make an annual disclosure with the Canada Revenue Agency each year. The specified foreign properties include bank accounts, stocks, bonds and real estate held in foreign countries. Stocks and Bonds held in Canadian brokerage accounts need to be reported too on the tax return. 

CRA imposes penalties of $25 per day, up to $2,500 per taxpayer for non-disclosure or late filing. If you previously forgot to submit this form, you can submit a Voluntary Disclosure to avoid penalties.

Frequently Asked Questions & Answers

Q) Does the term “specified foreign property” refer to real estate only?

A) No, the term “foreign property” includes money in a foreign bank account, a life insurance policy you own from a foreign issuer, any real estate you own held outside Canada, interest you own in any offshore mutual funds, foreign company shares owned, interest you own in a non-resident trust, bonds or debentures owned from foreign countries, and any income you earn from foreign property. You will have to declare your specified foreign property and income on Form T1135 at the same time you file your tax return. With property such as real estate, it is important to remember that if capital improvements are made to the real estate, the amount spent on the capital improvements will have to be added to the cost amount of the property thus increasing the $100,000 limit in some cases.A complete list of the foreign specified properties can be assessed at http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/1135-eng.html

Q) What are the exclusions from the specified foreign property list?

A) The exclusions are - Any investments you hold inside your registered accounts such as RRSP and TFSA, any property used mainly for personal use and enjoyment, such as a vehicle, cottage, vacation property, jewellery, artwork, paintings etc., and any assets used to run a business, such as a business inventory, equipment and building don’t need to be declared on your tax return.

 

At Bajwa CPA Professional Corporation, we can help you file your taxes efficiently and effectively to make sure that all your tax filings are up to date and on time, in order to beat the taxman. Contact us today for free consultation appointment at 416-907-0568 or visit our website at www.bajwacpa.com

 

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