Reporting Foreign Assets – The T1135 Form: A Complete Guide by a Montreal CPA Firm Near You

Introduction

Many Canadians don’t realize that simply owning foreign investments—such as U.S. stocks, crypto held on foreign exchanges, overseas rental property, or money in a foreign bank account—may trigger a mandatory filing requirement with CRA. The T1135 Foreign Income Verification Statement is one of Canada’s strictest tax reporting forms. Failure to file it can result in penalties starting at $2,500 per year, even when no tax is owing. CRA uses T1135 filings to combat offshore tax evasion and to match foreign holdings against income reported on your return. This guide explains who must file, what assets are included, and how to avoid costly mistakes.

Legal and Regulatory Framework

The T1135 filing requirement is governed by section 233.3 of the Income Tax Act. Canadian residents must file a T1135 if they own specified foreign property with a total cost base over $100,000 CAD at any time during the year. This reporting obligation is separate from income tax filing—meaning even if you owe no tax, the T1135 may still be mandatory. CRA uses information-sharing agreements with foreign governments, banks, and exchanges to verify disclosures. T1135 filings must match your T1 or T2 returns, including rental, investment, and business income from foreign assets.

Key Court Decisions

In Torres v. Canada, the Tax Court upheld T1135 penalties even when the taxpayer owed no tax, reinforcing that reporting is mandatory. In Bajgelman v. Canada, CRA successfully reassessed a taxpayer for failing to include foreign securities held through Canadian brokers. In Douglas v. Canada, the court confirmed that crypto assets held on foreign exchanges may constitute specified foreign property. These cases highlight CRA’s strict enforcement and broad interpretation of foreign asset reporting.

What Is “Specified Foreign Property”?

CRA defines specified foreign property broadly. It includes: foreign stocks (even held in Canadian brokerage accounts), ETFs and mutual funds domiciled outside Canada, cryptocurrency held on foreign exchanges, foreign bank accounts, foreign rental properties, foreign business interests, foreign trust holdings, debt owed by foreign persons, precious metals stored outside Canada, and certain insurance policies. It does not include: properties for personal use (cottage, vacation home), RRSPs, RRIFs, TFSAs, RESPs, RDSPs, or Canadian mutual funds.

When You Must File

You must file a T1135 if: the cost base of your foreign property exceeds $100,000 CAD at any time during the year. Cost base refers to what you paid for the assets in Canadian dollars—not current market value. Even if the value drops below $100,000 later, filing is still required if the threshold was exceeded at any point.

Simplified Method vs. Detailed Method

If your foreign assets cost between $100,000 and $250,000, you may use the Simplified Reporting Method, listing assets by category rather than individually. If your cost exceeds $250,000, you must use the Detailed Reporting Method, listing each asset separately with income and gains. CRA audits high-value filers closely and compares T1135 data to foreign investment statements.

Common Assets That Trigger T1135 Filing

• U.S. stocks (Apple, Tesla, Microsoft, etc.)

• Foreign ETFs (e.g., Vanguard U.S., European or Asian funds)

• Cryptocurrency on foreign exchanges (Binance, Coinbase, Kraken)

• Foreign rental property

• Foreign bank or investment accounts

• Partnership interests in foreign businesses

• Foreign life insurance policies
  Many taxpayers mistakenly believe that holding U.S. securities in a Canadian brokerage account avoids the T1135—it does not.

Penalties for Missing or Incorrect T1135 Filings

Penalties include: $25 per day late (minimum $100, maximum $2,500), gross negligence penalties of up to $12,000 per year, and penalties based on a percentage of asset value for repeated or intentional non-compliance. CRA may also reassess your return, deny losses, or require additional foreign reporting. Failure to file for multiple years can lead to tens of thousands in penalties.

Crypto and the T1135

Cryptocurrency held on foreign exchanges may count as foreign property. Crypto held in self-custody wallets is currently not reportable as T1135 property unless linked to a foreign corporation. Taxpayers with crypto must track exchange jurisdiction and cost base clearly, as CRA audits crypto holdings aggressively.

Mackisen Strategy

At Mackisen CPA Montreal, we ensure clients meet all foreign reporting obligations. We determine whether you exceed the $100,000 threshold, prepare Simplified or Detailed T1135 filings, reconcile transactions, classify crypto correctly, calculate foreign income, and defend you during CRA audits. Our team also corrects missed filings through voluntary disclosure programs to reduce penalties.

Real Client Experience

A client holding U.S. stocks through a Canadian brokerage was unaware of T1135 and faced penalties; we corrected filings and negotiated relief. An investor with crypto on multiple foreign exchanges avoided penalties after we prepared detailed filings and reconciled transaction histories. A landlord with foreign rental property passed CRA audit after we properly reported cost base and income. A high-net-worth client with offshore accounts avoided reassessment through our structured T1135 compliance plan.

Common Questions

Do I file T1135 if I own a U.S. stock like Apple? Yes—unless held in an RRSP or similar exempt account. Do foreign rental properties count? Yes. What if I moved to Canada mid-year? Only assets held after residency count. Is TFSA foreign property? No. What happens if I miss a filing? CRA imposes penalties even if no tax is owing.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadians stay compliant with T1135 rules and avoid harsh CRA penalties. Whether you hold U.S. stocks, overseas property, crypto, or international investments, we ensure accurate reporting, full compliance, and strong audit protection.