Monday, 29 March 2010

Tax Filing and Foreign Income Form T1135 - Save Some Trees and Your Time

Tax filing tip of the day ...
The Canada Revenue Agency is keen to track down potential tax cheats who hide their millions and billions away in foreign tax havens. So they oblige everyone to declare their foreign holdings over $100,000 by filling in form T1135 "Foreign Income Verification Statement" to submit with their tax return. Unfortunately, in the course of testing online tax prep packages I have noticed that the packages are not always clear about a couple of common situations where taxpayers do NOT need to fill in T1135:
1) if those holdings happen to be within a registered account, such as an RRSP, RESP, RRIF, TFSA, LIRA, LRIF, RPP etc; or
2) foreign investments held in Canadian ETFs (e.g. iShares XSP, which holds the S&P 500, but is registered in Canada by iShares Canada and traded on the TSX) or Canadian mutual funds

The instructions and examples on page 2 of the T1135 (available here from the CRA with an FAQ here) make this clear. It makes sense that it would be so as the CRA already is able to collect and control taxes on such accounts.

If you do have over $100k in foreign assets, such as US shares or ETFs in a taxable account, then you must mail in the signed paper copy, even though the rest of the tax info has been NetFile'd online.


Anonymous said...

do you have any expertise with taxes in canada, especially if you have funds and businesses outside canada? thanx

CanadianInvestor said...

hi anon, my knowledge of such situations is partial and based on my own circumstances. the best route is to find an accountant or accounting firm which specializes in international taxes. understandably, the easiest to find are those with Canada + US expertise. one needs to know not only the tax laws in both countries but also how they inter-act. it's a nightmare to say the least. an excellent self-help book is Garry Duncan's Canadians Resident Abroad recently updated in a 2009 edition, which has discussion of foreigners coming to Canada and Canadians returning to Canada.

Anonymous said...

What is meant by cost? Is it the value, is it the management fees associated with the investment, or is it something else?

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