Understanding the T1135: Foreign Property Reporting Requirements for Canadians

If you own foreign stocks, cryptocurrency, real estate abroad, or simply maintain a bank account outside Canada with a meaningful balance, there's a good chance you need to complete additional tax paperwork each year that many Canadians don't even know exists. One of the most common—and most frequently overlooked—requirements is the Canada Revenue Agency's Form T1135, officially titled the "Foreign Income Verification Statement."

Here's what catches people off guard: this isn't some obscure form that only applies to the ultra-wealthy with offshore accounts. If you've been investing in U.S. stocks through your non-registered account, own a vacation property in Arizona or Mexico, or dabbled in cryptocurrency, you might already be required to file this form. And if you haven't been filing when you should have, the penalties can be genuinely painful—we're talking thousands of dollars in fines, even if you didn't owe any additional tax.

This comprehensive guide will walk you through everything you need to know about the T1135, who must file it, what needs to be reported, and how to stay compliant without getting caught in the CRA's penalty trap.

What is Form T1135?

The T1135 is what tax professionals call an "information return"—a form that reports specific information to the CRA without directly calculating additional taxes owed. Think of it as the CRA's way of keeping tabs on Canadians' foreign assets to ensure that foreign investment income is being properly reported and taxed.

Despite its official title suggesting it's about verifying foreign income, the form itself doesn't actually calculate tax. You're simply reporting what foreign property you own and its value. The income from these assets still gets reported on your regular T1 tax return in the usual way. However, here's the critical point: failing to file a T1135 when required can result in significant penalties, even if you properly reported all your income and don't owe any additional tax. The CRA takes this reporting requirement seriously, and ignorance is not accepted as an excuse.

You can find the current version of the form and detailed instructions on the CRA's T1135 Forms and Publications page.

Who Must File?

You must file a T1135 if you're a Canadian tax resident and the total cost of your Specified Foreign Property exceeds CAD $100,000 at any time during the tax year. Notice that important qualifier: "at any time during the year." Even if your foreign property dropped below the threshold by year-end, if it exceeded $100,000 at any point during the year, you're required to file.

The threshold is based on cost basis (what you originally paid for the assets), not their current market value. This distinction matters significantly and can create surprising situations. For example, if you purchased U.S. stocks for $95,000 several years ago and they're now worth $180,000, you're not required to file a T1135 because your cost basis remains under the threshold. Conversely, if you purchased foreign investments for $110,000 that have since declined to $85,000 in value, you still must file because your cost exceeded the threshold.

For those with more than CAD $250,000 in cost basis of Specified Foreign Property, the reporting requirements become more detailed and granular, requiring specific information about each property category.

More details about who must file are available in the CRA's Guide for Form T1135.

What Counts as Specified Foreign Property?

This is where things get more complex than most people expect. "Property" in the T1135 context extends far beyond real estate—it encompasses various asset types that most Canadians wouldn't immediately think of as requiring special reporting. Let's break down the major categories.

Foreign Stocks, Bonds, and ETFs

Here's where the rules get nuanced, and the location of your brokerage account matters just as much as what you're investing in.

Canadian-domiciled companies with foreign listings don't require reporting. Interlisted companies like Royal Bank of Canada, which trade on both the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE), don't count toward your T1135 threshold regardless of which exchange you purchase shares on. These are Canadian companies, so even though they have U.S. listings, they're not considered foreign property.

Foreign securities in Canadian brokerage accounts are reportable once you exceed the threshold. This catches many DIY investors by surprise. If you have $120,000 (cost basis) of Microsoft shares, Apple stock, or a U.S.-domiciled ETF like VOO held in a non-registered account at TD Direct Investing, Questrade, or any other Canadian brokerage, that constitutes Specified Foreign Property and must be reported on a T1135. The fact that you purchased these through a Canadian brokerage and never directly dealt with a foreign institution doesn't exempt you from reporting.

Any securities in foreign brokerage accounts are reportable if they meet the threshold—even Canadian securities. This is counterintuitive but important: if you have an account with Interactive Brokers (a U.S. brokerage) or Charles Schwab and hold Canadian stocks in that account, those Canadian stocks become reportable because they're held in a foreign account. The location of the custodian matters, not just the domicile of the security itself.

Complex investment structures require additional scrutiny. Some foreign investments have legal structures that trigger even more reporting requirements beyond the T1135. Certain European ETFs organized as trusts, for example, may require you to file additional forms like the T1142 (Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust) when you receive distributions. If you're investing in complex foreign structures, professional tax advice becomes essential rather than optional.

Vacation and Rental Properties Abroad

Whether your foreign real estate requires T1135 reporting depends primarily on how you use the property, not just that you own it. The CRA distinguishes between personal use property and investment property, and this distinction determines your reporting obligations.

Personal use property is exempt from T1135 reporting. If you own a vacation home in Florida, Arizona, or Mexico that you use exclusively for personal enjoyment—spending your winters there, hosting family, or simply having a getaway spot—this property doesn't need to be reported on a T1135. The CRA recognizes that vacation homes used personally aren't income-producing assets requiring monitoring for tax compliance purposes.

Rental properties must be reported. Properties you purchased primarily as rental investments and use predominantly for generating rental income are considered Specified Foreign Property and must be reported once your aggregate foreign property exceeds the threshold. This includes long-term rentals, properties managed by property management companies, and any real estate held primarily for investment rather than personal enjoyment.

Mixed-use properties present a grey area. What about that Arizona condo you use for two months in winter but rent out through Airbnb or VRBO for a few weeks during spring training season to offset your costs? These mixed-use properties typically qualify as personal use property and remain exempt from T1135 reporting, provided the primary purpose remains personal use and any rental income is incidental and used mainly to offset expenses rather than generate profit. However, if the property is rented out more than it's used personally, it starts to look like a rental property requiring reporting.

The CRA provides guidance on personal use property in their Income Tax Folio S1-F3-C2, Principal Residence, though this focuses primarily on principal residence exemption rather than T1135 specifically.

Cryptocurrency: The Grey Zone

Cryptocurrency presents a unique and genuinely frustrating challenge when it comes to T1135 reporting requirements. The fundamental problem is this: while cryptocurrency exists on the blockchain—a decentralized, distributed network—determining its "location" for Canadian tax purposes remains unclear and subject to interpretation.

The CRA's guidance is limited and unsatisfying. The CRA has acknowledged that cryptocurrency holdings may constitute property for tax purposes, but they haven't provided crystal-clear guidance on when cryptocurrency triggers T1135 reporting obligations. The question centres on whether cryptocurrency should be considered "held in Canada" or held abroad, which depends on factors that aren't well defined in the tax code.

Where you purchased and store cryptocurrency might matter—but how much? Some tax professionals argue that cryptocurrency purchased through Canadian exchanges (like Shakepay, Newton, or Wealthsimple Crypto) and stored in Canadian cold wallets or held on Canadian platforms should be considered property held in Canada and therefore exempt from T1135. Others take a more conservative position that all cryptocurrency should be reported given the decentralized nature of the blockchain, which isn't truly "located" anywhere.

The stakes are high for getting this wrong. Given the severe penalties for non-compliance with T1135 requirements (which we'll discuss shortly), and given the lack of clear CRA guidance, this isn't a determination you want to make casually. If you hold significant cryptocurrency holdings that might push you over the $100,000 threshold, professional advice from a tax specialist experienced with cryptocurrency reporting isn't just recommended—it's essential protection against potentially devastating penalties.

What is absolutely clear: all cryptocurrency income must be reported. Regardless of whether your cryptocurrency holdings require T1135 reporting, all income from cryptocurrency trading, capital gains from selling crypto, staking rewards, mining income, and any other crypto-related income must be reported on your Canadian tax return. Canadian tax residents are taxed on their worldwide income, and the CRA has made it abundantly clear that this includes cryptocurrency income. The CRA provides some guidance on cryptocurrency taxation in their Guide for Cryptocurrency Users and Tax Professionals.

Foreign Bank Accounts

Cash held in foreign bank accounts counts toward your Specified Foreign Property total. If you maintain a U.S.-dollar account at an American bank, a Euro account at a European institution, or have foreign currency savings anywhere outside Canada, these balances contribute to your T1135 threshold calculation based on their Canadian dollar equivalent at cost.

Foreign currency accounts at Canadian banks are not reportable. This is an important distinction many people miss: a U.S. dollar account at TD Canada Trust or RBC is a Canadian bank account that happens to be denominated in foreign currency. It's not a foreign bank account and doesn't trigger T1135 reporting. The determining factor is where the financial institution is located and regulated, not which currency the account is denominated in.

Foreign Pensions and Retirement Accounts

This category becomes complex quickly, and the reportability of foreign pension arrangements depends heavily on the specific structure and legal characteristics of the plan.

Government-administered defined benefit pensions typically aren't reportable. Foreign pension systems that function like Canada's CPP—government-run, defined benefit programs where you don't own or control specific investment accounts—are generally not considered Specified Foreign Property. These pensions pay you benefits according to a formula; you don't own an investable asset.

Foreign defined contribution plans where you control investments likely are reportable. If you participated in a 401(k) while working in the United States, a private pension scheme in the UK where you directed investments, or similar plans where you have a designated "pension pot" with underlying investment assets you own and control, these arrangements should probably be reported as Specified Foreign Property. You own the underlying assets in these accounts, making them foreign property in the T1135 sense.

The distinction between reportable and non-reportable foreign pensions isn't always clear-cut, and professional guidance is valuable here, particularly for pensions earned in countries with complex retirement systems.

What is Exempt from T1135 Reporting?

Understanding what you don't need to report is just as important as knowing what you must report. Several categories receive specific exemptions from T1135 requirements:

Assets held in registered accounts are completely exempt. Foreign securities held inside your RRSP, RRIF, TFSA, RDSP (Registered Disability Savings Plan), or RESP don't count toward your T1135 threshold. You could have $500,000 of U.S. stocks in your RRSP and it wouldn't trigger any T1135 obligation. The registered account wrapper provides full exemption from this reporting requirement.

This creates a clear planning opportunity: if you're approaching the $100,000 threshold and want to avoid T1135 filing obligations, prioritizing foreign investments inside registered accounts while keeping Canadian investments in non-registered accounts can help you stay below the threshold.

Canadian mutual funds and ETFs that hold foreign securities are exempt. This is one of the most valuable exemptions for investors who want international exposure without T1135 complications. If you invest in a Canadian mutual fund or Canadian-domiciled ETF (traded on the TSX) that invests in foreign stocks, you only report your ownership of the Canadian fund or ETF itself—which isn't foreign property. The fund's underlying holdings don't count toward your threshold.

For example, if you own $150,000 of iShares Core S&P 500 Index ETF (XUS on the TSX), this is a Canadian ETF that holds U.S. stocks. You would not report this on a T1135, even though the underlying holdings are foreign. However, if you directly owned $150,000 of Vanguard S&P 500 ETF (VOO on the NYSE), this would be reportable as Specified Foreign Property.

Property used exclusively in an active business is exempt. Foreign property that's used directly in carrying out active business operations gets an exemption. This might include inventory stored at a foreign warehouse, business equipment located abroad, or accounts receivable from foreign customers. However, foreign investments held as passive investments within your corporation still count as Specified Foreign Property.

Calculating Your T1135 Obligation

T1135 reporting uses cost basis—what you originally paid for the property—not current market value. This bears repeating because it's a source of frequent confusion and miscalculation. Let me walk you through a concrete example to illustrate how the calculation works.

Example: A Canadian taxpayer owns:

• A vacation condo in Mexico purchased for CAD $85,000

• Apple stock originally purchased for CAD $20,000 (now worth $45,000, but that doesn't matter)

• CAD $2,000 sitting in a Mexican bank account

Aggregate cost basis: CAD $107,000

Conclusion: A T1135 must be filed because the total cost basis of Specified Foreign Property exceeds $100,000, even though the Mexican condo alone doesn't trigger the requirement and even though we're not counting the current value of the appreciating Apple shares.

Remember, the threshold applies to the aggregate of all Specified Foreign Property across all sources and all types. You can't say "well, my foreign stocks are only $80,000 so I don't need to report those." If your foreign stocks ($80,000) plus your foreign real estate ($85,000) plus your foreign bank account ($2,000) add up to more than $100,000, everything must be reported.

Special Rules for New Immigrants

Canada provides a grace period for new immigrants in their first tax year as Canadian residents—you're exempt from filing a T1135 even if you arrive in Canada with substantial foreign assets. This makes sense: you weren't a Canadian tax resident when you acquired these assets, so the CRA doesn't expect you to track their original cost in Canadian dollars from years or decades ago.

However, here's the crucial detail for subsequent years: for new immigrants, the "cost basis" becomes the fair market value of your Specified Foreign Property on your date of immigration to Canada. This becomes your deemed cost for all future T1135 calculations.

Example: An individual immigrated to Canada in January 2022 holding foreign securities originally purchased for $75,000 USD several years earlier. On the immigration date, these securities were worth $130,000 CAD.

• 2022 (first tax year as Canadian resident): No T1135 required due to new immigrant exemption

• 2023 onward: T1135 reporting required because the deemed cost basis (fair market value on immigration date) was $130,000, which exceeds the reporting threshold

This "step-up" in cost basis at immigration date serves two purposes: it establishes a clear starting point for Canadian tax purposes, and it ensures the CRA can track assets that were already substantial when you became a Canadian tax resident.

More information about newcomers to Canada and their tax obligations is available through the CRA's Guide for Newcomers.

Filing Deadlines and Penalties

The T1135 is due at the same time as your annual T1 tax return—generally April 30th for most individuals, or June 15th if you or your spouse or common-law partner carried on a business during the year (though any taxes owed are still due April 30th). The T1135 is filed alongside your tax return as part of your complete tax filing package.

Penalty Structure: Much Harsher Than You'd Expect

The penalties for failing to file a T1135 when required are severe, and they apply even if you reported all your foreign income correctly and don't owe any additional tax. Let that sink in: you can be hit with thousands of dollars in penalties purely for not filing an information return, even when you've paid every dollar of tax you actually owe.

Initial penalty period (first 24 months): $25 per day for each day the return is late, starting from your filing deadline. This continues up to a maximum of $2,500 per return per year. Note that "per return" qualifier—if both spouses need to file T1135 forms (each has their own foreign property exceeding the threshold), penalties apply separately to each return. A couple could face $5,000 in penalties for a single year of late filing.

After 24 months: The penalties escalate dramatically. After 24 months of non-compliance, the penalty increases to 5% of the cost of your Specified Foreign Property (or fair market value in the case of certain trusts), minus any penalties already applied during the first 24 months.

Example of penalty escalation: Imagine you have $200,000 (cost basis) in Specified Foreign Property that you should have been reporting. You discover three years late that you should have been filing T1135 forms.

• Years 1-2: $2,500 per year × 2 years = $5,000

• Year 3: 5% of $200,000 = $10,000, minus the $5,000 already paid = $5,000 additional

• Total penalties: $10,000 even though you reported all your income and paid all taxes owed

"I didn't know" is not a defence. The CRA explicitly states that lack of awareness of the T1135 filing requirement is not considered a valid defence against penalties. The burden is on taxpayers to understand their filing obligations. This is one of those situations where ignorance of the rules can prove very expensive.

The Voluntary Disclosure Program: A Potential Lifeline

If you've just discovered that you should have been filing T1135 forms for previous years and haven't been, don't panic—but do act quickly. The CRA's Voluntary Disclosure Program (VDP) may allow you to correct past non-compliance while potentially reducing or eliminating penalties and interest for late filings.

Key requirements for the VDP:

• Voluntary: You must come forward before the CRA contacts you about the issue

• Complete: You must disclose all non-compliance, not just some of it

• Involves penalty: There must be a penalty that would otherwise apply

• At least one year late: The disclosure must relate to information at least one year overdue

If your disclosure is accepted under the VDP, the CRA will typically waive penalties (though you'll still need to pay any taxes and interest owing). However, the program has become more restrictive in recent years, and not all applications are accepted.

Don't attempt this without professional help. If you're in this situation, consultation with a qualified tax professional experienced in voluntary disclosures is essential. The application process requires careful preparation, and mistakes can result in rejection of your disclosure, leaving you exposed to full penalties. More information is available on the CRA's Voluntary Disclosures Program page.

Planning Considerations for Your Investment Strategy

The T1135 requirement should factor into your investment planning decisions, particularly if you're approaching the $100,000 threshold or concerned about the administrative burden of compliance.

U.S. ETFs vs. Canadian ETFs: The T1135 trade-off. Many Canadian investors are drawn to U.S.-domiciled ETFs because they typically offer lower management expense ratios (MERs) than their Canadian counterparts. For example, you might pay 0.03% for Vanguard's VOO (U.S.-listed S&P 500 ETF) compared to 0.09% for a Canadian-domiciled equivalent. Over large portfolios, these fee differences can add up to significant savings over time.

However, there's a hidden cost many investors overlook: the administrative burden and potential professional fees associated with T1135 compliance. If you need to hire an accountant to prepare your T1135 (particularly for amounts over $250,000 where detailed reporting is required), those professional fees might partially or completely offset the MER savings from U.S. ETFs. Additionally, there's your own time and effort in gathering information, tracking cost bases, and ensuring compliance.

Canadian mutual funds and ETFs provide a simpler path to international diversification. For investors who want international exposure without T1135 complications, Canadian mutual funds and Canadian-domiciled ETFs that invest globally offer an elegant solution. You get the same international diversification, but because you're holding a Canadian security, you avoid T1135 reporting requirements entirely. For investors close to the threshold who want to keep their tax filing simple, this is often the optimal choice even if the fees are slightly higher.

Registered accounts can shelter foreign investments from reporting. If you have RRSP or TFSA contribution room available, prioritizing foreign investments inside these registered accounts keeps them off your T1135 calculation. You could structure your portfolio to hold U.S. and international investments exclusively in registered accounts while keeping Canadian investments in your non-registered accounts, potentially avoiding T1135 requirements altogether even with substantial total assets.

Getting Currency Conversion Rates for Your T1135: A Better Way to Handle Exchange Rate Lookups

Here's a detail that becomes surprisingly tedious when you're actually filling out your T1135: you need to convert the cost of all your foreign property into Canadian dollars using the exchange rate that was in effect when you purchased each asset. If you've been investing in U.S. securities over several years, you might need to look up exchange rates for dozens of different purchase dates across multiple years.

The Bank of Canada maintains historical exchange rate data, but navigating their website to look up multiple dates and currencies can be time-consuming and frustrating, especially when you're trying to complete your tax return efficiently. You find yourself clicking through multiple screens, searching for specific dates, and manually recording rates for each transaction.

That's where our Bank of Canada Currency Calculator comes in. We've built a tool specifically designed to make this process faster and far less painful. Instead of hunting through the Bank of Canada website transaction by transaction, our calculator lets you:

• Look up multiple dates at once - Enter all your purchase dates and get all the exchange rates in a single search

• Handle multiple currencies - Need USD, EUR, and GBP rates? Get them all simultaneously

• Export your results - Copy or download the data for your records or to provide to your accountant

• Access historical rates going back years - Whether you bought that property in 2015 or those stocks in 2020, we have the data

The calculator pulls directly from the Bank of Canada's official data, so you're getting the same rates the CRA expects you to use, but in a format that's actually designed for preparing your T1135 rather than forcing you to adapt to a government database interface built for economists rather than taxpayers.

You can access our Bank of Canada Currency Calculator for free—it's part of our suite of Canadian financial planning tools designed to make your financial life simpler. Thousands of Canadians use it each tax season to streamline their T1135 preparation, and the time savings alone make it worth bookmarking for next year.

When in Doubt: It's Better to Over-Report Than Under-Report

Because the T1135 is fundamentally an information return rather than a tax calculation that directly determines money owed, there's an important principle to keep in mind when you're uncertain whether specific property requires reporting: over-reporting is generally preferable to under-reporting.

If you disclose property that may not strictly require T1135 reporting—perhaps because its status is ambiguous or you're interpreting complex rules conservatively—the worst-case scenario is usually that the CRA might contact you with questions or provide clarification that you didn't need to report it. This is an inconvenience but carries no penalty.

Conversely, failing to report property that should have been disclosed can result in the severe penalties we discussed earlier, even if the omission was based on a good-faith misunderstanding of the rules. Given this asymmetry of consequences, taking the conservative approach and reporting questionable items makes sense from a risk management perspective.

Getting Professional Advice

Most Canadian accountants, particularly those working with higher-net-worth clients or clients with international exposure, can provide competent guidance on T1135 obligations and help you determine whether your specific assets constitute Specified Foreign Property. For straightforward situations—such as owning U.S. stocks in a Canadian brokerage or rental property abroad—your regular tax preparer should be able to handle T1135 preparation as part of your annual tax filing.

However, certain situations genuinely require specialized expertise:

Cryptocurrency holdings - Given the unclear guidance and potentially severe penalties, if you hold significant cryptocurrency that might trigger T1135 reporting, seek advice from a tax professional specifically experienced in cryptocurrency taxation, not just general tax preparation.

Foreign trusts - If you've received distributions from foreign trusts or are a beneficiary of such trusts, you may need to file additional forms beyond the T1135 (such as Form T1142), and these situations can become quite complex. A cross-border tax specialist should review your situation.

International pension arrangements - Foreign pension plans vary dramatically in structure across different countries, and determining whether they constitute Specified Foreign Property requires careful analysis. Professional guidance from someone familiar with cross-border retirement planning is valuable here.

New immigrants with complex foreign holdings - If you immigrated to Canada with substantial and varied foreign assets, professional advice in your first few years as a Canadian tax resident can help you establish proper reporting practices and avoid costly mistakes.

The CRA also maintains a helpline where you can seek opinions on whether particular assets fall under T1135 reporting requirements, though obtaining written confirmation of the CRA's position rather than relying on verbal advice is prudent for significant situations.

Key Takeaways

• The T1135 is required when your Specified Foreign Property exceeds $100,000 (cost basis) at any time during the year

• The threshold is based on original cost, not current market value

• Penalties for non-compliance are severe ($25/day up to $2,500/year, then 5% of property value) even if you reported all income correctly

• Foreign securities in Canadian brokerages count toward the threshold if they're foreign-domiciled

• Registered accounts (RRSP, TFSA, etc.) are completely exempt from T1135 reporting

• Canadian ETFs with foreign holdings don't trigger reporting obligations

• Personal-use vacation properties are exempt, but rental properties must be reported

• Cryptocurrency reporting remains unclear—seek professional guidance if holdings are substantial

• The Voluntary Disclosure Program may help if you discover past non-compliance

• New immigrants get a grace period in their first year, but must report based on immigration-date values thereafter

• When uncertain, over-reporting is safer than under-reporting

The Bottom Line

The T1135 is one of those tax requirements that catches many Canadians completely off guard, often years after they should have been filing it. The combination of a relatively low threshold ($100,000 in cost basis of foreign property isn't as much as it sounds when you consider a mix of investments and real estate), severe penalties for non-compliance, and limited public awareness creates a situation where well-intentioned taxpayers can find themselves facing thousands of dollars in penalties for paperwork violations rather than any actual tax evasion.

The good news is that with proper awareness and planning, T1135 compliance doesn't have to be complicated or burdensome. Understanding what triggers reporting requirements, keeping good records of your foreign property purchases with their dates and costs, and considering the T1135 implications when structuring your investment portfolio can help you stay compliant while minimizing administrative hassles.

If you're unsure about your T1135 obligations, don't wait until the CRA contacts you. A consultation with a qualified tax professional costs far less than the penalties for non-compliance, and getting clarity now prevents potentially expensive problems down the road.

This information is provided for educational purposes only and does not constitute tax, financial, or legal advice. Tax laws are complex and change periodically. Consult with qualified professionals regarding your specific circumstances and current tax requirements.