Everything you need to know about T1135

Do you own foreign investments? Then you'll need a T1135 form.

What is a T1135 Form?

The T1135 is a unique taxpayer form filled by all resident individuals, companies/corporations, trusts and some partnerships that own SFPs (specified foreign property) that cost more than $100,000. If you own property, such as a business, outside of Canada, it is crucial to check whether your property is within the limits where T1135 applies. Essentially, the form is used to report assets that citizens own outside of Canada.

Who Should Fill Out a T1135?

If you own SFP that cost more than $100,000 at any time of the year, then you need to fill out a T1135, regardless of whether you’re an individual, a corporation, a trust, or a partnership. You should complete the T1135 form regardless of whether you sold part or all of your holdings within the specified tax year.

What Are The Foreign Investment Limits Beyond Which The T1135 Is Necessary?

A specified foreign investment (SFP) refers to the assets and revenue you generate outside of Canada. Only property that cost more than $100,000 should be reported on form T1135, but there are two tiers within the form. 

The first tier is for property with a value above $100,000 up to $250,000, and the next is for property above $250,000. The T1135 form is due on the same date as the income tax report filled annually.

A qualifying SFP includes:

• All amounts held in foreign bank accounts

• Shares you have in foreign countries

• Canadian corporations outside Canada

• Interests received from non-resident trusts

• Debts and loans you have given to non-residents,

• Debentures from foreign governments

• Life insurance coverage from foreign insurers

• Interests in foreign mutual funds

• Real estate and tangible property held outside Canada

• Any property that's convertible, convertible or confers a right to acquire SFPs

You will be required to include the following information when declaring your specified foreign property:

• Name of the company, corporation, or legal entity that owns or holds the SFP

• Description of the foreign property, including the country it is located

• The maximum cost of running the SFP during the taxation year and at year-end

• Income or loss related to foreign property

• The capital gain or loss realized on the SFP's deposition

How To Calculate Foreign Investment Income?

To calculate your foreign investment income, you should consider the following:

a) Gross income - This refers to all amounts you receive from your business in a foreign country before deductions are made.

b) Net income - This refers to the gross income minus the expenses you incur to run the business in a foreign country. This can include the cost of the goods and services, wages, and other business expenses.

You should file the T1135 if your SFP net income is above $100,000. The taxable amount is your gross amount, minus the taxes paid to the foreign country.

T1135 Breakdown

There are two main T1135 parts as follows:

Part A – This section is for eligible taxpayers with a property that exceeds the $100,000 limit but below $250,000. It is a simplified form where taxpayers check checkboxes for the property they hold outside Canada in the specified taxation year without further details about the property.

Part B – This is reserved for taxpayers with specified foreign property that cost more than $250,000. It is more detailed, requiring accurate descriptions of the SFPs.

Both forms are available as fillable PDFs that you can also save and print.

Where do I send my T1135?

T1135 forms should be filled and submitted to the CRA before the issued deadlines. The CRA allows taxpayers to file their T1135 online through EFILE (NETFILE), although this isn't available for trusts. You can also fill the form manually by downloading and completing it before sending it to the respective CRA office. If you plan to extend the period, you can attach a schedule based on the table formats in form T1135. The CRA will extend the reporting period by up to three years.