Earlier this week, the government took yet another step to combat international tax evasion by Canadians by following through on its federal budget promise to revamp and re-launch what it calls a “strengthened” Foreign Income Verification Statement (Form T1135).
“Stronger reporting requirements will provide the Canada Revenue Agency with more information to crack down on those who attempt to cheat the system,” said Gail Shea, Minister of National Revenue who made the announcement on Tuesday when meeting with members of the Certified General Accountants Association of Canada to discuss various tax matters.
The revised T1135, applicable for 2013 tax filings, will require Canadians who hold “specified foreign property,” at any time in the year, with a cost over $100,000, to provide additional information to the CRA. The new information required includes: the name of the specific foreign institution or other entity holding funds outside Canada, the specific country to which the foreign property relates and the income generated from the foreign property.
Specified foreign property includes: funds held on deposit outside of Canada, foreign real estate, other than personal residential real estate that isn’t rented out, and shares and debt of non-resident corporations.
The penalty for failing to file this form on time is $25 per day, to a maximum of $2,500, which can increase if you knowingly or under circumstances amounting to “gross negligence” fail to file the form.
But there may actually be a silver lining hiding in the instructions to the revised form, at least for Canadians whose only “offshore” assets are shares of foreign companies held in a Canadian non-registered brokerage account.
For an investor who holds multiple foreign securities, filling out the T1135 annually has traditionally been a burdensome and sometimes costly process, which may now be a lot simpler.
The new form states that “where the reporting taxpayer has received a T3 or T5 from a Canadian issuer in respect of a specified foreign property for a taxation year, that specified foreign property is excluded from the T1135 reporting requirement for that taxation year.”
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