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    Submitted by crataxrescuesupport

    The Government of Canada announced through the federal budget last year about its intention to take steps in addressing non-compliance in taxes which involve foreign property investment and foreign income. One of the major steps was the introduction of the revised Form T1135. This is for all practical purposes a foreign income statement of verification. It is applicable for the taxation period that followed June 2013. CRA could impose heavy penalties on unreported foreign income if the taxpayers failed to comply with the requirements concerning filling of Form T1135.

    This Form has existed for several years now. It was pretty straight forward to complete in the taxation years that have gone by, previously. Starting from the 2013 taxation year, this form has been revised and it now needs detailed information concerning foreign property which is owned by Canadian residents.

    Who is required to complete Form T1135?
    Any Canadian resident who owns a specified foreign property at any part of the year is required to file the Form T1135 and the criteria has very much remained the same as it was before. The investment in the foreign property has to exceed a sum of one hundred thousand Canadian Dollars. Those individuals who migrate to Canada are not required to fill this form and be concerned about unreported foreign income. This applies during the year when the immigrants first become Canadian tax residents unless they were residents of Canada previously. It has to be noted that the form has to be filed for all the subsequent taxation periods which includes the taxpayer’s departure year from Canada. Besides the individual residents in Canada, Form T1135 has to be filed by all trusts and corporations also who are Canadian residents.

    What is categorized as Foreign Property?
    The definition of foreign property is broad and it includes non-Canadian assets like funds which are held outside of Canada. It also involves real estate property located outside Canada, stocks in non-Canadian corporations and interest accumulated in a non-resident trust which was acquired for due consideration. Foreign property specification will exclude property for personal use such as vacation houses. Properties which are used in active business operations are also excluded as per the Income Tax Act. Specified property abroad also involves non-Canadian investments that are held in a brokerage account in Canada.

    CRA has strengthened the enforcement of Canadian tax laws when it comes to unreported foreign income relating to all individuals who own foreign property and earn income from investments abroad. Some examples of how this enforcement has been stepped up include the new `Offshore Tax Informant Program (OTIP)’. This is also referred to as the `whistle blower program’. The program gives financial rewards to those individuals who can provide evidence and proof about important unreported foreign income and international tax non-compliance cases.

    The information would mostly be connected with income which is earned from the gains when disposing of foreign property. It would also include identification details such as the name of the bank in that foreign country where the Canadian resident is holding funds outside of Canada.