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) ...