Canadian residents are required to report their income on a worldwide basis. In addition, every individual must indicate on their personal income tax return whether or not they own Specified Foreign Properties with an aggregate cost of $100,000 or more. To determine the cost of foreign properties acquired in a currency other than Canadian dollars, use the exchange rate in effect at the time the property was purchased. If you own Specified Foreign Properties with an aggregate cost more than $100,000 you must complete and file Form T-1135 by your tax return due date (April 30 of the following year for many individuals and June 15 for self-employed individuals). You must include the income earned in the year from foreign property, specified or otherwise, on your Canadian tax return, irrespective of the property's cost.
Specified Foreign Property does not include property that is purely for personal use and generates no income. If the foreign property (for example, a vacation home) is not used to generate income, then it does not have to be reported as foreign property. Foreign property used exclusively in an active business, foreign property held through a Canadian mutual fund, and foreign property held through an RRSP are also excepted from the reporting requirement.
If you own Specified Foreign Properties with an aggregate cost of $100,000 or more, contact a Chartered Accountant to help you understand the reporting requirements and identify tax-planning opportunities for foreign tax credits. Failure to comply with the foreign property reporting requirements can result in significant penalties.
Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.