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Foreign Information Reporting Form T1135 Applies to Taxation Years Ending After June 30, 2013 

Canadian Tax Adviser

 

August 06, 2013

 

Brian Mustard
Montreal, International Corporate Tax

 

Diane Wood
London, Canadian Corporate Tax

 

The CRA has officially confirmed that the revised Form T1135 applies to taxation years ending after June 30, 2013 and that, accordingly, old form T1135 will still be accepted for taxation years that ended prior to July 1, 2013. Further details have also been provided on the application of the exclusions where a T3 or T5 has been received for a foreign property.

Previously, it was unclear whether the CRA would provide transitional relief for the use of new Form T1135, "Foreign Income Verification Statement", which states on the revised form that it must be used for the 2013 and later taxation years. This is welcome news for taxpayers who now have additional time to gather the new required information.

 

Background
On June 25, 2013, the CRA released New Form T1135 "Foreign Income Verification Statement", which requires specific details about the categories of specified foreign property rather than just their cost amounts, as previously required. The CRA now requires taxpayers to:

 

  • Include the name of the bank or other entity holding funds outside of Canada
  • Identify the foreign country to which the property relates
  • Identify the maximum and year-end cost amounts of the property
  • Provide the income/loss or gain/loss from the particular property.

 

New Form T1135 also states that, where the reporting taxpayer has received a T3 or T5 from a Canadian issuer for a specified foreign property for a taxation year, that specified foreign property is excluded from the T1135 reporting requirement for that taxation year and that if a functional currency election has been made, then all monetary amounts should be stated in the functional currency.

 

The 2013 federal budget had announced that Form T1135 would be revised to require more detailed information. The budget also announced a three-year extension of the normal reassessment period if the taxpayer fails to file the form when required or fails to report required information on the form. These measures apply for the 2013 and subsequent taxation years.

 

For details please see TaxNewsFlash-Canada 2013-10, "2013 Federal Budget Highlights".

 

CRA clarifies when new Form T1135 must be filed
On the "What's new?" section of its "Revised Form T1135, Foreign Income Verification Statement" page on the CRA site, the CRA clarifies that New Form T1135 applies to taxation years ending after June 30, 2013 and must be filed with the CRA on or before the filing due date of the related tax return in the case of a T1, T2 or T3 return or, in the case of a partnership, the filing due date of the T5013 Partnership Information Return. The CRA also clarifies that the old Form T1135 will still be accepted for taxation years that ended prior to July 1, 2013.

 

CRA comments on T3/T5 exclusion
The CRA also clarifies that, where a reporting taxpayer receives a T3 or T5 from a Canadian issuer for a taxation year, the details of that particular specified foreign property do not have to be disclosed in one of the tables on Form 1135. The reporting exclusion for properties is administrative relief only, and the determination of whether the exclusion applies must be done on a property-by-property basis for each taxation year during which the property was held. For example, if there are numerous properties held in one investment account, only those properties for which a T3 or T5 was issued for a particular taxation year would be subject to the reporting exclusion in that particular year.

 

Furthermore, a specific property may be subject to the reporting exclusion in one year and not in another year, depending on whether it earned income for which a T3 or T5 was issued. The CRA also notes that the taxpayer is still required to file Form T1135 by the filing due date even if a T3 or T5 was issued in respect of all specified foreign property held during the taxation year. In this case, the taxpayer would complete the identification information and check the reporting exclusion box on Form T1135.

 

Other CRA comments
Currently, Form T1135 must be paper filed, however, the CRA also notes it is working on allowing taxpayers to electronically file the form and will announce when this option becomes available. The CRA also noted that, beginning with the 2013 taxation year, reminders to file Form T1135 will begin to be included with taxpayer's Notices of Assessment, for taxpayers who have ticked "yes" to the question of whether they held specified foreign property in a taxation year with a total cost of more than $100,000 on their tax return.

 

For more information, contact your KPMG adviser.

 

 

 

 

 

Information is current to August 06, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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