"What is foreign property? And why does EVERY taxpayer need to know about this?"
When you file your personal tax return every year (and always on time), the question “Do you own any foreign property?” is always asked. By default, most taxpayers just answer “NO” and often don’t even stop to think about what it means. However, what most don’t know, is that there are penalties that apply if you just answer “NO” when it might actually be “YES”. And yes, by answering “YES”, that does mean another tax filing would be needed.
What is foreign property? This is any property that is not considered Canadian property. It includes bank accounts for another country even when held with a Canadian bank or credit union (i.e. US bank account at your local bank), investment accounts held in foreign currency (i.e. even when held with your local investment advisor), rental and/or vacation properties in another country, shares of non-resident corporations, etc.
When the value of your foreign property is greater than $100,000 Canadian, CRA requires you to file a T1135 Foreign Property Verification Form. They want to ensure that all income you are making from any property held outside of Canada is being reported. Albeit, most Canadian banks will provide you with a report that summarizes the necessary information if you are investing outside of Canadian banks, you will need to keep track of the original CDN cost when purchased, the market value on December 31 each year and depending on when your foreign property is greater than $250,000 CDN, you may even need to know what month it was the highest market value during the year.
If you think this might apply, contact us immediately so we can help mitigate any penalties for late filing.
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***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.