CRA’s T1135 Foreign Income Verification Statement is one of the more commonly missed filings for Canadian IT contractors, particularly those who have opened a foreign brokerage account to hold USD client payments or built an investment position in US securities. The form does not require the property to have generated any income, and it is easy to assume a USD account somehow falls outside CRA’s reach because the currency is foreign, when the actual test is where the account is held and what it holds, not what currency it is denominated in.
What T1135 Actually Requires
Any Canadian resident individual, corporation, trust, or partnership that held specified foreign property with a total cost amount exceeding CAD $100,000 at any point during the year must file T1135 for that year. The filing is separate from the T1 or T2 return itself, though it is filed alongside it and is subject to the same filing deadline.
The threshold is measured by cost, generally the original acquisition cost converted to Canadian dollars, not by current market value. A foreign investment account that has appreciated well past $100,000 in current value but was purchased for less than that amount can still fall under the threshold, and conversely, an account purchased for over $100,000 that has since dropped in value is still subject to the filing requirement, since the test looks at cost, not the fluctuating market value.
What Counts as Specified Foreign Property
The category is broader than most contractors expect and includes:
- Funds held in a foreign bank account, including a USD account at a US financial institution
- Shares of foreign corporations, held directly or through either a Canadian or foreign brokerage account
- Interests in foreign mutual funds, trusts, or partnerships
- Debt owed by a non-resident, including foreign bonds
- Real property located outside Canada, other than personal-use property
- Precious metals, futures contracts, and other property held outside Canada
It generally excludes property used exclusively in an active business, personal-use property such as a vacation property used personally, and shares of a foreign affiliate corporation reported under separate rules, along with property held inside a registered account such as an RRSP.
The Account Location, Not the Currency, Is What Matters
This is where the confusion tends to happen. For cash and deposit accounts, a US-dollar account held at a Canadian bank is generally not specified foreign property merely because the balance is denominated in US dollars. But securities are different: shares of non-resident corporations are specified foreign property even if they are held through a Canadian broker, though CRA allows aggregate reporting for property held with a Canadian registered securities dealer or Canadian trust company.
An IT contractor who opens a USD account at a Canadian bank to receive US client payments, and simply holds that cash there, does not create a T1135 obligation from the account location alone. The same contractor who instead opens a brokerage account with a US-based broker to invest that USD income, or who buys foreign securities in a non-registered Canadian brokerage account, is now holding specified foreign property and needs to track the cost amount against the $100,000 threshold.
The Threshold Is Combined, Not Per Account
The CAD $100,000 test applies to the combined cost amount of all specified foreign property held, not to any single account or asset in isolation. A contractor with a US brokerage account holding USD $70,000 in cost and a separate foreign rental property with a CAD $40,000 cost base has crossed the combined threshold, even though each individual holding looks modest on its own.
This combined-threshold structure means that a contractor who opens a second small foreign account, thinking it stays under the radar because it is a modest balance, may unknowingly trigger the filing requirement once it is added to other foreign holdings already in place. Tracking specified foreign property across all accounts as a running total, rather than evaluating each account independently, is the only way to catch this reliably.
Corporate T1135 vs. Personal T1135
The filing obligation attaches to whichever entity, individual or corporation, actually holds the specified foreign property. A corporation that holds foreign accounts or foreign securities as part of its retained earnings, discussed in the corporate investments and passive income guide, files its own T1135 alongside the T2 return if the corporation’s foreign property crosses the threshold.
This is a separate filing from any T1135 the shareholder needs to file personally for foreign property held outside the corporation in their own name. A contractor holding a personal US brokerage account and a corporation separately holding US investments in a corporate account may need two T1135 filings in the same year, one for each entity, each measured against its own $100,000 threshold independently.
Penalties for Late or Missing T1135
The standard penalty for failing to file T1135 by the deadline is CAD $25 per day the return is late, with a CAD $100 minimum and CAD $2,500 maximum, plus arrears interest calculated from the original due date. There is no de minimis exception based on how much income the unreported property actually generated; the penalty is tied to the failure to file the information return itself.
Where CRA determines the failure was made knowingly or under circumstances amounting to gross negligence, the penalty can rise to CAD $500 per month for up to 24 months, less penalties already charged. False statements or omissions can trigger a separate penalty based on the greater of CAD $24,000 and 5% of the relevant foreign property cost. For 2013 and later tax years, the normal reassessment period can also be extended by three years where foreign-property income was not reported on the income tax return and T1135 was not filed, was filed late, or was filed inaccurately. Contractors who realize partway through the year that they have missed a prior T1135 filing should address it through the Voluntary Disclosures Program rather than waiting for CRA to identify the gap independently, since a proactive disclosure before CRA initiates contact is generally treated more favourably than a filing made after a review has already started.
What to Review Each Year
Before finalizing a T1 or T2 return, confirm:
- Whether any foreign brokerage, bank, or investment account was opened or held at any point during the year, regardless of balance
- The combined cost amount of all specified foreign property, not just the balance in any single account
- Whether a corporate account holding USD investments is being tracked separately from any personal foreign holdings
- Whether the account is genuinely held at a foreign institution, versus a USD-denominated cash account at a Canadian bank that does not itself trigger the filing, and whether any Canadian brokerage account holds foreign securities anyway
- Whether a prior year’s T1135 filing was missed and needs to be addressed through a voluntary disclosure before continuing to file current-year returns without it
The Canadian filing obligations while living in the U.S. guide and the foreign exchange and multi-currency guide on the Ecomcount side cover related USD account and cross-border considerations that often come up alongside the T1135 question.