Foreign Property Reporting (T1135) for Retirees Abroad

Many Canadians who retire abroad — or who simply invest in foreign assets while still living in Canada — are unaware of a significant annual reporting obligation: the T1135, Foreign Income Verification Statement.

If you are a Canadian tax resident who owns foreign property with a cost of more than $100,000 CAD at any point during the year, you must file the T1135 with your annual tax return. Failure to file — or filing late — carries penalties that are disproportionately harsh compared to the effort required to comply.

Who Must File the T1135?

You must file the T1135 if you are a Canadian resident for tax purposes and you held specified foreign property with a total cost base exceeding $100,000 CAD at any time during the year.

Note: this applies to Canadian tax residents. Once you become a non-resident of Canada, you no longer file T1135 — you are no longer subject to Canadian worldwide income reporting. However, during your final part-year resident tax return (your departure year), the T1135 still applies if you held qualifying foreign property during the resident portion of that year.

What Counts as Specified Foreign Property?

The definition is broader than most people expect:

• Foreign bank accounts (including accounts at foreign branches of Canadian banks)
• Foreign stocks and bonds held directly (not inside a Canadian registered account)
• Shares in foreign corporations
• Foreign real estate — including a vacation property or retirement home purchased abroad
• Interests in foreign trusts
• Foreign annuities
• Loans to non-residents
• Interests in foreign partnerships

What does not count as specified foreign property:

• Foreign property held inside a Canadian RRSP, RRIF, TFSA, or RESP
• Personal use property (a foreign vacation home used primarily for personal use — though this has nuances)
• Property used in an active business
• Foreign mutual funds held through a Canadian dealer that are already reported

The $100,000 Threshold — Cost, Not Market Value

The threshold is based on the adjusted cost base of the foreign property — not its current market value. This means:

• If you purchased foreign stocks for $80,000 and they have grown to $140,000, you are below the threshold (cost is $80,000)
• If you purchased a foreign property for $110,000 and it has declined to $90,000, you are above the threshold (cost is $110,000)

This distinction catches some people off guard. Keep records of your cost base for all foreign property — you will need them.

The Two Tiers of T1135 Reporting

The T1135 has two methods of reporting depending on the total cost of your foreign property:

Total Cost of Foreign Property	Reporting Method	Details Required
$100,000 – $250,000	Simplified method	Asset category, country, income, and gains — no individual asset listing required
Over $250,000	Detailed method	Each foreign property listed individually with cost, income, and gains

Penalties for Non-Compliance

CRA takes T1135 non-compliance seriously. The penalties are:

• Late filing: $25 per day, up to $2,500 per year
• Gross negligence or false statement: 5% of the cost of the unreported property, minimum $24,000 — this can be a very large number
• Repeated failure: Escalating penalties apply
• Voluntary disclosure: CRA has a Voluntary Disclosures Program that may reduce or eliminate penalties for taxpayers who come forward proactively — but this window closes once CRA has initiated an audit or contact

Given that the maximum late filing penalty is $2,500 and the penalty for gross negligence starts at $24,000, the incentive to file late — rather than not at all — is clear. Even if you miss the April 30 deadline, file as soon as you discover the error.

Practical Implications for Canadians Retiring Abroad

If you are a Canadian resident who has purchased a property abroad — a retirement home in Portugal, a condo in Mexico, a cottage in the US — and the cost exceeded $100,000, you are likely required to file T1135 each year until you either sell the property or become a non-resident.

This is an area where many Canadians unknowingly fall out of compliance. The purchase of a foreign retirement property feels personal and domestic — not like an investment requiring CRA reporting. But from CRA’s perspective, it is specified foreign property and the reporting obligation is clear.

T1135 and Non-Residents

Once you become a non-resident of Canada, your T1135 obligation ends. CRA does not require non-residents to report worldwide assets. However, you may have reporting obligations in your new country of residence that are analogous — the US FBAR and FATCA requirements for US residents with foreign financial accounts are a prominent example.

Before leaving Canada, review your foreign property holdings and ensure all prior-year T1135 filings are current. Departing with unfiled obligations creates risk — CRA can still assess penalties for prior years even after you become a non-resident.