As part of the 2013 budget, the federal government has made a number of key changes to the rules governing the reporting of foreign property valued at more than $100,000. Specifically, these deal with changes related to Form T1135, the Foreign Income Verification Statement, in an effort to ensure Canadians are correctly reporting their foreign property and income.

Budget 2013 proposes to extend the normal reassessment period for a taxation year of a taxpayer by three years if the taxpayer fails to report income from a foreign property on his or her tax return, if Form T1135 was not filed on time by the taxpayer, or a foreign property was either not identified or not identified on Form T1135. This measure applies to the 2013 and subsequent taxation years.

The normal reassessment period for individuals is three years; for public corporations and mutual funds it is four years. Under the budget proposal, the period would be six years for individuals and seven for corporations and mutual funds.

In addition, the CRA will revise Form T1135 to require taxpayers to provide more detailed information regarding each foreign property, including the name of the foreign institution holding the funds; the country to which the property relates; and the foreign income generated from the property.

Finally, the CRA intends to clarify the filing instructions on T1135s, which some taxpayers have indicated are unclear; it will notify taxpayers on their Notice of Assessments that they are required to file a Form T1135 if they have indicated on their income tax returns that they have foreign property with a total cost of more than $100,000; and it will continue with the process of developing a system to allow Form T1135 to be filed electronically.

“It’s to allow the CRA to collect more specific information than they can otherwise,” said a Department of Finance official, who explained that the T1135 was too general and didn’t give the CRA the proper information in order to assess issues such as non-compliance risk. The CRA is also hoping that the changes will make it easier for taxpayers to file the form on time and properly.

Individual, corporations and trusts that own specified foreign property costing more in total than $100,000 must file a Form T1135 with the CRA. Specified foreign property includes most types of income-earning property held outside of Canada, other than personal property and property used in carrying on an active business.