Newcomer Guide to T1135: The Threshold, the Scope, and the First-Year Rule

Summary

For newcomers who have recently landed in Canada, foreign-asset reporting is one of the most misunderstood topics, and the central form is T1135. Under Canadian tax rules, a tax resident whose “specified foreign property” had a total cost exceeding CAD 100,000 at any point in the year must report it by filing T1135 with the return. The trigger is the assets themselves, not the income they produced during the year — a distinction many newcomers miss when they conflate “foreign assets” with “foreign income,” and one that leads them to underestimate their filing obligations.

Specified foreign property generally includes foreign bank deposits, shares of foreign corporations, interests in non-resident trusts, bonds issued by foreign governments or corporations, and real estate located outside Canada that is held mainly for investment. Personal-use assets — such as a personal vehicle, a principal residence, jewellery, or artwork — and assets held inside an RRSP, RRIF, or RPP are generally outside the reporting scope. The test is whether the total cost exceeded the threshold on any day of the year, not the year-end balance or market value.

There is also an important easing rule for newcomers: in the year you become a Canadian tax resident (your landing year), you generally do not need to report foreign assets; the obligation begins the following year. For example, a newcomer who landed in 2019 would not report foreign assets on the 2020 return, but would need to do so for the 2020 tax year (filed in 2021). At the same time, automatic exchange of financial-account information under the Common Reporting Standard (CRS) now covers many participating countries, including China, so relying on “no one will find out” carries growing risk; the penalties for failing to report or misreporting can be significant.

One caution: being exempt in the first year does not mean records can be discarded. Title documents, fair-market-value records at acquisition, and the balance sheets or capital-verification reports used in your original immigration application should all be kept, in case they are needed for a future audit or for calculating capital gains. Newcomers who are unsure whether they must file, or how to establish the cost base of their assets, should consult a licensed CPA early.

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Our Take

For newcomer families, the practical difficulty with T1135 is usually not filling in the form but making the determination: which assets count as specified foreign property, how to establish the cost base, whether the first year requires filing, and whether prior years must be corrected. Because the trigger is the total cost at any point in the year, pre-landing preparation and record retention matter a great deal. As CRS information exchange expands, clarifying your position and filing correctly is far more comfortable than explaining it after the fact. We recommend planning the asset inventory and filing obligations together during your first tax season.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.