Foreign Property Reporting Requirements
Canadian residents are required to report their income on
a worldwide basis. In addition, every individual is now required
to indicate on their personal income tax return whether or
not they own Specified Foreign Properties with an aggregate
cost of $100,000 or more. If you own specified foreign property
which costs more than $100,000 then you must complete and
file Form T-1135 by your tax return due date (April 30 of
the following year for many individuals and June 15 for self-employed
individuals). You must also include the income earned in the
year from the specified foreign property on your Canadian
tax return for the year.
Specified Foreign Property does not include property that
is purely for personal use and generates no income. If the
foreign property (for example, a vacation home) is not used
to generate income, then it does not have to be reported as
foreign property. Foreign property used exclusively in an
active business, foreign property held through a Canadian
mutual fund, and foreign property held through an RRSP are
also excepted from the reporting requirement.
If you own specified foreign property with a cost of $100,000
or more, contact a Chartered Accountant to help you understand
the reporting requirements and identify tax-planning opportunities
for foreign tax credits. Failure to comply with the foreign
property reporting requirements may result in significant
penalties.
The Institute of Chartered Accountants of Alberta provides
information for Tax Tips as a public service.
Foreign Source Income
If you have obtained income from foreign sources, such as
pension income, you must report it in Canadian dollars on
your tax return.
To convert the foreign source income, you must use the rate
of exchange that was in effect when the money was received
or the average exchange rates for each year published by the
Bank of Canada. You must report the amount of foreign income
before deducting any tax that was withheld at the source.
However, if you have paid tax on that same income in a foreign
country, the amount of foreign tax paid should be eligible
for a Canadian tax credit.
Some income may also be exempt under international tax treaties.
There may be several tax planning opportunities, depending
on the source and type of income. However, since the sourcing
rules can be quite complex, you should seek the advice of
a Chartered Accountant.
The Institute of Chartered Accountants of Alberta provides
information for Tax Tips as a public service.
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