{"id":323,"date":"2014-04-21T12:45:56","date_gmt":"2014-04-21T12:45:56","guid":{"rendered":"http:\/\/capitaltaxltd.com\/canada\/?p=323"},"modified":"2021-02-25T16:46:45","modified_gmt":"2021-02-25T16:46:45","slug":"the-cra-and-foreign-holdings-points-to-keep-in-mind","status":"publish","type":"post","link":"https:\/\/www.capitaltaxltd.com\/canada\/2014\/04\/21\/the-cra-and-foreign-holdings-points-to-keep-in-mind\/","title":{"rendered":"The CRA and Foreign Holdings: Points to Keep in Mind"},"content":{"rendered":"<div style=\"padding-bottom:20px; padding-top:10px;\" class=\"hupso-share-buttons\"><!-- Hupso Share Buttons - https:\/\/www.hupso.com\/share\/ --><a class=\"hupso_counters\" href=\"https:\/\/www.hupso.com\/share\/\"><img decoding=\"async\" src=\"https:\/\/static.hupso.com\/share\/buttons\/share-small.png\" style=\"border:0px; padding-top:2px; float:left;\" alt=\"Share Button\"\/><\/a><script type=\"text\/javascript\">var hupso_services_c=new Array();var hupso_counters_lang = \"en_US\";var hupso_image_folder_url = \"\";var hupso_url_c=\"\";var hupso_title_c=\"The%20CRA%20and%20Foreign%20Holdings%3A%20Points%20to%20Keep%20in%20Mind\";<\/script><script type=\"text\/javascript\" src=\"https:\/\/static.hupso.com\/share\/js\/counters.js\"><\/script><!-- Hupso Share Buttons --><\/div><p>In an effort to combat fraud and tax evasion, the Canada Revenue Agency is taking a\u00a0more proactive stance in reference to foreign accounts and gathering information about\u00a0taxpayers who have holdings overseas. As such, it is wise to have a more in-depth look\u00a0at what this means for the individual resident and what steps need to be taken.<\/p>\n<p><strong> A Global Reach <\/strong><\/p>\n<p>Indeed, Canada is not the only country pursuing such methods. In fact, the Foreign\u00a0Income Verification Statement (Form T1135) is in line with the steps defined by the\u00a0Organization for Economic Cooperation and Development (OECD) and their protocols to fight tax fraud and evasion.<\/p>\n<p>This is on the heels of the recent action of the United States in relation to the exposure\u00a0of over 4,000 nationals that had significant holdings in the Swiss banking giant UBS.\u00a0In fact, Canada has recently taken similar steps when it uncovered no less than\u00a0180 individuals that had holdings in Liechtenstein. To put the figures into a bit of\u00a0perspective, it was found that no less than 130,000 individuals had holdings in offshore\u00a0havens and 450 of those identified were of Canadian nationality. Of course, having such\u00a0accounts is by no means illegal. On the contrary, it is only those who openly or covertly\u00a0flout tax laws that need to be investigated. So, the CRA launched a tax evasion hotline\u00a0in 2013. Part of the taxes collected from a successful outcome would be given to the\u00a0informants themselves.<\/p>\n<p><strong>Completing the T1135<\/strong><\/p>\n<p>Recall that this form actually dates from the 1990s and is therefore nothing new to the\u00a0taxpayer. Any taxpayer with a foreign holding of more than $100,000 Canadian dollars\u00a0will need to fill in and submit this form. This property includes funds in foreign bank\u00a0accounts, interest from foreign trusts, bonds or share issued abroad and indeed any form\u00a0of taxable foreign income.<\/p>\n<p>However, the levels of disclosure that have been implemented since 2013 are the\u00a0major difference in reporting methods. Again, this is seen as one step that the\u00a0Canada Revenue Agency has taken to allow for a higher level of transparency \u00a0while\u00a0simultaneously discouraging fraud. Unfortunately, some of the information that is\u00a0required may be difficult to come by (such as a detailed analysis of investment activity\u00a0within a foreign account).\u00a0Other details are also required. These will include the name of any property held outside\u00a0of Canada as well as the country in which it is located. The maximum cost is also\u00a0required as is any related gain (or loss) that may have resulted from the sale of one of\u00a0these properties. Recall that this is in contrast to the previous requirements that only\u00a0asked for general information such as year-end costs, the total income earned and the\u00a0classification of the country itself.<\/p>\n<p><strong>Compliance Issues<\/strong><\/p>\n<p>The CRA is also taking certain steps to ensure that this information is reported. If\u00a0one fails to fill in form T1135, does so late or reports incorrect data, he or she can be\u00a0investigated for a total of six previous years. Obviously, this would place all income and\u00a0deductions under a great deal of scrutiny. Finally, a penalty of up to $2,500 Canadian\u00a0dollars may be levied in some cases. All in all, these are excellent ways to motivate an\u00a0individual to comply with such new legislation.<\/p>\n<p><strong>Slight Leeway<\/strong><\/p>\n<p>This has obviously caused a certain amount of confusion and consternation amongst\u00a0those who hold foreign investments. For this reason, the deadline for filing form\u00a0T1135 has been extended until July 31st\u00a030th or June 16th). Also, the CRA has allowed a more streamlined reporting service for\u00a0those individuals who may have their holdings in an account that is a securities dealer\u00a0registered with the Canada Revenue Agency. In other words, individuals will be able to\u00a0report any combined values of their properties for the 2013 tax year by July 31st \u00a0year.<\/p>\n<p>Remember that for the 2014 tax year, you must report all of the aforementioned\u00a0information on the T1135 tax form. It is only this first year that the CRA has offered \u00a0a bit of leeway. So, it is better to put together any foreign property details sooner\u00a0as opposed to later. This can help prevent a good deal of frustration and even the\u00a0possibility of stiff penalties further down the line.<\/p>\n<p>The actions taken by CRA are but one example of the global crackdown on foreign tax\u00a0evasion and fraud that we have witnessed in recent years. Whether individuals choose\u00a0to agree with these measures or not, it is no secret that form T1135 and other such\u00a0regulations are indeed a permanent fixture of the CRA&#8217;s reporting policies. Thus, it is\u00a0best to become acclimated to how such logistics operate by speaking with a professional\u00a0financial adviser or tax professional.<\/p>\n<p><strong>Contact us for more information.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In an effort to combat fraud and tax evasion, the Canada Revenue Agency is taking a\u00a0more proactive stance in reference to foreign accounts and gathering information about\u00a0taxpayers who have holdings overseas. As such, it is wise to have a more in-depth look\u00a0at what this means for the individual resident and what steps need to be [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1216,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-323","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uncategorized","8":"entry"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v15.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<meta name=\"description\" content=\"In an effort to combat fraud and tax evasion, the Canada Revenue Agency is taking a\u00a0more proactive stance in reference to foreign\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.capitaltaxltd.com\/canada\/2014\/04\/21\/the-cra-and-foreign-holdings-points-to-keep-in-mind\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"International Tax Services - 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