National Revenue Minister responds to call to ease foreign income reporting

The Minister of National Revenue has considered CPA Canada’s call to simplify Form T1135 reporting. Find out how she responded to three key recommendations to ease the burden for taxpayers and their advisers.

Form T1135 creates significant challenges for taxpayers, tax preparers and members of the investment community. Although the Canada Revenue Agency (CRA) has made progress in relieving some of the filing burden, more needs to be done. This message is central to Chartered Professional Accountants of Canada (CPA Canada)’s December 2014 letter to the federal ministers of National Revenue and Finance.

In her reply, Minister of National Revenue Kerry-Lynne D. Findlay says the CRA recognizes the challenges some taxpayers and tax preparers may face in meeting T1135 obligations. She also replied to three key recommendations:

RESTORE AND EXPAND THE EXCEPTION FROM FORM T1135 REPORTING FOR SECURITIES HELD IN CANADIAN BROKERAGE ACCOUNTS.

The minister says that the CRA does not receive key information about the value and location of assets on other reporting forms (e.g., T3, T5, T5013, T5008). The additional information “strengthens the CRA’s ability to assess risks and identify potentially abusive tax avoidance strategies.”

ELIMINATE FORM T1135 REPORTING OBLIGATIONS FOR TAXPAYERS WITH FOREIGN PROPERTY HAVING A COST OF UP TO AT LEAST $250,000.

The minister notes the federal government’s Budget 2015 alternative action of simplifying the reporting of specified foreign property between $100,000 and $250,000, for 2015 and after.

EXTEND THE FILING DEADLINE FOR FORM T1135 REPORTING TO JULY 31 FOR INDIVIDUALS (INCLUDING TRUSTS).

Given other simplification measures that are or will be put in place, the Minister says this would be an “extraordinarily long delay,” but she will consider the request for a potential extension for future years.

Finally, the letter has good news for taxpayers who make diligent efforts to comply with Form T1135. The minister clarifies that the CRA aims to be reasonable in applying penalties. For T1135, penalties will only be assessed where the taxpayer both:

  • did not file the required form and provide the information it requires
  • did not report income from a specified property on their tax return

While the minister’s responses are helpful, there is still considerable scope for streamlining T1135 reporting. CPA Canada will continue to work with the CRA to find ways to reduce the red tape that the current system creates while ensuring the CRA can get the information it needs to enforce compliance.

Highlights

Canada is celebrating its 150th anniversary. We’re celebrating you, Canadian CPAs. Tell us why you’re proud to be a Canadian CPA. Then watch for our big celebration in July.

Gain practical organizational insights and learn from industry experts at this annual event for not-for-profit financial leaders.