T1135 Deadline April 30: What to Do This Week

Who Must File T1135 — and Who Is Exempt

T1135 is required under Section 233.3 of the Income Tax Act for any Canadian resident individual, corporation, trust, or partnership whose total cost of "specified foreign property" exceeded CAD $100,000 at any point during the calendar year. The key words here are at any point — if you owned a Mexican condo worth $120,000 CAD in January and sold it in March, the obligation applies to that year even though you held it only briefly.

The most common situation for readers of this guide: a Canadian who owns a vacation property or rental condo in Mexico, Costa Rica, the Dominican Republic, or another destination. If you paid $100,000 CAD or more — measured at cost, not current market value — T1135 is required each year you hold it.

The most important exemption: property used exclusively for personal use. A vacation home you never rent, where you use it solely for your own enjoyment and that of family and friends, is exempt from T1135 reporting. CRA's guidance uses "exclusively" strictly — a couple of Airbnb weeks can void the exemption for that entire year. If your use is mixed (personal plus some rentals), document your personal-use days carefully.

Other exemptions that matter for Compass Abroad readers:

• Foreign property inside registered accounts (RRSP, RRIF, TFSA, RESP, RDSP) — completely exempt regardless of value.
• Property used in an active business — if you operate a bonafide business from a foreign property, it may qualify for an active business exclusion.
• Foreign pension entitlements — excluded from the specified foreign property definition.

The $100,000 Cost Threshold: Exactly What That Means

CRA measures the threshold using cost amount, not fair market value. Cost amount is essentially your adjusted cost base — what you actually paid, plus acquisition costs such as legal fees and transfer taxes, minus any principal repayments if you have a foreign mortgage. It is emphatically not the property's current assessed or market value.

This matters in two ways that often surprise buyers:

1. A property that has declined in value still triggers the obligation. You paid $140,000 CAD for a condo in 2020. The peso has weakened and it's worth $95,000 CAD today. Your cost amount is still $140,000. T1135 is required.
2. A property that has appreciated dramatically does not increase the threshold. You paid $85,000 CAD in 2018. It's now worth $220,000 CAD. Your cost amount is $85,000 — below the threshold — and T1135 is not required (though capital gains will apply when you sell).

When calculating cost amount in CAD for a property purchased in USD or another currency, use the Bank of Canada spot rate on the acquisition date. If you don't have the exact date, use the annual average rate for the year — CRA accepts either method if applied consistently. The BOC published the 2025 annual average USD/CAD rate as approximately 1.38.

What Counts as Specified Foreign Property — The Full List

Many Canadians focus only on real estate and miss other categories that can push them over the $100,000 threshold. Specified foreign property includes:

• Foreign real estate — vacation condos, rental properties, raw land, timeshares held abroad
• Shares of foreign corporations held outside registered accounts — including shares in a foreign corporation that holds your property (a Sociedad Anónima in Costa Rica, for example)
• Foreign bank accounts — any account at a foreign financial institution, even a USD account at a US bank used for property expenses
• Foreign bonds and debt instruments — foreign government bonds, corporate bonds, GIC equivalents held at foreign institutions
• Interests in foreign trusts or partnerships — if you are a beneficiary of a foreign trust that holds real estate, your proportional interest counts
• Foreign investment funds — units in foreign mutual funds or ETFs held outside registered accounts
• Accounts receivable from foreign persons — loans you have made to foreign individuals or entities

The most commonly overlooked items: a Mexican fideicomiso technically involves a Mexican bank holding legal title on your behalf. However, CRA has confirmed that your beneficial interest in a fideicomiso is treated the same as direct foreign property ownership — it counts toward the T1135 threshold and must be reported if the threshold is met.

Completing the T1135 Form: A Practical Walkthrough

T1135 has two parts based on your total cost of specified foreign property:

• Part A (Simplified) — total cost $100,000 to $249,999: You report by category only — a checkbox indicating you held foreign real estate, foreign bank accounts, etc. — without individual property details. Much easier.
• Part B (Detailed) — total cost $250,000 or more: You must report each property individually with: description of property, country, maximum cost during the year, cost at year-end, income earned, and gain/loss on any dispositions.

For most readers purchasing a single vacation property in Mexico or Costa Rica in the $150,000–$220,000 CAD range, Part A applies and the form is relatively straightforward. For buyers who also hold US stocks in a taxable account, have a US bank account, or own multiple foreign properties, they may tip into Part B territory — in which case a cross-border accountant is worth the fee.

Key fields on Part A that trip people up:

• Country code: Use the two-letter ISO country code — MX for Mexico, CR for Costa Rica, DO for Dominican Republic, PA for Panama.
• Maximum cost during the year: The highest cost amount the property reached at any point during the calendar year. For a purchase made mid-year, this is the cost from acquisition date onward.
• Cost at year-end: The cost amount on December 31. If you sold mid-year, this is zero — but you still report because the threshold was triggered during the year.

The Penalty Structure — Don't Let This Get Away From You

CRA's penalty for late or non-filed T1135 under ITA s.162(7) is:

• $25 per day starting the day after the due date
• Minimum $100
• Maximum $2,500 per year for ordinary late filing

At the $25/day rate, you hit the $2,500 maximum after exactly 100 days — which means by about August 9. After that, no additional penalty accumulates for ordinary late filing.

The higher-stakes penalty applies when CRA determines the non-filing was due to "gross negligence" or "knowledge and wilful default" under ITA s.162(10):

• $500 per day
• Maximum $12,000 per missed year under s.162(10)(a)
• Up to $24,000 per missed year under s.162(10.1) for repeated non-compliance
• Plus potential prosecution under ITA s.238 (criminal)

What triggers the gross negligence threshold in practice? CRA's typical indicators include: owning significant foreign property for years without filing, having foreign income appearing on your T1 (which implies you know about foreign property reporting) while omitting T1135, or having your foreign wire transfers flagged by FINTRAC (which automatically notifies CRA). The more years missed, the harder it becomes to claim simple oversight.

Property Held Through a Foreign Corporation or Trust: Additional Forms

If you own your foreign property through a corporate entity — a Sociedad Anónima in Costa Rica or Panama, a Mexican S.A. de C.V., or any other foreign corporation — you face additional CRA reporting obligations beyond T1135:

• T1134 (Foreign Affiliate Information Return): Required if you own 1% or more of a foreign corporation (with 10%+ owned by you plus related persons). Due 15 months after the corporation's year-end. This is a separate filing from T1135 and has its own significant penalties.
• T1141 (Information Return re Transfers or Loans to a Non-Resident Trust): Triggered if you or a related person transferred assets to a foreign trust.

The key takeaway: if you structured your foreign property purchase through a corporate entity for asset protection or estate planning purposes, confirm with a cross-border tax specialist that all required forms are being filed annually — not just T1135.

If You've Missed Prior Years: Voluntary Disclosure

The Voluntary Disclosures Program (VDP) exists specifically for situations where a taxpayer realizes they have not complied and wants to come forward before CRA finds out. Key conditions for acceptance:

1. Voluntary: CRA must not have already initiated an audit, investigation, or other enforcement action regarding the omission.
2. Complete: The disclosure must be full and accurate — you cannot disclose selectively.
3. Penalty-involving: There must be a penalty exposure (late T1135 qualifies).
4. At least one year overdue: Must relate to a tax year at least one year old.

A successful VDP application typically results in:

• Cancellation or significant reduction of failure-to-file penalties
• No criminal prosecution
• Payment of outstanding tax and interest still required

For missed T1135 years where no additional tax is owed (the property was personal-use, or rental income was already reported), the VDP result is often penalty waiver with minimal payment required. The filing itself can be time-consuming but the outcome is substantially better than waiting for CRA.