T1135 Late Filing: How to Request Relief and Use the CRA Voluntary Disclosure Program

Not in the way people expect. There is no formal 'extension request' process for T1135 comparable to what exists for some income tax situations. CRA does not have a standard mechanism to pre-approve a later filing deadline. What actually happens when Canadians ask about 'extensions' is one of two things: either they file by the deadline and don't need an extension, or they file late and are subject to the automatic penalty. The exception is if you have a documented, extraordinary circumstance (serious illness, natural disaster, death in the family) that prevented timely filing — in that case you can submit a fairness request (Form RC4288) to CRA asking for penalty and interest relief based on reasonable circumstances. This is not an extension; it's a retroactive penalty waiver. The VDP is the planned mechanism for taxpayers who have multiple years of unfiled T1135s and want to regularize their situation with penalty relief.

Specified foreign property (SFP) under s.233.3 of the Income Tax Act includes a broad range of foreign assets: (1) Real property located outside Canada — including residential property, commercial property, undeveloped land, and fractional ownership interests; (2) Funds held in foreign bank accounts; (3) Shares of foreign corporations (including foreign ETFs and stocks on foreign exchanges held in non-registered accounts); (4) Indebtedness owed to you by a non-resident; (5) Interests in foreign partnerships; (6) Interests in offshore trusts; (7) Cryptocurrency held on foreign exchanges. Notable exclusions from SFP: (a) Property used exclusively in an active business; (b) Shares of a Canadian company (even if it has foreign operations); (c) RRSPs/TFSAs/RRIFs/pension plans holding foreign securities — the registered plan itself is not SFP; (d) Personal-use property with a cost under $100,000; (e) Property of a foreign affiliate. The $100,000 threshold is calculated on the aggregate cost of all SFP together — not per individual asset. If you have a $60,000 foreign condo and $50,000 in a US brokerage account, your total SFP cost is $110,000 and T1135 is required.

The T1135 has two methods of reporting depending on the total cost of your foreign property. The simplified method (for property with aggregate cost between $100,000 and $250,000) requires: type of property, country where held, gross income from property, and maximum cost during the year for each category of asset. The detailed method (required when aggregate cost exceeds $250,000, or optionally for simpler situations) requires: for each individual asset — its description, country, maximum cost during the year, income generated, and whether it was held at year-end. For a Mexican condo purchased for $150,000 CAD, the simplified method would suffice in most years. The key numbers needed: the original cost in CAD (purchase price plus acquisition costs at the exchange rate on closing day), and any rental income earned from the property. The T1135 is a disclosure form — it does not trigger tax on its own. Tax obligations from foreign rental income are reported separately on your T1 return Schedule T1135 does not substitute for the rental income schedule.

You have late T1135 filings for potentially 7 years (2018–2024, assuming you didn't file for any of them). The maximum basic penalty exposure is 7 × $2,500 = $17,500 in standard late-filing penalties — but the gross negligence risk is larger if CRA determines the non-filing was deliberate. The recommended path: (1) Confirm CRA has not yet contacted you about your foreign property — check your CRA My Account for any correspondence, and check your mail. (2) Engage a tax lawyer or CPA with VDP experience before doing anything else. (3) Determine whether you had unreported rental income from the condo in any of those years — if so, the VDP needs to address both the T1135 late filings and the unreported income. (4) Apply under VDP Track 1 for penalty waiver across all affected years. The cost of professional help and back interest (if any income was unreported) will likely be far less than the accrued penalties under the standard late-filing schedule, especially with VDP relief. Don't wait — VDP eligibility ends the moment CRA contacts you about this issue.

Yes — filing late T1135s without a formal VDP application is always an option and is sometimes the right approach. If you have only 1–2 years of late filings, the maximum basic penalty is $2,500–$5,000, and the professional cost of a VDP application might approach or exceed the penalty amount. In those cases, simply filing the late T1135s, paying the standard penalties, and potentially submitting a fairness request (RC4288) for penalty waiver based on reasonable circumstances may be more cost-effective. However, if you have 3+ years of late filings, significant unreported rental income, or any risk of CRA interpreting the non-filing as gross negligence rather than simple oversight, the VDP provides meaningful protection that justifies the professional cost. The key factor: if you had unreported foreign rental income alongside the T1135 non-filings, you need the VDP to address both simultaneously. Filing late T1135s without disclosing the accompanying unreported income creates a disclosure asymmetry that CRA may use to open a broader audit.

For most T1 income tax issues, CRA can reassess within 3 years of the date of the initial Notice of Assessment (the 'normal reassessment period'). For serious non-compliance or misrepresentation, the normal period can be extended, but there is generally a 4-year absolute limit for most individuals. T1135 operates differently: CRA has explicitly extended the reassessment period for foreign income verification failures to 10 years from the date the return was filed (or, if not filed at all, 10 years from when it was due). This means if you didn't file a T1135 for 2016 (due April 30, 2017), CRA can still reassess you for that year until April 30, 2027. This 10-year window is the statutory backstop that makes historical T1135 non-compliance significantly more dangerous than most other tax compliance gaps. It is also the reason that VDP applications for T1135 need to go back the full 10 years — selectively disclosing recent years while hoping CRA doesn't look further back is not a viable strategy. A complete VDP disclosure covering all affected years within the lookback window is the only way to genuinely regularize the situation.

Corporations and trusts have their own T1135 obligations separate from individual shareholders or beneficiaries. A Canadian corporation that owns specified foreign property with aggregate cost over $100,000 CAD must file a T1135 for that corporation's tax year — the individual shareholder does not report the corporate foreign property on their personal T1135. However, if you personally hold foreign property through a foreign corporation or trust (rather than through a Canadian entity), the analysis becomes more complex — interests in foreign entities can themselves be SFP. Additionally, Canadians with significant interests in foreign corporations may have T1134 obligations (interests in foreign affiliates) separate from T1135. If your foreign property ownership structure involves any corporate or trust layer — whether Canadian or foreign — get professional advice before filing, as the reporting obligations are multi-layered and errors on corporate filings carry their own penalty schedule.