What triggers the T1135 filing obligation?

The T1135 filing obligation is triggered when the total cost of all 'specified foreign property' you held at any point during the tax year exceeds CAD $100,000. 'Specified foreign property' includes foreign real estate that is not used primarily for personal use (i.e., rental properties or investment properties), foreign bank accounts, foreign stocks and mutual funds, interests in foreign corporations, and other foreign investment assets. The critical measurement is cost (adjusted cost base), not market value. If you paid CAD $95,000 for a Mexican condo that is now worth $300,000, you do not need to file T1135 (assuming personal use). If you paid $110,000 for a property now worth $70,000, you must file. Personal-use property — a vacation home used primarily for your own or family's use — is exempt from T1135 even above the threshold. But any rental activity may jeopardize that exemption.

What is the difference between the 'late filing' penalty and the 'repeated failure' penalty?

The late filing penalty under ITA s.162(7) applies to any late-filed T1135: $25 per day from the filing deadline to the date of actual filing, maximum $2,500 per year. This cap means the maximum penalty for any single year's late T1135 is $2,500, regardless of the value of the property. The repeated failure penalty under ITA s.162(10.1) is a separate and additional penalty that applies when a taxpayer has failed to file T1135 in more than one year and the CRA demands the filings. It runs at $500/month for the period of non-compliance, up to a maximum of 24 months ($12,000). These two penalties can stack — so 3 years of non-compliance could theoretically generate $7,500 in late filing penalties ($2,500 × 3) plus $12,000 in repeated failure penalties, for a total of $19,500 in T1135-specific penalties alone — before considering any gross negligence assessment.

When does gross negligence apply to T1135?

The gross negligence standard under ITA s.162(10) is a higher bar than simply being late. It applies when the CRA determines you knowingly, or under circumstances amounting to gross negligence, failed to file or filed a false or misleading T1135. In the T1135 context, gross negligence typically means the CRA can show you knew the filing obligation existed and deliberately ignored it, or were recklessly indifferent to whether you had to file. Being uninformed of the T1135 requirement is theoretically a defense, but it is becoming harder to sustain as the CRA increases public awareness through audit campaigns and foreign institution information sharing (FATCA, CRS). The gross negligence penalty is 5% of the cost amount of the foreign property per year of non-compliance — with a minimum of $500. On a $400,000 property, that is $20,000 per year. The VDP is the standard mechanism for avoiding gross negligence penalties through voluntary disclosure.

What is the Voluntary Disclosure Program (VDP) and who qualifies?

The CRA's Voluntary Disclosure Program (VDP) allows taxpayers with previously unreported or late-filed obligations — including T1135 — to come forward and correct their records with reduced penalties. For T1135 specifically, the VDP typically waives the gross negligence and repeated failure penalties (the most severe penalties), leaving only the basic late filing penalty ($2,500/year maximum) plus any tax and interest owed on unreported foreign income. To qualify for VDP, your disclosure must be: (1) voluntary — before the CRA has started an audit or contacted you about the deficiency; (2) complete — covering all years and all foreign assets; (3) involving previously unassessed information. VDP applications that are accepted provide substantial relief — often reducing total exposure by 60–80% compared to a CRA-initiated audit finding. The program requires filing through the CRA's VDP portal and often benefits from a tax lawyer's assistance to ensure the disclosure is framed correctly.

Can the CRA go back more than 3 years to assess T1135 penalties?

Yes — the normal reassessment period of 3 years does not apply in the same way to T1135. For T1135 failures involving gross negligence or misrepresentation, the CRA can reassess beyond the 3-year window under ITA s.152(4). Additionally, since T1135 is an information return (not an income tax return), the standard limitation periods are different. The practical implication: do not assume you are safe because the non-filing is more than 3 years old. The CRA has been increasingly active in requesting T1135 filings for multiple prior years through its foreign asset compliance programs. If you are currently non-compliant, the VDP is the appropriate tool — filing through VDP establishes a clean record and shields you from additional penalties for the disclosed years.

What happens if I rent my foreign vacation property on Airbnb — does that trigger T1135?

Potentially yes — and this is one of the most common T1135 compliance traps for Canadian property owners abroad. The personal-use property exemption under ITA s.233.3(1) applies only if the property is used 'primarily for personal use' — meaning more than 50% of the time during the year it is held. Any rental activity, including short-term Airbnb rentals, may disqualify the personal-use exemption if it exceeds 50% of the time the property is held, or if the CRA views the property as held 'mainly for rental purposes.' A property rented for 3 months and personally used for 2 months likely loses the exemption. The CRA's position on mixed-use properties has been hardening — if you have any rental activity on a foreign property over $100K cost, consult a cross-border tax advisor before concluding you are exempt from T1135.

What triggers the T1135 filing obligation?

The T1135 filing obligation is triggered when the total cost of all 'specified foreign property' you held at any point during the tax year exceeds CAD $100,000. 'Specified foreign property' includes foreign real estate that is not used primarily for personal use (i.e., rental properties or investment properties), foreign bank accounts, foreign stocks and mutual funds, interests in foreign corporations, and other foreign investment assets. The critical measurement is cost (adjusted cost base), not market value. If you paid CAD $95,000 for a Mexican condo that is now worth $300,000, you do not need to file T1135 (assuming personal use). If you paid $110,000 for a property now worth $70,000, you must file. Personal-use property — a vacation home used primarily for your own or family's use — is exempt from T1135 even above the threshold. But any rental activity may jeopardize that exemption.

What is the difference between the 'late filing' penalty and the 'repeated failure' penalty?

The late filing penalty under ITA s.162(7) applies to any late-filed T1135: $25 per day from the filing deadline to the date of actual filing, maximum $2,500 per year. This cap means the maximum penalty for any single year's late T1135 is $2,500, regardless of the value of the property. The repeated failure penalty under ITA s.162(10.1) is a separate and additional penalty that applies when a taxpayer has failed to file T1135 in more than one year and the CRA demands the filings. It runs at $500/month for the period of non-compliance, up to a maximum of 24 months ($12,000). These two penalties can stack — so 3 years of non-compliance could theoretically generate $7,500 in late filing penalties ($2,500 × 3) plus $12,000 in repeated failure penalties, for a total of $19,500 in T1135-specific penalties alone — before considering any gross negligence assessment.

When does gross negligence apply to T1135?

The gross negligence standard under ITA s.162(10) is a higher bar than simply being late. It applies when the CRA determines you knowingly, or under circumstances amounting to gross negligence, failed to file or filed a false or misleading T1135. In the T1135 context, gross negligence typically means the CRA can show you knew the filing obligation existed and deliberately ignored it, or were recklessly indifferent to whether you had to file. Being uninformed of the T1135 requirement is theoretically a defense, but it is becoming harder to sustain as the CRA increases public awareness through audit campaigns and foreign institution information sharing (FATCA, CRS). The gross negligence penalty is 5% of the cost amount of the foreign property per year of non-compliance — with a minimum of $500. On a $400,000 property, that is $20,000 per year. The VDP is the standard mechanism for avoiding gross negligence penalties through voluntary disclosure.

What is the Voluntary Disclosure Program (VDP) and who qualifies?

The CRA's Voluntary Disclosure Program (VDP) allows taxpayers with previously unreported or late-filed obligations — including T1135 — to come forward and correct their records with reduced penalties. For T1135 specifically, the VDP typically waives the gross negligence and repeated failure penalties (the most severe penalties), leaving only the basic late filing penalty ($2,500/year maximum) plus any tax and interest owed on unreported foreign income. To qualify for VDP, your disclosure must be: (1) voluntary — before the CRA has started an audit or contacted you about the deficiency; (2) complete — covering all years and all foreign assets; (3) involving previously unassessed information. VDP applications that are accepted provide substantial relief — often reducing total exposure by 60–80% compared to a CRA-initiated audit finding. The program requires filing through the CRA's VDP portal and often benefits from a tax lawyer's assistance to ensure the disclosure is framed correctly.

Can the CRA go back more than 3 years to assess T1135 penalties?

Yes — the normal reassessment period of 3 years does not apply in the same way to T1135. For T1135 failures involving gross negligence or misrepresentation, the CRA can reassess beyond the 3-year window under ITA s.152(4). Additionally, since T1135 is an information return (not an income tax return), the standard limitation periods are different. The practical implication: do not assume you are safe because the non-filing is more than 3 years old. The CRA has been increasingly active in requesting T1135 filings for multiple prior years through its foreign asset compliance programs. If you are currently non-compliant, the VDP is the appropriate tool — filing through VDP establishes a clean record and shields you from additional penalties for the disclosed years.

What happens if I rent my foreign vacation property on Airbnb — does that trigger T1135?

Potentially yes — and this is one of the most common T1135 compliance traps for Canadian property owners abroad. The personal-use property exemption under ITA s.233.3(1) applies only if the property is used 'primarily for personal use' — meaning more than 50% of the time during the year it is held. Any rental activity, including short-term Airbnb rentals, may disqualify the personal-use exemption if it exceeds 50% of the time the property is held, or if the CRA views the property as held 'mainly for rental purposes.' A property rented for 3 months and personally used for 2 months likely loses the exemption. The CRA's position on mixed-use properties has been hardening — if you have any rental activity on a foreign property over $100K cost, consult a cross-border tax advisor before concluding you are exempt from T1135.

Reviewed on March 2026 by the Compass Abroad editorial team

T1135 Penalty Estimator

Estimate your CRA penalty exposure for unfiled or late T1135 forms — and see how much the Voluntary Disclosure Program (VDP) could save you.

T1135 Penalty Estimator

Estimate your CRA penalty exposure for unfiled or late T1135 forms. See how the Voluntary Disclosure Program (VDP) can reduce your liability.

Cost of Foreign Property (CAD $)

Use the original purchase price in CAD (converted at Bank of Canada annual average rate for that year). Must be your ACB — not current market value.

Years Unfiled (or Late Filed)

Repeated failure to file

ITA s.162(10.1): applies when more than one year of T1135 non-compliance. $500/month up to 24 months.

Gross negligence (knowingly ignored obligation)

ITA s.162(10): CRA's higher standard — knowingly or recklessly failed to file. 5% of cost amount (min $500) per year.

Moderate Exposure

$5,000

Total estimated penalty exposure

Penalty Breakdown (2 years)

Late filing penalty (2 × $2,500/yr max)$5,000

Total Exposure$5,000

This calculator estimates penalties based on ITA s.162(7), s.162(10), and s.162(10.1) as of 2025. Actual penalties are determined by the CRA based on specific facts and circumstances. Gross negligence determination is a CRA judgment call — not all multi-year non-filers are assessed gross negligence. VDP relief is not guaranteed and depends on program eligibility. Consult a qualified Canadian tax professional before taking any action. This is not tax or legal advice.

T1135 Penalties: Key Facts

T1135 filing threshold: CAD $100,000 cost of all foreign property held at any time in the year(ITA s.233.3)
Late filing penalty: $25/day from due date, maximum $2,500 per year of non-compliance(ITA s.162(7))
Repeated failure penalty: $500/month, maximum 24 months ($12,000 total)(ITA s.162(10.1))
Gross negligence penalty: 5% of cost of foreign property — minimum $500(ITA s.162(10))
T1135 due date: Same as T1 return: April 30 (or June 15 if self-employed)(CRA)
VDP (Voluntary Disclosure): Typically waives gross negligence and repeated failure penalties — not the basic late fee(CRA IC00-1R6)
Statute of limitations: CRA can reassess T1135 beyond the normal 3-year window for gross negligence/fraud(ITA s.152(4))
Personal use exemption: Property used primarily for personal use is EXEMPT — rental activity may void the exemption(ITA s.233.3(1))

Understanding T1135 Penalties and How They Escalate

The T1135 (Foreign Income Verification Statement) is one of the most penalized information returns in the Canadian tax system — not because the penalties are uniquely harsh, but because Canadians with foreign property frequently don't know it exists until they face a CRA inquiry. The $25/day late filing penalty with a $2,500 annual cap sounds manageable — but it stacks across years. Three years of non-compliance generates $7,500 in basic late penalties before any assessment of the more serious gross negligence or repeated failure charges.

The gross negligence penalty is where exposure becomes severe. At 5% of the cost of the foreign property per year, a $400,000 property generates a $20,000 gross negligence penalty for a single year. Three years of gross negligence-level non-compliance on the same property produces $60,000 in gross negligence penalties alone — plus $7,500 in late filing penalties, for a total potential T1135 exposure of $67,500. This is before any penalties and interest on unreported rental income or capital gains from the same property.

The good news: the CRA's Voluntary Disclosure Program (VDP) exists precisely for this scenario. Taxpayers who come forward proactively — before a CRA audit, demand letter, or inquiry is initiated — can typically have gross negligence and repeated failure penalties waived entirely. They still owe the basic late filing penalty ($2,500/year max) and any tax and interest on unreported foreign income, but the catastrophic penalties are avoided. The VDP is only available pre-audit. Use our T1135 obligation checker to determine if you need to file.

The Voluntary Disclosure Program: What It Does and Doesn't Cover

The CRA's VDP is one of the most valuable tools available to Canadians with unreported foreign assets. An accepted VDP application for T1135 non-compliance will typically: waive gross negligence penalties under s.162(10); waive repeated failure penalties under s.162(10.1); and in some cases reduce interest on unpaid taxes. What it does NOT waive: the basic late filing penalty ($2,500/year per year of non-compliance), any income tax owing on foreign rental income or capital gains that was not reported on your T1 returns, and interest on the unpaid tax.

To qualify for VDP, your application must be voluntary — the CRA must not have already contacted you about the non-compliance. Once you receive a demand letter, an audit notice, or even an inquiry about your foreign holdings, you are ineligible for VDP for those years. This is why acting immediately upon discovering a compliance gap is critical. The VDP is not a recurring option — it is for genuinely missed filings, not deliberate evasion.

The application must be complete — covering all years of non-compliance and all unreported foreign assets. Filing VDP for two years and hiding the third is not acceptable and voids the application. Many tax professionals recommend using a CRA-designated tax lawyer for VDP applications to ensure the disclosure is complete, correctly framed (particularly for properties with rental income), and protected by solicitor-client privilege during the process.

Disclaimer: This calculator estimates penalties based on ITA s.162(7), s.162(10), and s.162(10.1) as of 2025. Actual penalties are determined by the CRA based on specific facts and circumstances. Gross negligence is a CRA determination — not all multi-year non-filers are assessed at that level. VDP relief is not guaranteed and requires an accepted application. This is not tax or legal advice. Consult a Canadian cross-border tax professional before taking any action regarding unreported foreign assets.

T1135 Penalties: Frequently Asked Questions

Worried About an Unfiled T1135?

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