CRA hits taxpayer with hefty 'foreign property' penalty over Swiss bank account

As you begin to prepare your 2024 tax return in the days ahead, you should pay close attention to a seemingly innocuous question on page 2 of the return. The question asks whether you owned or held “specified foreign property” where the total cost amount of all such property, at any time in 2024, was more than $100,000. If the answer is yes, the return instructs you to complete Form T1135, Foreign Income Verification Statement.

There are substantial penalties for failure to file this form, as one taxpayer recently found out in a tax case decided last month. But before delving into the details of this latest T1135 penalty case, let’s briefly review the foreign property reporting rules.

Specified foreign property includes obvious foreign assets, such as a Bahamian bank account or Bermudian offshore investment portfolio, as well as precious metals held outside Canada. Also included are foreign stocks, such as Apple Inc., Microsoft Corp. or Meta Platforms Inc., debt of a non-resident issuer, or an interest in a non-resident trust held in a Canadian, non-registered brokerage account. Options to purchase specified foreign property are also included.

If you hold foreign securities in a Canadian brokerage account, consider the residency of the issuer of the security. If the issuer is a non-resident of Canada, then the securities count as specified foreign property. Note that it’s irrelevant whether the security is listed on a Canadian or foreign stock exchange, or if the security is denominated in Canadian or foreign currency.

Some foreign assets do not need to be reported. For example, foreign securities held inside Canadian pooled products, such as Canadian mutual funds, need not be reported; however, if you invest in a