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As you start to organize your tax slips, receipts and other tax information to begin preparing your 2025 personal tax return, you’ll want to ensure you have all the details of any foreign property you held last year.

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The prompt to report ownership of foreign property appears right on page two of the 2025 personal income tax return, under the heading “Foreign property.” The form asks: Did you own or hold specified foreign property where the total cost amount of all such property, at any time in 2025, was more than $100,000? Yes or No. If the answer is yes, the return asks you to complete Form T1135, Foreign Income Verification Statement.

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If you are required to file a T1135, it’s important that you file on time or risk a late-filing penalty of $25 per day to a maximum of $2,500, plus arrears interest. If, however, you fail to file the T1135 “knowingly or under circumstances amounting to gross negligence,” the penalty jumps to $500 per month for each month that the return is late, to a maximum of $12,000. After 24 months, the penalty becomes five per cent of the cost of the foreign property, less any penalties already assessed.

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So, what exactly is specified foreign property? A Swiss bank account? Check. Your Cayman investment account? Sure. But what about shares of widely-held U.S. corporations such as Apple Inc. or Nvidia Corp. if held in a non-registered account? If the total cost is more than $100,000, they must be disclosed on the T1135. Personal use property, like a Florida vacation home, is excluded, as are any assets held in registered accounts such as registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs) and tax-free savings accounts (TFSAs).

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The most recent T1135 case involved a British Columbia taxpayer who was hit with penalties and interest for each of the 2021 and 2022 taxation years for failing to file timely T1135 forms. The taxpayer was charged with $4,500 in penalties and arrears interest for filing the forms late. He had filed the forms for the years in question in July 2023, which was past the deadlines.

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The taxpayer first attempted to seek relief directly from the Canada Revenue Agency on the basis that he attempted to file the required form in each year, but had “technical difficulties.” He also argued that the penalties caused him “financial hardship” given his personal circumstances.

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His first request for relief was denied by the CRA, so he challenged that decision, asking for a second-level review. That officer also refused his request. The taxpayer then turned to court, which heard the case in a Vancouver courtroom in September 2025.

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In these types of court challenges, the federal court judge’s role is to determine whether the second CRA official’s decision to deny relief was “reasonable.” In 2019, a seminal Supreme Court of Canada decision described a reasonable decision as “one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision maker.”

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The judge carefully considered the taxpayer’s arguments, but felt that the CRA officer did, indeed, consider the issues raised by the taxpayer before making their decision. First, on the issue of the technical difficulties the taxpayer faced, the CRA officer considered that the taxpayer had used the same tax software for which he claimed technical difficulties to successfully file his income taxes for the two taxation years at issue. The CRA officer also noted the taxpayer’s failure to act quickly to remedy the late filing, despite being warned that late penalties would be ordered if the T1135 forms were not filed.