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Are precious metal investments, such as gold or silver, stored in a vault outside of Canada considered foreign property, such that their mere existence must be reported annually to the tax man? A new technical interpretation released by the Canada Revenue Agency this week suggests that investors who have a beneficial interest in physical gold or other metals may have an obligation to file Form T1135, Foreign Income Verification Statement if the cost of their metals was more than $100,000 at any time in the prior year.

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You’ll recall that we are required to report ownership of foreign property on Page 2 of the personal income tax return, which 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.

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If you fail to file the form, the late-filing penalty is $25 per day to a maximum of $2,500, plus arrears interest. If 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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Foreign property includes a foreign bank account, as well as shares of widely-held foreign. corporations if held in a non-registered account. Personal use property, such as an Arizona 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 taxpayer who wrote in to the CRA asking about the T1135 is a customer of a Canadian corporation which allows its clients to buy from or sell to the corporation various precious metals consisting of physical gold, silver, platinum or palladium by using the corporation’s online platform.

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Each client is provided with a “holding,” which is the electronic record provided online to the client by the corporation evidencing the quantity of precious metals held by or on behalf of the client and stored in a vault outside Canada.

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There are two possible ways for the taxpayer to own and hold the precious metals: as registered bars or as non-registered metals. The holding is evidence of the taxpayer’s ownership of the registered bars or in the case of non-registered metals, the taxpayer’s proportionate undivided interest in the weight of the metal. If the investor chose to invest in registered bars, the taxpayer can arrange at any time for the physical delivery or collection of the bars upon demand.

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In the CRA’s recent technical interpretation, the agency distinguished between legal and beneficial ownership. Although beneficial ownership is not defined in the Income Tax Act, prior jurisprudence has recognized that its main characteristics include possession, use, risk and control. While determining beneficial ownership is a question of fact, the rights to possess, manage, control, derive income, use, dispose of, and susceptibility to the risk of loss are all relevant factors to consider.