Form T1135 step by step for ETF and stock investors

1. Step 1: the C$100,000 cost test, at any time in the year

The form T1135 says to complete and file it if at any time in the year the total cost amount to you of all specified foreign property was more than $100,000 (Canadian). The rule itself is in the definition of “reporting entity” in s.233.3(1) of the Income Tax Act.

Three words do the work:

• Cost. CRA’s questions and answers about Form T1135 say the cost amount is generally the adjusted cost base, not the fair market value. A portfolio that has doubled can be worth $180,000 and still cost $90,000.
• At any time. If the total crossed $100,000 for one month and you then sold, you still file — and, per the same answers, you report all specified foreign property held during the year, including what you sold.
• Total. Everything that counts is added together, across accounts and countries.

2. Step 2: what counts, and what does not

“Specified foreign property” is defined in s.233.3(1). For a typical investor:

• Counts: shares of non-resident corporations, such as US shares, wherever they are held. CRA’s answers call them specified foreign property, and the form’s instructions say to report them whether or not they are physically held in Canada — so US shares at a Canadian discount broker count.
• Counts: interests in non-resident trusts acquired for consideration, and foreign funds generally. CRA’s answers say that for a foreign mutual fund the investment itself, not the underlying property, is the specified foreign property. US-listed and Irish-domiciled ETFs are funds resident outside Canada; CRA’s answers do not name ETFs, so treating them as specified foreign property is a reading of the definition.
• Counts: cash held outside Canada, debts owed by non-residents (including foreign bonds) and foreign real property other than personal-use property.
• Does not count: Canadian mutual fund trusts and corporations. CRA’s answers say an investment in a Canadian mutual fund trust is not specified foreign property, even when the fund holds foreign securities. That covers Canadian-listed ETFs structured as Canadian mutual fund trusts; the prospectus says how a fund is structured.
• Does not count: registered plans. CRA’s answers say specified foreign property held in an RRSP or a TFSA is excluded. The form’s instructions exclude trusts described in paragraphs (a) to (e.1) of the definition of trust in s.108(1), the paragraphs that cover registered plans.
• Does not count: personal-use property, property used exclusively in an active business, and shares of a foreign affiliate (which has its own form).

3. Step 3: work out the cost amount

• Start from the ACB, the same figure you use for capital gains: purchases plus commissions, averaged for identical properties. (Our Schedule 3 guide covers the adjustments.)
• Convert at the transaction date. The form’s instructions say to determine amounts in the foreign currency and translate them into Canadian dollars, generally at the exchange rate in effect at the time of the transaction — the day you bought.
• Read the maximum at month ends. The instructions say the maximum cost amount during the year can be based on the maximum month-end cost amount.
• New residents start at market value. The instructions say that if you immigrate to Canada, the cost amount is the fair market value of the property at the time of immigration.

4. A worked example

Illustrative figures only: the holdings, costs and gain are made up to show the method.

Jordan has lived in Canada since 2019. Outside registered plans Jordan holds US shares, a US-listed ETF and an Irish-domiciled ETF, plus $60,000 of a Canadian-listed ETF that is a Canadian mutual fund trust. Jordan’s TFSA holds another $40,000 of US shares. Cost amounts in Canadian dollars at selected month ends of 2025:

• The Canadian-listed ETF and the TFSA are left out (Step 2).
• July is exactly $100,000, which is not more than $100,000. August is $102,000, so Jordan files for 2025 — even though the year-end total is $89,000.
• The maximum is below $250,000, so Jordan can use Part A or Part B (Step 4).
• Top countries by maximum cost: the United States ($82,000 at the end of August) and Ireland ($20,000), on the assumption that each fund is resident where it is domiciled.
• The September sale produced a gain of, say, $1,850. T1135 asks for the capital gain itself, not the taxable half (CRA’s answers say so explicitly).

5. Step 4: simplified (Part A) or detailed (Part B)

The form says: if the total cost of all specified foreign property held at any time during the year exceeds $100,000 but was less than $250,000, you complete either Part A or Part B; if it was $250,000 or more, you complete Part B.

Part A: Simplified reporting method asks for:

• a tick for each type of property you held (the seven categories below);
• the top three countries based on the maximum cost amount held during the year, as country codes;
• gross income from all specified foreign property;
• gain (loss) from the disposition of all specified foreign property.

Part B: Detailed reporting method has one table per category. For category 2 (shares of non-resident corporations) each line asks for the name of the corporation, its country code, the maximum cost amount during the year, the cost amount at year-end, gross income, and gain (loss) on disposition. Category 4 (trusts) asks for income received and capital received instead of gross income. The instructions ask for amounts rounded to the nearest dollar and “0” rather than blanks.

Gross income — dividends and interest from the foreign property — comes from your broker’s tax slips and statements. CRA’s answers say you must report it on the form.

6. Step 5: the seven categories

The form’s categories, with the country its instructions say each country code should identify:

Two decisions trip up ETF investors:

• A fund is category 2 or category 4 depending on its legal form: a corporation is category 2, a trust category 4. The prospectus says which. For a US mutual fund trust, CRA’s answers say to use the country of residence of the trust.
• Category 7 is optional. If your foreign property is held with a Canadian registered securities dealer, the form lets you report it in aggregate, country by country, at maximum and year-end fair market value (month-end values are acceptable), instead of property by property.

Category 6 includes shares of corporations resident in Canada held for you outside Canada.

7. Due date, penalties and the first year

• Due date. The form’s instructions say it must be filed on or before the due date of your income tax return. Individuals can file it electronically for 2017 and later years.
• First year of residence. An individual does not have to file T1135 for the year in which they first became resident in Canada (s.233.7; the form’s instructions say the same). From the next year, the cost amount of property you brought is its fair market value when you arrived.
• Penalties. CRA’s table of penalties marks T1135 as subject to s.162(7) (failure to comply), s.162(10)(a) and (b) (failure to furnish foreign-based information), s.162(10.1) (additional penalty) and s.163(2.4) (false statement or omission). CRA’s penalties page for foreign reporting forms sets out the amounts: $25 a day for up to 100 days (minimum $100, maximum $2,500) for failing to file; $500 a month for up to 24 months (maximum $12,000) for failing to file knowingly or through gross negligence; a further 5% of the cost of the foreign property after 24 months, less penalties already levied; and, for a knowing or grossly negligent false statement or omission on these returns, the greater of $24,000 and 5% of the relevant amount. CRA’s answers add that the reassessment period for a return can be extended by three years where the conditions they describe are met.
• Voluntary disclosure. The form’s instructions point to the Voluntary Disclosures Program for correcting past years.

8. How Borderfolio helps

With Canada set as your tax residence, the tax page of the investor app has a card called Foreign property for T1135, built from the confirmed transactions you imported, in your own and joint accounts outside registered plans:

• The test: the highest month-end total cost of your foreign securities in the year, against C$100,000 — “Due”, “Not required”, or “Not required this year” when the year is the one you became resident — and whether the detailed method applies at C$250,000.
• Cost as ACB: purchases at their own date’s exchange rate, averaged across your non-registered accounts, with issuer return of capital and reinvested distributions and any superficial loss, and your value on arrival where you entered one.
• The cost at year end and the gain on dispositions of foreign property in the year (from the same replay as the Schedule 3 list).
• Categories as far as the data allows: a security whose ISIN is not Canadian counts as foreign; shares go in category 2, with the ISIN’s country taken as the corporation’s residence; funds are shown as “2 or 4”, because their legal form is not on file; securities whose type is not on file are shown as “2, 3 or 4”; anything without an ISIN is listed as not classified, and the totals stay open until it is.
• Top countries by highest cost, for Part A.
• A CSV: one line per property by category, with highest and year-end cost and gain, and a totals line.

Free shows the test and the totals; the properties by category and country and the CSV are part of Pro ($15 a month or $149 a year). It sorts what the data supports into the form’s categories. It does not fill in or file the form.

What it does not cover, as the card says:

• Gross income for the form is not computed.
• Categories 1 (cash held outside Canada), 3 (bonds and other debt, unless held as a security on file), 5 (real property) and 6 are not on file.
• Category 7 is not prepared: whether your broker is a Canadian registered securities dealer, and month-end market values per country, are not on file.
• Registered plans (RRSP, RRIF, TFSA, FHSA, RESP, RDSP, locked-in plans), traditional IRAs and 401(k) plans are excluded; a Roth IRA is counted. Excluding a 401(k) is a reading of the Act’s “exempt trust” definition, labelled as such in the app.
• Joint accounts are counted in full; the form asks for your own share.
• A holding whose transactions do not add up to what you hold has an unknown cost, and the total is then not settled unless the known part alone is above C$100,000.

FAQ

Do US shares held at a Canadian broker count for T1135?

Yes. CRA’s answers say shares of non-resident corporations are specified foreign property, and the form’s instructions say to report them whether or not they are physically held in Canada. Holding them at a Canadian broker can let you use category 7, which reports fair market value by country instead of each property.

Do my RRSP and TFSA count towards the C$100,000?

No. CRA’s answers say specified foreign property held in an RRSP or a TFSA is excluded from T1135 reporting. Only property you hold outside registered plans counts.

My foreign property was above C$100,000 in summer but below it on 31 December. Do I file?

Yes. The test is the total cost amount at any time in the year, not at year end. CRA’s answers say that if you met the threshold at any time in the year, you report all specified foreign property held during the year, even property sold before year end.

Does Borderfolio file my T1135?

No. It works out the highest month-end cost of your foreign securities outside registered plans, tests it against C$100,000 and C$250,000, and sorts what the data supports into the form’s categories, listing what it cannot classify. Gross income is not computed. It lists what the form asks for; you complete and file the form.