If you’re a Canadian individual, corporation, trust, or partnership holding cryptocurrency, you may have foreign reporting obligations. One of the most important is Form T1135 – Foreign Income Verification Statement.
This form must be filed if you hold “specified foreign property” (SFP) with a total cost base over $100,000 CAD at any point during the year. Failing to file on time can result in serious penalties.
Who Needs to File Form T1135?
Form T1135 applies to:
- Individuals
- Corporations
- Certain trusts
- Certain partnerships
Each of these must file if their total SFP exceeds the $100,000 CAD threshold. Penalties for non-compliance start at $25 per day, up to a maximum of $2,500. If the Canada Revenue Agency (CRA) determines gross negligence, they may impose an additional $500 per month, up to $12,000 in penalties.
Is Cryptocurrency Considered Specified Foreign Property?
Yes—under certain conditions.
The CRA has confirmed that cryptocurrency may fall under SFP if it is considered intangible property “situated, deposited, or held” outside Canada. The challenge lies in determining where crypto is “held,” as it does not have a physical location.
The CRA has stated that if cryptocurrency is held by a foreign exchange or custodian, it would generally be considered foreign property. However, crypto held through a Canadian crypto trading platform (CTP) that complies with Canadian regulations may not be considered foreign for T1135 purposes.
Because of this uncertainty, tax professionals often recommend treating all cryptocurrency as foreign property unless it is clearly held through a compliant Canadian CTP.
Determining Location of Crypto Holdings
The CRA compares the treatment of crypto to traditional assets like shares. If a Canadian company’s shares are held by a non-resident agent, they are considered foreign property. By extension, cryptocurrency held by a foreign exchange or wallet provider is also considered foreign.
Even when using a Canadian exchange, if that exchange stores crypto assets outside of Canada, it may still qualify as foreign property.
As a precaution, many advisors recommend including all crypto holdings when calculating the $100,000 SFP threshold, unless it is clearly exempt.
Business Use and Exemptions
There is one important exemption: if the cryptocurrency is held exclusively in an active business, it may not be considered SFP.
- Active trading businesses: If you operate a crypto trading business, and your holdings are considered inventory, those holdings are not reportable on Form T1135.
- Long-term investors: Crypto held for long-term appreciation or staking rewards is typically considered capital property, which is reportable if the value exceeds the threshold.
What About Speculative Trading?
If you buy and sell cryptocurrency in a one-time or occasional transaction aiming for a quick profit, the CRA may classify it as an “adventure in the nature of trade.”
This is not considered an active business. Therefore, even if the crypto was only held for a short period, if the cost base exceeded $100,000 at any time, you must file Form T1135.
Filing Deadlines
Form T1135 is due on the same date as your tax return:
- Individuals: April 30 (or June 15 if self-employed)
- Corporations: Six months after fiscal year-end
- Trusts: Due with the trust’s return
- Partnerships: Due with the partnership return
Final Thoughts
Cryptocurrency taxation and foreign reporting are complex, and CRA guidance is still developing. If you’re holding a significant amount of crypto, it’s important to evaluate your foreign reporting obligations carefully.
When in doubt, consider including crypto holdings in your foreign property total or consult a tax advisor for personalized guidance.
Need help? Reach out to our team to schedule a consultation and ensure you’re meeting your tax obligations accurately and on time.
