How Does CRA Know I have Foreign Properties

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How Does CRA Know I have Foreign Properties?
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When paying your taxes annually, you need to
include all of your foreign income on your return
including details of your foreign properties.
And this goes to any taxpayer who is required to
pay taxes in Canada - whether you reside in the
country or are a Canadian resident who lives
abroad. But how exactly does the Canada Revenue
Agency (CRA) know about your foreign properties?
Let us find out.
T1135 Form and its Significance
If you live in Canada, your income from all
sources is subject to tax.
There are severe penalties for failing to
disclose your worldwide income in Canada
accurately. The country's voluntary tax system
depends on individuals accurately and honestly
declaring their income and paying their income
taxes.
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It's why criminal sanctions may occasionally be
part of the penalties.
If you own foreign property with a value of more
than 100,000, you are required to submit a Form
T1135 Form once a year. This is done to ensure
that all Canadian residents accurately report
their worldwide income. These include cash/assets
kept in foreign bank accounts, stocks, real
estate located outside of Canada, and similar
investments.
How Does CRA Know I have Foreign Properties?
Here is how the CRA knows about your offshore
assets
To increase access to information about
Canadian taxpayers who are located abroad and to
increase its capacity to collect tax, fines, and
interest, Canada is negotiating new Tax Treaties
and Tax Information Exchange Agreements ("TIEA").
Currently, the CRA can use the authority granted
to it by Canada's 92 treaties and 22 TIEAs to
gather data on Canadians' overseas assets and
offshore bank accounts.
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The Offshore Compliance Division created by the
CRA is charged with identifying tax evasion and
non-compliance with offshore tax laws. To
facilitate this the staff are provided training
in data analysis. Canadian banks started
disclosing information about international
electronic funds transfers ("EFT") of 10,000 or
more to the CRA in 2015. The CRA has started
sending "educational letters" to "remind chosen
taxpayers" of the necessity of filing Form T1135.
The CRA also reminds them of the severe penalties
related thereto through its Office Audit Letter
Campaign. The CRA Office Audit Letter Campaign
notifies a select group of taxpayers that, for
each year the taxpayer failed to complete a Form
T1135 Foreign Income Verification Statement, the
CRA may levy a penalty equal to the greater of
24,000 or 5 of the cost or fair market value of
the property. The CRA may also levy additional
civil fines and file criminal tax evasion
charges. The CRA has been getting better at
discovering hidden cashflow and properties and
with new treaties and digitalization, information
is more readily available. More information visit
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