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Foreign Property Disclosure Requirements

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Canadians have always been taxed on their worldwide income and for the past three years Revenue Canada has been itching to find out from Canadians if they have any foreign asset holdings and interests in order to determine if there are any investment operations which earn income that is not being taxed in Canada. Up until now, the Government has always backed down under severe political pressure when the subject came up. However, beginning with the 1998 taxation year, Revenue Canada has been given the go-ahead to make disclosure of this information mandatory on the annual personal income tax form.

Taxpayers will be asked a series of questions and instructed to check a box on the return to indicate their answers. These questions will indicate a range and location of foreign investments but will not require a detailed description of each specific holding.

The new rules apply to Canadians who:

own foreign property worth more than $100,000 Canadian. This property can be in the form of cash, stocks, bonds, other financial instruments or real estate;
have transferred or lent property to an offshore trust;
have received a distribution from an offshore trust: or
own shares or a partnership interest in a foreign based corporation.

In order to decide how to reply to the questions that are being asked, consider your responses to the following questions, marking “yes” or “no”. It is likely that even for the answers marked “yes”, further details will be required before it can be determined how the inquiry should be handled on the income tax form itself. Failure to disclose the required information can lead to penalties of $500 per month for up to two years as well as a five percent levy on the total cost of the foreign holdings.

(a) Have you ever made a loan or a gift to a trust?	Yes No
(b) Have you ever made a loan or a gift to a foreign corporation or entity?	Yes No
(c) At any time during 1998 did you receive any money or property from any person, company, entity or trust who was at he time resident outside Canada?	Yes No
(d) At any time in 1998 did you owe money or property to any person, entity or trust who at the time was outside Canada?	Yes No
(e) Do you own any foreign assets that are either outside or inside Canada (including bank accounts)? If yes, did the cost of these assets, converted to Canadian dollars, exceed $100,000 at any time during the year? (Include residential property if you rent it out).	Yes No
(f) If you do not presently own foreign assets, did you at any time during the year have foreign assets (including foreign bank accounts) that exceeded $100,000 Canadian?	Yes No
(g) At any time in 1998 did you, or a trust in which you have an interest, own shares in a foreign corporation?	Yes No

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