There are substantial penalties for failing to complete and file T1135 forms if required. If CRA discovers that a taxpayer has not complied with their T1135 filing requirements, the penalties levied on the taxpayer may include:
- Failure to Comply (Income Tax Act s.162(7))
- Failure to furnish foreign-based information (Income Tax Act s.162(10)(a) and (b))
- Additional penalties after 24 months (Income Tax Act s.162(10.1))
- Gross negligence or false statements and omissions (Income Tax Act s.163(2.4))
- A simple (but heavy) late-filing penalty (i.e. failure to comply) is $25 per day up to a maximum of $2,500 per year.
The failure to furnish foreign-based information
penalty is levied when the failure to file is done knowingly or under circumstances amounting to gross negligence, and is a penalty of $500 per month up to a maximum of $12,000 less any penalties already levied.
Similarly, a failure to furnish foreign-based information
penalty is issued where a demand to file a return is issued and the person knowingly or under circumstances amounting to gross negligence fails to file, and is a penalty of $1,000 per month up to a maximum of $24,000 less any penalties already levied.
After 24 months the penalty for non-filers becomes 5% of whichever of the following events led to a requirement to file: cost of the foreign property, fair market value of the property transferred/loaned to the trust, cost of shares, and indebtedness of the foreign affiliate.
Finally, gross negligence penalties or a penalty for false statements and omissions can be applied and are the greater of $24,000 or 5% of the event leading to a requirement to file, taken from the list in the preceding paragraph.