T1135 and XEQT: Do You Need to Report Foreign Property?

It was late on a Sunday night in April, and my friend Dave was deep into one of those tax-season internet rabbit holes that make you question every financial decision you have ever made. He had just crossed $100,000 in his non-registered brokerage account – all of it in XEQT – and had stumbled onto a Reddit thread about the T1135 Foreign Income Verification Statement. Someone in the thread had written, in very confident capital letters, that any Canadian holding over $100K in an ETF that invests in foreign stocks MUST file a T1135 or face penalties of $25 per day.

Dave texted me at 11:47 PM: “Do I need to file this thing? I have $130K of XEQT. It holds US and international stocks. Am I going to get fined?”

I will admit – even though I had done my homework on this topic before – his panic was briefly contagious. I spent the next hour re-reading the CRA’s guidance just to be absolutely certain before texting him back. The answer, thankfully, was simple. But the fact that Dave panicked is completely understandable, because the rules around the T1135 are confusing, the penalties are harsh, and the name “Foreign Income Verification Statement” sounds like it was designed to induce anxiety.

If you have been Googling “do I need to file T1135 for XEQT” – or if you are the kind of person who worries about tax compliance at midnight – this guide is for you. I am going to explain exactly what the T1135 is, why XEQT does not trigger it, and the specific situations where you would need to worry about it.

The short answer: No, you do not need to file a T1135 for your XEQT holdings. But there are nuances worth understanding, especially if you hold other investments alongside XEQT. Let me walk you through everything.

1. What Is the T1135 Foreign Income Verification Statement?

The T1135 is a form that the Canada Revenue Agency (CRA) requires Canadian taxpayers to file when they hold specified foreign property with a total cost amount exceeding $100,000 CAD at any point during the tax year. It is not a tax form in the traditional sense – it does not calculate any tax you owe. It is a reporting form designed to help the CRA track foreign assets held by Canadian residents.

Think of it as the CRA saying: “We know you might have investments, bank accounts, or property outside of Canada. If the total cost of those foreign assets exceeds $100,000, we want to know about them.”

A few key details:

• Who must file: Any Canadian resident taxpayer (individuals, corporations, trusts, partnerships) who holds specified foreign property with a total cost exceeding $100,000 CAD at any time during the year.
• What triggers it: The cost amount of your foreign property, not the market value. If you bought $105,000 worth of qualifying foreign property and it dropped to $80,000 in market value, you still need to file because the cost exceeded $100,000.
• When to file: The T1135 is due at the same time as your income tax return – typically April 30 for individuals.
• How to file: Electronically through certified tax software, or on paper. If the total cost of all your specified foreign property is under $250,000, you can use the simplified reporting method.

The form has two reporting methods:

The existence of two reporting tiers tells you something about how seriously the CRA takes this form. It is not optional, and it is not something you can ignore because you forgot about it.

2. What Counts as “Specified Foreign Property”?

This is where the confusion starts for most Canadian investors. The term “specified foreign property” sounds like it could mean anything outside of Canada, but the CRA has a specific definition. It includes:

• Funds or intangible property situated, deposited, or held outside Canada – this includes foreign bank accounts, foreign brokerage accounts, and foreign currency held outside Canada
• Tangible property situated outside Canada – foreign real estate held for investment purposes (not personal use)
• Shares of non-resident corporations held outside a registered account – even if they are held in a Canadian brokerage account, individual stocks listed on a foreign exchange (NYSE, NASDAQ, LSE, etc.) are specified foreign property
• Shares of Canadian corporations on deposit or held outside Canada
• Indebtedness owed by non-resident persons – foreign bonds, notes, or receivables
• Interests in non-resident trusts
• An interest in a partnership that holds specified foreign property (your share may count)
• Property held in a foreign insurance policy

Here is the critical point: the property itself must be foreign. A Canadian ETF that holds foreign assets within its structure is not considered foreign property – the ETF units are Canadian property.

3. The Key Question: Is XEQT “Specified Foreign Property”?

No. XEQT is not specified foreign property.

Here is why:

• XEQT is listed on the Toronto Stock Exchange (TSX) under the ticker XEQT. It trades in Canadian dollars on a Canadian exchange.
• XEQT is a trust organized under Canadian law, managed by BlackRock Asset Management Canada Limited. It is domiciled in Canada.
• The units you hold are units of a Canadian-resident mutual fund trust. When you buy XEQT, you are buying units of a Canadian trust. You are not directly buying shares of Apple, Toyota, or Nestle – you are buying units of a Canadian fund that happens to invest in those companies.

The CRA explicitly excludes the following from the definition of “specified foreign property”:

• Mutual fund units and shares of mutual fund corporations that are Canadian-resident
• Units of Canadian-resident trusts (which is what ETFs like XEQT are)
• Property held in registered accounts (TFSA, RRSP, RESP, RDSP, FHSA, DPSP)
• Personal-use property (your vacation home in Florida that you use personally, though rental property would count)

So even though XEQT’s portfolio is roughly 45% US stocks, 25% international developed markets, 5% emerging markets, and 25% Canadian stocks – meaning approximately 75% of its underlying assets are foreign – the ETF units themselves are Canadian property. The “look-through” principle does not apply here. You do not need to look through the ETF to its underlying holdings for T1135 purposes.

This is one of the underrated advantages of holding an all-in-one Canadian ETF like XEQT. It gives you global diversification without the compliance headache of reporting foreign property.

4. What IS vs. What ISN’T Specified Foreign Property

This table should help clarify the distinction. I find it useful to see concrete examples side by side.

The pattern is clear: it is about where the property is domiciled and listed, not what the property invests in. A Canadian wrapper around foreign assets keeps you out of T1135 territory.

5. Common XEQT Scenarios That Do NOT Trigger T1135

Let me run through the scenarios I see most often in online investing communities. Every single one of these is a “no, you do not need to file T1135” situation.

Scenario A: $200,000 of XEQT in your TFSA

No T1135 required. Two reasons: (1) XEQT is not specified foreign property, and (2) holdings in a TFSA are exempt from T1135 reporting regardless. Double protection.

Scenario B: $500,000 of XEQT in a non-registered account

No T1135 required. Even though this is a large amount in a taxable account, XEQT is a Canadian-listed ETF and is not specified foreign property. The amount does not matter – the property type does.

Scenario C: $100,000 of XEQT + $50,000 of VEQT in your RRSP

No T1135 required. Both XEQT and VEQT are Canadian ETFs, and everything is in a registered account. No part of this triggers T1135.

Scenario D: $80,000 of XEQT in non-registered + $200,000 of XEQT in TFSA + $300,000 of XEQT in RRSP

No T1135 required. Regardless of the total amount, XEQT is not specified foreign property in any account type. And the TFSA and RRSP holdings are exempt from T1135 in any case.

Scenario E: $1,000,000 of XEQT split across multiple accounts at different brokerages

Still no T1135. It does not matter how much XEQT you own or how many accounts it is spread across. Canadian ETF units are not specified foreign property.

The bottom line: if the only investments you hold are Canadian-listed ETFs like XEQT, you will never need to file a T1135, regardless of the amount or account type.

6. When XEQT Investors MIGHT Need to File T1135

Here is where things get more nuanced. Even though XEQT itself does not trigger T1135, many Canadian investors do not hold only XEQT. If you have branched out into other investments, some of those may qualify as specified foreign property.

You may need to file T1135 if, in a non-registered account, you hold:

• Individual US stocks – If you own shares of Apple, Microsoft, Google, Amazon, Tesla, or any other company listed on the NYSE or NASDAQ, those shares are specified foreign property. Each position counts toward the $100,000 threshold.
• US-listed ETFs – If you hold VOO, VTI, SPY, QQQ, SCHD, or any other ETF listed on a US exchange, those are specified foreign property. This is true even if you bought them through a Canadian brokerage like Wealthsimple or Questrade.
• Foreign bank accounts – A US-dollar savings account at an American bank, a UK current account, or any other foreign bank account counts.
• Foreign rental property – An investment condo in Florida or Arizona that you rent out (not personal use) is specified foreign property.

The $100,000 threshold is cumulative across all specified foreign property. So if you have $60,000 of US stocks and $50,000 in a US bank account in a non-registered account, your total is $110,000 and you need to file.

Here is a scenario where an XEQT investor would need T1135:

You hold $300,000 of XEQT in your non-registered account (does NOT count toward the threshold) plus $80,000 of VOO and $30,000 of individual US stocks in the same non-registered account (these DO count: $110,000 total). You need to file T1135.

And here is a scenario where you would not:

You hold $300,000 of XEQT in your non-registered account plus $90,000 of VOO in your RRSP. The XEQT does not count (Canadian ETF), and the VOO does not count (held in a registered account). No T1135 needed.

7. T1135 and Registered Accounts: The Good News

One of the most important rules to understand is that holdings in registered accounts are completely exempt from T1135 reporting. This applies to:

• TFSA (Tax-Free Savings Account)
• RRSP (Registered Retirement Savings Plan)
• RESP (Registered Education Savings Plan)
• RDSP (Registered Disability Savings Plan)
• FHSA (First Home Savings Account)
• DPSP (Deferred Profit Sharing Plan)
• RPP (Registered Pension Plan)
• RRIF (Registered Retirement Income Fund)

This means you could hold $1,000,000 worth of US-listed ETFs, individual American stocks, and international securities inside your RRSP, and you would not need to file a T1135. The registered account exemption is absolute.

This is a powerful reason to consider holding your US-listed investments (if you have any) inside registered accounts. Not only do you benefit from tax-deferred or tax-free growth, but you also avoid T1135 compliance entirely.

For most XEQT investors, though, this point is academic. Since XEQT is not specified foreign property regardless of account type, the registered account exemption is a bonus layer of protection rather than a necessity.

8. What About Norbert’s Gambit and USD Holdings?

If you are the type of investor who uses Norbert’s Gambit to convert Canadian dollars to US dollars for purchasing US-listed investments, there are a few things to be aware of.

Holding USD cash in a non-registered Canadian brokerage account:

This is a grey area that comes up frequently. If you hold US dollars in a Canadian brokerage account, the CRA’s position is that Canadian-dollar deposits and foreign-currency deposits held at a Canadian financial institution are generally not specified foreign property. Your USD sitting in a Wealthsimple or Questrade non-registered account is held at a Canadian institution, so it typically does not count.

However, if you hold USD in a US-based bank account (for example, a cross-border account at a US bank), that would be specified foreign property.

US-listed securities purchased through Norbert’s Gambit:

If you used Norbert’s Gambit to convert CAD to USD and then purchased US-listed ETFs (like VTI or VOO) in a non-registered account, those US-listed ETFs are specified foreign property, regardless of how you funded the purchase. The method of currency conversion does not change the nature of the property.

If those US-listed holdings are in a registered account (RRSP, TFSA, etc.), they are exempt from T1135 – which is one more reason to consider the RRSP for US-listed holdings, where you also benefit from the Canada-US tax treaty’s withholding tax exemption. For more on this, see our guide on XEQT foreign withholding tax.

The Norbert’s Gambit process itself – where you briefly hold an interlisted stock like DLR/DLR.U – does not trigger T1135. You are buying and selling a Canadian-listed security (DLR on the TSX) and receiving the US-listed equivalent (DLR.U). The transaction is typically completed within a few days and does not involve holding specified foreign property in any meaningful sense.

9. Penalties for Getting T1135 Wrong

The reason Dave was panicking at midnight is that the penalties for failing to file a T1135 are genuinely severe. Here is the breakdown:

These penalties apply per tax year. If you failed to file for three consecutive years, the penalties multiply accordingly.

The extended reassessment period is the one that keeps tax professionals up at night. Normally, the CRA has three years from the date of your original notice of assessment to reassess your return. But if you fail to file a T1135, or file it late, the CRA can go back six years for any income connected to the unreported foreign property. That is a much wider window for the CRA to audit and adjust your taxes.

The good news for XEQT investors: since XEQT is not specified foreign property, these penalties are irrelevant to your XEQT holdings. You cannot be penalized for failing to report something that does not need to be reported.

But if you do hold specified foreign property alongside your XEQT – say, individual US stocks or US-listed ETFs in a non-registered account – take the T1135 seriously. The penalties are not proportional to the tax owed (there may be no additional tax owed at all). They are penalties purely for failing to report, which makes them feel especially punitive.

10. How to Know If You Need to File T1135: A Simple Decision Tree

Here is a quick checklist to determine whether you need to file T1135. Run through it top to bottom.

Step 1: Are all your investments in registered accounts (TFSA, RRSP, RESP, RDSP, FHSA)?

• Yes –> No T1135 needed. Stop here.
• No –> Continue to Step 2.

Step 2: In your non-registered account(s), do you hold ONLY Canadian-listed securities (XEQT, VEQT, individual Canadian stocks, Canadian bonds, etc.)?

• Yes –> No T1135 needed. Canadian-listed securities are not specified foreign property. Stop here.
• No –> Continue to Step 3.

Step 3: In your non-registered account(s), do you hold any of the following?

• Individual stocks listed on a foreign exchange (NYSE, NASDAQ, LSE, etc.)
• ETFs listed on a foreign exchange (VOO, VTI, SPY, QQQ, etc.)
• Foreign bank accounts
• Foreign rental property
• Foreign bonds or debt instruments
• Other specified foreign property

If yes –> Continue to Step 4. If no –> No T1135 needed.

Step 4: Was the total cost amount of all your specified foreign property (from Step 3) greater than $100,000 CAD at any point during the tax year?

• Yes –> You need to file T1135.
• No –> No T1135 needed, but keep tracking. If you are close to $100,000, you may cross the threshold next year.

Important: The threshold is based on cost, not market value. If you bought $105,000 of US stocks and they dropped to $70,000, you still exceeded the threshold because the cost was over $100,000 at some point during the year.

For the vast majority of XEQT-only investors, you will stop at Step 1 or Step 2. The T1135 is simply not relevant to your situation.

11. Why XEQT Keeps Things Simple

This is one of those topics where XEQT’s design really shines. By holding a single, Canadian-listed, all-in-one ETF, you get:

• Global diversification across 9,000+ stocks in 49 countries
• No T1135 filing requirement, regardless of account type or amount invested
• No need to track specified foreign property or worry about the $100,000 threshold
• No complex foreign tax reporting beyond the standard T3 slip your brokerage provides
• Automatic rebalancing across Canadian, US, international, and emerging market equities

Compare this to an investor who builds a similar portfolio using US-listed ETFs. That investor might hold VTI (US total market), VXUS (international), and VCN (Canadian) in a non-registered account. The VTI and VXUS holdings are specified foreign property. If their combined cost exceeds $100,000, they need to file T1135 every year – tracking the cost, income, and gains for each position separately.

XEQT gives you essentially the same global exposure with none of the compliance overhead. It is not the most exciting reason to choose an all-in-one Canadian ETF, but for anyone who values simplicity at tax time – and who does not? – it is a meaningful benefit.

For more on the tax implications of XEQT, including how distributions are taxed, foreign withholding taxes, and optimal account placement, see our comprehensive tax guide. And if you are specifically interested in how capital gains tax works with XEQT, we have a detailed guide on that as well.

12. The Bottom Line

Let me circle back to Dave’s midnight panic. After I walked him through everything in this guide, he sent me a single-word reply: “Phew.”

That about sums it up. If you hold XEQT – whether it is $10,000 or $1,000,000, whether it is in a TFSA, RRSP, or non-registered account – you do not need to file a T1135. XEQT is a Canadian-listed ETF, organized as a Canadian trust, and its units are not specified foreign property. Full stop.

The only time you need to think about T1135 is if you hold other investments that qualify as specified foreign property in a non-registered account, and the total cost of those investments exceeds $100,000. If you are an XEQT-only investor, you can sleep soundly at tax time.

This is, honestly, one of the underappreciated benefits of the all-in-one ETF approach. You get the entire world’s equity markets in a single Canadian wrapper, and you sidestep an entire category of tax compliance. Fewer forms, fewer deadlines, fewer midnight panics. That is the kind of simplicity that compounds over a lifetime of investing.

Disclaimer

This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and can change. The information in this guide reflects my understanding of the CRA’s rules as of the date of publication, but I am not a tax professional. Your specific situation may differ based on your residency status, the nature of your holdings, and current legislation. Please consult a qualified tax professional or accountant for advice tailored to your individual circumstances. When in doubt, ask your accountant – it is far cheaper than a CRA penalty.

Related Reading

• What is XEQT? A Comprehensive Guide
• XEQT Foreign Withholding Tax
• XEQT in TFSA vs RRSP: Where Should You Hold It?
• Capital Gains Tax and XEQT: What Canadian Investors Need to Know
• XEQT Tax Implications: Complete Guide for Canadian Investors
• Norbert’s Gambit and XEQT