Crypto Foreign Reporting


(From the July 2022 Edition of eFORUM)

By Jamie Golombek 


In the past couple of years, some of your clients may have started dabbling in cryptocurrency, a blockchain-based digital asset that has become popular with certain investors, although less so recently, given the price volatility that’s been experienced in the past few months.

While clients are likely aware that the sale of crypto needs to be declared for tax purposes, many may not realize that cryptocurrency might also be considered foreign property, which may necessitate annual reporting if the clients’ total cost of all foreign property exceeds $100,000 at any point in a tax year. If so, clients are required to file Form T1135. The penalty for filing late is $25 per day to a maximum of $2,500, plus arrears interest.

The Canada Revenue Agency (CRA) was recently asked about this at the Association for Tax and Financial Planning conference held last fall during the CRA’s roundtable on taxation of financial strategies and instruments. It published its formal answers in a June 2022 technical interpretation.

The CRA stated that it is of the view that cryptocurrencies are funds or intangible property and are specified foreign property that should be disclosed on a taxpayer’s Form T1135 if the cryptocurrency in question is “situated, deposited or held outside of Canada.” The Form T1135, however, not only requires the identification and reporting of foreign property, but also indicating which country the property is from.

The CRA went on to state that it’s “impossible to precisely locate cryptocurrencies that are merely the result of mathematical formulas, the records of which are contained on servers that can be in several different locations around the world, and may even be moved and copied to a USB drive that may be in another location. It could also be argued that passwords can be stored by users and holders of cryptocurrencies, and thus follow the location of the physical person. The procedures for storing public and private data may also vary depending on the cryptocurrency.”

In the U.K., the local tax guidance states that for as long as a person is a U.K. resident, the exchange tokens they hold as a beneficial owner will be located in the U.K. In other words, in that taxing authority’s view, the situs of the cryptocurrencies will follow the holder’s residence for all tax purposes.

The U.S., however, has chosen a different approach, and in December 2020, the IRS issued a statement indicating that it intends to add virtual currency accounts to the reportable accounts under the FBAR rules, which apply to the foreign bank accounts of a U.S. taxpayer.

The CRA was asked whether, for simplicity purposes, it would adopt a principle like that of the U.K. and treat the situs of cryptocurrencies as following that of the holder’s residence and thus not require reporting on the T1135.

The CRA’s response, however, was non-committal, saying that the matter is “currently under review.” In the meantime, however, the best advice is probably to disclose your cryptocurrency on the T1135 or else risk harsh penalties from the CRA for non-disclosure. Those questions were discussed in a 2021 article in the publication Tax for the Owner-Manager by tax lawyers William Musani and Ashvin Singh, who concluded: “This highly complex and unique form of intangible property flouts the traditional concepts and methods historically used to determine the situs of other types of intangible property. Given the CRA’s administrative position and the hefty penalties associated with a failure to file form T1135 … the cautious approach is to report cryptocurrency holdings if the situs of the holdings is ambiguous.”


Jamie Golombek, CPA, CA, CFP, CLU, TEP, is the managing director, tax & estate planning with CIBC Private Wealth in Toronto. He can be reached at