If you are a Canadian resident who owns foreign assets, you need to be aware of the Foreign Asset Reporting System (FARS) rules. The FARS is a set of regulations that require Canadian taxpayers to report specified foreign assets to the Canada Revenue Agency (CRA) annually. This blog post will cover everything you need to know about the FARS, including the reporting requirements, penalties for non-compliance, and how to ensure that you are in compliance.

Reporting Requirements

The FARS requires taxpayers to report foreign assets that meet or exceed specific thresholds. These thresholds vary depending on whether the taxpayer is an individual, corporation, or trust, and whether the assets are held directly or indirectly. As an individual taxpayer, you must report specified foreign property that has a total cost of more than CAD $100,000 at any time during the taxation year. Specified foreign property includes assets such as foreign bank accounts, foreign stocks, and foreign rental properties.

In addition to reporting specified foreign property, Canadian taxpayers must also report certain transactions involving foreign property. These transactions include the acquisition, disposal, and transfer of foreign property, as well as the receipt of income or capital gains from foreign property.

Penalties for Non-Compliance

Failure to comply with the FARS rules can result in significant penalties. The penalty for failing to file the required form disclosing foreign assets can be as high as CAD $2,500 per year. If the CRA believes that the failure to report was due to gross negligence, the penalty can be up to 5% of the value of the foreign property that was not reported. In addition, the CRA can extend the normal reassessment period indefinitely until the taxpayer files the required FARS form.

How to Ensure Compliance

To ensure that you are in compliance with the FARS rules, you should consult with a qualified accountant who has experience dealing with foreign asset reporting. Your accountant can help you determine which foreign assets need to be reported and ensure that the required forms are filed accurately and on time. If you are unsure whether you need to report a particular foreign asset, it is always best to err on the side of caution and report it.

In conclusion, if you are a Canadian resident who owns foreign assets, you must be aware of the FARS rules and ensure that you are in compliance. Failure to comply with the reporting requirements can result in significant penalties, so it is essential to work with a qualified accountant who can help you navigate the complex reporting requirements. At JTT Accounting, we have extensive experience in dealing with foreign asset reporting and can help ensure that you remain in compliance with all CRA rules and regulations. Contact us today to schedule a consultation.