What is the penalty for filing a T1135 late, and how bad can it get?
For 2026, a late T1135 costs $25 a day for up to 100 days under ITA 162(7), with a $100 minimum and a $2,500 maximum per return. A knowing or grossly negligent failure costs $500 a month under 162(10), up to $12,000 ($24,000 after a demand), and past 24 months 162(10.1) adds 5% of cost, net of those penalties.
Every T1135 penalty in one table
The CRA's penalty table for foreign reporting lists the same tiers the Income Tax Act sets out in sections 162 and 163 canada.ca. The first row is the one most clients face. The rest need the CRA to show the failure was knowing or grossly negligent.
| Situation | ITA section | Penalty | Ceiling |
|---|---|---|---|
| Filed late | 162(7) | Greater of $100 and $25 a day, counting up to 100 days | $2,500 per return |
| Information missing from the form | 162(5) | $100 for each failure | $100 per item |
| Knowing or grossly negligent failure to file | 162(10) | $500 a month unfiled, up to 24 months, less the 162(7) penalty | $12,000 |
| Same, after ignoring a demand under section 233 | 162(10) | $1,000 a month unfiled, up to 24 months, less the 162(7) penalty | $24,000 |
| Still unfiled after 24 months (knowing or grossly negligent) | 162(10.1) | 5% of the highest total cost amount of specified foreign property in the year, less the 162(7) and 162(10) penalties | None |
| False statement or omission, knowingly or grossly negligent | 163(2.4)(c) | Greater of $24,000 and 5% of that highest total cost amount | None |
The wording of each tier comes from section 162 laws-lois.justice.gc.ca and from subsection 163(2.4)
laws-lois.justice.gc.ca. The CRA's table also marks the due diligence exception in section 233.5 as unavailable for the T1135, so that defence isn't available on this form.
Interest runs on top. Under paragraph 161(11)(a), interest on a section 162 or 163 penalty starts on the day the return was due and runs until the penalty is paid laws-lois.justice.gc.ca.
Worked example: a T1135 filed 40 days late
Your client held foreign shares with a total cost amount of $180,000 and filed the T1135 40 days after their filing due date. There's no suggestion it was deliberate, so only 162(7) applies.
| Step | Amount |
|---|---|
| Days late (capped at 100) | 40 |
| $25 times 40 days | $1,000 |
| Compare with the $100 minimum | $1,000 is higher |
| 162(7) penalty | $1,000 |
| Plus arrears interest from the due date | Varies |
The day count does most of the work, and the floor and ceiling only matter at the edges:
| Days late | $25 times days | Penalty |
|---|---|---|
| 2 | $50 | $100 (minimum) |
| 4 | $100 | $100 |
| 40 | $1,000 | $1,000 |
| 100 | $2,500 | $2,500 |
| 250 | $6,250 | $2,500 (100 day cap) |
Each year's T1135 is a separate return, so a client who missed three years faces three penalties. Three returns more than 100 days late is $7,500 before interest.
Gross negligence and the 24 month cliff
Subsection 162(10) is a formula: $500 times the months the return stays unfiled (capped at 24), times 2 if your client ignored a demand to file under section 233, minus the 162(7) penalty for the same return. That subtraction is why the CRA describes the ceilings as $12,000 and $24,000 "less any penalties already levied".
Subsection 162(10.1) only bites when the return stays unfiled for more than 24 months and 162(10) already applies. It takes 5% of the highest total cost amount of specified foreign property at any time in the year, then subtracts the 162(7) and 162(10) penalties.
Now change the facts: the CRA proves gross negligence, the return stays unfiled for 30 months, and the cost amount is $400,000:
| Penalty | Arithmetic | Amount |
|---|---|---|
| 162(7) | 100 days times $25 | $2,500 |
| 162(10) | ($500 times 24) minus $2,500 | $9,500 |
| 162(10.1) | (5% of $400,000) minus ($2,500 plus $9,500) | $8,000 |
| Total | $20,000 |
The total lands exactly on 5% of cost. Past 24 months, the combined penalty works out to the larger of the 162(10) total and 5% of the cost amount, because each layer is net of the ones beneath it.
Cost amount drives both the filing test and the 5% penalty, not market value. A specified Canadian entity files once the total cost amount of its specified foreign property exceeds $100,000 at any time in the year laws-lois.justice.gc.ca. The full filing test is on T1135 filing requirements.
The extra three years to reassess
Paragraph 152(4)(b.2) gives the CRA three more years past the normal reassessment period when two things are both true: your client failed to file the T1135 as and when required (or left out required information about a specified foreign property), and failed to report income from a specified foreign property on the return laws-lois.justice.gc.ca.
The normal period under 152(3.1) is three years from the original notice of assessment for individuals and CCPCs, and four years for other corporations and mutual fund trusts. With (b.2), that becomes six years for an individual or a CCPC and seven for any other corporation.
One gotcha accountants miss: subsection 152(4.01), which confines most extended reassessments to the items that triggered them, doesn't list paragraph (b.2). On the face of the statute, the whole return stays open.
The CRA says the extension applies to the 2013 and later tax years canada.ca. For how the base periods run, see CRA reassessment period.
Getting the penalty reduced or cancelled
The Voluntary Disclosures Program lists an unfiled T1135 as an eligible situation canada.ca. A valid application has to meet five conditions: it comes before any audit or investigation on the issue, it's complete, it shows an error carrying interest or penalties, the information is at least one year past its due date, and it includes payment of the estimated tax or a request for a payment arrangement.
Under the rules in force since October 1, 2025, an unprompted application normally gets 100% penalty relief and 75% interest relief, while a prompted one gets up to 100% penalty relief and 25% interest relief canada.ca. For foreign income or assets, the application covers the most recent 10 years. More detail is on the Voluntary Disclosures Program.
The one year condition means the VDP can't help the client who filed 40 days late. That client's route is taxpayer relief.
Taxpayer relief covers penalties for tax years ending in the 10 calendar years before the request, for extraordinary circumstances like serious illness or a disaster, and for CRA errors or delays. Financial hardship can get interest waived, but the CRA lists no penalty relief for it canada.ca. By mail, the request goes on Form RC4288
canada.ca. As of October 2026, the CRA quotes about 16 months to process a request
canada.ca.
Sources
Is there a T1135 penalty if no tax is owing?
Yes. The 162(7) penalty is a flat amount tied to days late, not to tax, and the T1135 is due even when your client isn't otherwise required to file a return canada.ca.
Can I put a T1135 filed 40 days late through the VDP?
No. The VDP only accepts information that is at least one year past its due date, so a return filed 40 days late goes through taxpayer relief on Form RC4288 instead.
Does interest run on the T1135 penalty itself?
Yes. Paragraph 161(11)(a) charges interest on a section 162 penalty from the day the return was due until the penalty is paid, so a $1,000 penalty grows while it sits unpaid.
Does the 5% penalty use market value?
No. Subsections 162(10.1) and 163(2.4) both use the highest total cost amount of specified foreign property at any time in the year, the same measure as the $100,000 filing threshold.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.