The T1135 question.

If you're a Canadian resident who's bought (or is about to buy) Costa Rica real estate, the question your accountant will ask first isn't about beach views. It's about Form T1135 — the Foreign Income Verification Statement. Whether you must file it depends on two numbers and one decision. Get it wrong and the meter starts at $25 a day, capped at $2,500 — and that's just the basic penalty. Here is exactly how it works in 2026.

This page is written for Canadian tax residents who own — or plan to own — real estate in Costa Rica directly in their personal name, through a Costa Rican S.A. or SRL, or via a fideicomiso (trust). It is informational only. Confirm your specific facts with a Canadian cross-border CPA before you file.

What is Form T1135?

T1135 is the Canada Revenue Agency form that tracks specified foreign property held by Canadian residents when the cost base of that property exceeds CAD $100,000 at any point in the tax year. It's filed alongside your annual T1 personal return — same April 30 deadline — and applies whether the property is held in your own name, in a corporation you control, or inside a trust.

It is not a tax. It is a reporting form. Filing T1135 does not, by itself, create a tax liability. But failing to file when required is its own offence, and the penalty cascade ramps fast.

What counts as "specified foreign property" for Canadians who buy in Costa Rica

• Real estate held outside Canada — your Costa Rica home, lot, or condo, whether held in your name, a CR S.A./SRL you control, or a fideicomiso
• Funds in foreign bank accounts — your BAC, BCR, or Banco Nacional account holding rental income or operating cash
• Shares of foreign corporations — if you own a CR holding company that owns the property
• Debts owed by non-residents — if you've extended credit (rare on the Canadian-buyer side)

When you must file

You must file T1135 for the tax year if both of the following are true at any time during the year:

1. The total cost amount of all your specified foreign property combined exceeds CAD $100,000; and
2. The property is anything other than personal-use property — i.e., it generates income (rental, capital gain on sale) or you bought it primarily for investment.

The threshold is cost base, not market value. A USD $295,000 home in Mal País at the 2026 CAD/USD rate of about 1.37 lands at roughly CAD $404,000 in cost — well above the threshold. T1135 applies the moment you close.

Most Canadian buyers underestimate this. They look at the threshold and think "$100K — easy, I'm under." Then they realize their $300K USD vacation rental is actually $410,000 CAD on the day they wired the funds. T1135 fires.

When you do not have to file

You're off the hook in three specific cases — but only one is common for Canadian buyers in Costa Rica:

Case 1: Pure personal-use property

If you own a Costa Rica home that is purely for personal use — you and your family vacation there, you never rent it on Airbnb or to a long-term tenant, you never list it for sale at a profit motive — it is treated as personal-use property and is excluded from T1135 reporting.

This is the case most Canadian buyers want to land in. It works if you buy a vacation home, use it yourself, and never put it on a rental platform. The moment one Airbnb booking lands, the property is no longer purely personal-use that year.

Case 2: Cost base under CAD $100,000

If the cost base of all your foreign property combined is under $100K CAD, no T1135. For Costa Rica buyers this is rare — the cheapest beach lots in our inventory start around USD $80K, which converts to roughly CAD $110K and trips the threshold immediately.

Case 3: Foreign property held in registered accounts

RRSPs, TFSAs, RRIFs that happen to hold foreign property are excluded from T1135. This is irrelevant for direct real estate purchases — Costa Rica property is rarely held inside a Canadian registered account.

Simplified vs. detailed reporting

The form has two layers. Most Canadian buyers in our typical price band (USD $300K–$1.5M) end up in Detailed Reporting.

The conversion to CAD uses the spot exchange rate on the date of each transaction (for cost) and the year-end rate (for year-end balance). Keep wire confirmations, escritura, registry inscription, and broker statements — your CPA will need every piece.

How to file: step-by-step

1. Pull every piece of paper from closing. Wire confirmations (CAD/USD), the escritura, the registry inscription, and CR escrow agent receipts. Date and spot exchange rate per transaction.
2. Compute the cost base in CAD. Purchase price + legal fees + transfer fees + agent commission + CR closing costs. Convert at the day-of-wire spot rate.
3. Determine income for the year. Total gross rent in CAD less directly attributable expenses (HOA, property tax, repairs, advertising, agent commission). Costa Rica withholding tax may apply — your property administrator can issue receipts for the foreign tax credit claim.
4. Engage a Canadian cross-border CPA. File T1135 alongside your T1. The form lives inside most filing software (TurboTax, H&R Block) and every accountant's professional package. Add 30–60 minutes to a typical return.
5. Save the package for six years. CRA can audit T1135 separately. Keep wire confirmations, escritura, registry, and rental ledger.

The Canadian-buyer-specific edge cases we see most

Buying through a Costa Rican S.A. or SRL

Many of our Canadian clients buy through a Costa Rican Sociedad Anónima or SRL for asset-protection and estate-planning reasons. That changes the T1135 line — you're now reporting shares of a foreign affiliate, not direct real estate. Cost base is what you contributed to the entity. Your CPA needs the entity registration, the shareholder ledger, and any inter-company loans.

Owner-financing (vendor takes back the mortgage)

If we structure your deal with seller-financing — the seller carries paper instead of you taking a Canadian mortgage — the T1135 cost base is still the full purchase price. You owe the full amount; you owe T1135 reporting on the full amount. The seller's hipoteca registered against title does not reduce your cost base.

Mid-year purchases

The "any time during the year" wording matters. If your cost base crossed $100K at any point — even for one day — T1135 applies for that year, even if you closed on December 28.

Spousal / joint ownership

Cost base is allocated by ownership share. If you and your spouse take title 50/50 on a $400K CAD property, each of you reports a $200K cost base. Each spouse files their own T1135 if their individual share exceeds $100K. Most CR-buying Canadian couples will both file.

Cross-border CPAs we routinely refer Canadian clients to

We do not give tax advice ourselves. Our Canadian clients have used the firms below for T1135 + cross-border filings without issues. We share specific names on the Discovery Call:

• Toronto-based cross-border CPA practice — handles 30–40 CR-resident Canadians a year
• Vancouver-based firm with a CR + cross-border specialty for BC clients
• Montréal bilingual practice for Quebec residents — files T1135 in French and English

People also ask

Do Canadians have to file T1135 for Costa Rica vacation homes?

Only if the property is held for income (rental, capital gain) and the cost base of all foreign property exceeds CAD $100,000 at any point in the year. A purely personal-use vacation home — never rented, never listed — is excluded under the personal-use property exemption.

What is the T1135 threshold in Canadian dollars?

CAD $100,000 in cost base, not market value, calculated across all specified foreign property combined. The threshold is tested at any time during the tax year — if you crossed it for one day, T1135 fires for the whole year.

What is the penalty for not filing T1135?

$25/day basic, capped at $2,500. Knowing failure: $500/month, capped at $12,000. After CRA demand: $1,000/month, capped at $24,000. Gross-negligence false statements: $24,000+ plus 5% of the unreported property's cost base.

Does T1135 apply if I buy through a Costa Rican S.A. or SRL?

Yes — but the line item changes. Instead of reporting real estate held outside Canada, you report shares of a foreign affiliate. Cost base is what you contributed to the entity.

Is rental income from Costa Rica taxable in Canada?

Yes. Canadian residents pay tax on worldwide income. CR rental income goes on your T1 (and on T1135 in the income field). Canada and Costa Rica do not currently have a comprehensive tax treaty, but Canadian residents can typically claim a foreign tax credit for CR taxes paid against the Canadian tax owed on the same income.

Sources: Canada.ca T1135 Q&A · CIBC T1135 Reporting PDF · TurboTax Canada T1135 guide. This page is informational only — not tax, legal, or accounting advice. Confirm your specific facts with a Canadian cross-border CPA.