23 September 2025 External T.I. 2025-1064831E5 - "Specified foreign property" under ss. 233.3(1)

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: 1. Whether precious metals held by an individual resident in Canada through a Canadian corporation and stored in a vault situated outside Canada constitute "specified foreign property" as defined in subsection 233.3(1). 2. Whether the individual is required to file Form T1135 to disclose the precious metals holding.

Position: 1. Factual determination, but likely yes. 2. Yes, if the total cost of the "specified foreign property" to the "specified Canadian entity" exceeds $100,000.

Reasons: 1. Precious metals owned by the particular individual and stored in a vault situated outside Canada may constitute "specified foreign property" pursuant to paragraph (b) or (h) of the definition in subsection 233.3(1). 2. In the situation where a "specified Canadian entity" owns "specified foreign property" and the cost amount of the “specified foreign property” to the entity exceeds $100,000, the entity would be required to file Form T1135 in relation to the foreign property under subsection 233.3(3).

XXXXXXXXXX 2025-106483
Mei Ng

September 23, 2025

Dear XXXXXXXXXX:

Re: Foreign reporting requirements under section 233.3

Unless stated otherwise, all statutory references in this document are to the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th Supp.) (the “Act”), as amended to the date hereof.

We are writing in reply to your letter of May 12, 2025 regarding the foreign reporting requirements under section 233.3 in respect of precious metals held by a particular individual (the “Taxpayer”) through a Canadian corporation and stored in a vault situated outside Canada.

Our understanding of the pertinent facts, as you provided, are as follows:

• The Taxpayer is a resident in Canada.
• The Taxpayer is a client of a corporation that is located in Canada (the “Corporation”), which allows its clients to buy from or sell to the Corporation “metal” consisting of “physical gold, silver, platinum or palladium” on the Corporation’s online platform.
• A “Holding” is the electronic record provided online to the client by the Corporation that evidences the quantity of precious metals held by or on behalf of the client and stored in a vault situated outside Canada (the “Holding”).
• There are two possible ways for the Taxpayer to own and hold the precious metals, i.e., as registered bars or as non-registered metals. The Holding is evidence of the Taxpayer’s ownership of the registered bars or in the case of non-registered metals, the Taxpayer’s proportionate undivided interest in the weight of the metal.
• In the case of registered bars, the Taxpayer can arrange at any time for the physical delivery or collection of the bars according to the Taxpayer’s request.

You have asked us to confirm whether the property evidenced by the Holding, namely the Taxpayer’s precious metals (whether registered bars or non-registered metal), constitutes “specified foreign property” within the meaning of subsection 233.3(1) of the Act such that the Taxpayer is required to file Form T1135, Foreign Income Verification Statement (“Form T1135”), in respect of that property.

Please note the determination of whether a particular property is “specified foreign property” and required to be reported on Form T1135 is a question of fact. In that regard, we cannot provide a factual determination, but offer the following general comments that may be of assistance.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R12, Advance Income Tax Rulings and Technical Interpretations.

Relevant definitions

Pursuant to subsection 233.3(3), a “reporting entity” for a taxation year or fiscal period is required to file Form T1135 on or before the entity’s filing-due date for the year. A “reporting entity” for a taxation year or fiscal period is defined in subsection 233.3(1) to mean a “specified Canadian entity” for the year or period where at any time in the year or period, other than a time when the entity is non-resident, the total cost amount to the entity of “specified foreign property” exceeds $100,000. A “specified Canadian entity” is further defined under subsection 233.3(1) to include a taxpayer resident in Canada in the year. In the case at hand, the Taxpayer would be considered a “specified Canadian entity”.

The term “specified foreign property” as defined in subsection 233.3(1) refers to property of a person or partnership, which, in our view, means property owned by the person or the partnership. Accordingly, for purposes of the reporting requirements under section 233.3, a “reporting entity” is viewed as the owner of the “specified foreign property”.

Ownership of the metals

For common law purposes, ownership may be legal or beneficial. Although “beneficial ownership” is not defined in the Act, the Courts (footnote 1) have recognized that its central attributes include possession, use, risk and control. Determining beneficial ownership is a question of fact having regard to all the circumstances. As such, in making a determination of beneficial ownership, the rights to possess, manage, control, derive income, use or dispose without interference and susceptibility to the risk of loss are relevant factors to consider.

According to the information provided in your inquiry, the Holding is evidence of the title for each precious metal owned and stored in its allocated vault location on behalf of the Taxpayer. In addition, the precious metals recorded in the Holding are reconciled on a daily basis by the Corporation with the weight of precious metals stored at each vault and on a quarterly basis, the Corporation’s outside auditor performs a full audit to verify the assets held as stated.

Accordingly, there is a direct, traceable and verifiable link between the title and ownership of the quantity of metals recorded in the Holding and the physical metals held in allocated storage in the vault on behalf of the Taxpayer. Furthermore, you indicated that the precious metals are held under a bailment relationship in a vault until sold or delivered according to the Taxpayer’s instructions. The “bailee” (i.e., the vault provider who has possession of the metals) holds the property on behalf of the “bailor” (i.e., the Taxpayer) on the understanding that the property will be returned to the Taxpayer once the bailment relationship is terminated according to their instructions. At common law, a bailment entails a change in possession but does not transfer title; the bailor ordinarily retains legal ownership, while the bailee holds the goods in custody.

In the situation at hand, despite the fact that the Taxpayer does not have possession of the metals under the bailment relationship, it is possible to conclude the Taxpayer as opposed to the Corporation has the rights to use, manage, control, use or dispose without interference and derive income. Furthermore, according to the information provided, the Taxpayer assumes the risks of loss such as those associated with valuation and price volatility.

In regard to those facts, it is reasonable to conclude that where the bars are registered, the Taxpayer’s legal title attaches to identified bars situated in the foreign vault. Where the Holding reflects non-registered metal, the Taxpayer holds a proportionate undivided interest in the weight of the metal situated abroad. In either case, the Taxpayer also bears the core attributes of beneficial ownership (control over sale/delivery, exposure to price risk, entitlement to proceeds).

Application of the Specified Foreign Property definition to registered metal

Paragraph (b) of the definition “specified foreign property” in subsection 233.1(1) includes in the definition “tangible property […] situated outside Canada”.

As stated in your inquiry, the Holding is an electronic record that is maintained by a corporation situated in Canada, but the physical precious metals recorded in the Holding are stored in a vault situated outside Canada.

Therefore, the physical nature of the registered bars and the fact that the Taxpayer can arrange for the physical delivery or collection of the registered bars could support the argument that the registered bars have a physical existence and therefore, can be considered “tangible property”.

As such, where the registered bars are stored in a vault situated outside Canada, it is possible to conclude that the bars owned by the Taxpayer are tangible property situated outside Canada and therefore, may be considered “specified foreign property” pursuant to paragraph (b) of the definition in subsection 233.3(1).

Application of the Specified Foreign Property definition to non-registered metal

In the case of non-registered metal, according to the information provided, the Taxpayer’s proportionate undivided interest in the weight of the metal recorded in the Taxpayer’s Holding quantifies the Taxpayer’s metal stored in the vault outside Canada and the Holding is evidence of the Taxpayer’s ownership interest in the non-registered metal.

In that regard, it can be said that the Taxpayer’s proportionate undivided interest in the weight of non-registered metal that is situated in a vault outside Canada is the Taxpayer’s interest in tangible property situated outside Canada, and consequently may be considered an interest in a property that is specified foreign property.

Paragraph (h) of the definition “specified foreign property” in subsection 233.1(1) includes in the definition “an interest in, […] any property (other than any property owned by a corporation or trust that is not the person) that is specified foreign property”. As such, the non-registered metals owned by the Taxpayer and situated outside Canada may constitute “specified foreign property” under paragraph (h) of the definition in subsection 233.3(1).

Distinction from 2014-0517021E5

The situation considered in CRA document 2014-0517021E5 to which you referred to in your request, involved an indirect interest in a non-resident corporation (non-resident entity). By contrast, your inquiry concerns direct ownership (or an undivided interest) in physical precious metals held in a foreign vault. The analysis in 2014-0517021E5 regarding paragraph (f) of the ”specified foreign property” definition (interests in non-resident entities) is therefore not determinative of the present fact pattern.

Filing requirement

Based on the facts provided, it is reasonable to conclude the metals evidenced by the Holding (whether registered bars or non-registered metals) would generally be specified foreign property of the Taxpayer. Consequently, if, at any time in a taxation year, the total cost amount to the Taxpayer of all specified foreign properties (including the metals described above) exceeds $100,000, the Taxpayer would be a reporting entity for that year and required to file Form T1135 pursuant to subsection 233.3(3).

We trust these comments to be of assistance.

Yours truly,

Gillian Godson
Section Chief, Administrative Law Section I
Specialty Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

FOOTNOTES

Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:

1 Prevost Car Inc. v. R. (2008 TCC 231, affirmed by 2014 FCA 86) and Velcro Canada Inc. v. R. (2012 TCC 57)