New trust reporting requirements
New reporting requirements are effective for trusts with tax years ending on or after Dec. 31, 2023.
Under current rules, a trust must generally file a T3 return for a tax year if the trust:
- has tax to pay for the year,
- disposes of a capital property, or
- distributes all or part of its income or capital to its beneficiaries.
The new reporting requirements will apply to “express trusts” that are resident in Canada and to non‑resident trusts that are currently required to file a T3 return. An express trust is generally a trust created with the settlor's express intent, usually made in writing. Bare trust arrangements are also subject to these new reporting requirements. Therefore, many trusts which were not previously required to file an annual return must now submit a return with the additional disclosures discussed below.
Exemption from the enhanced reporting requirements includes:
- Trusts that have existed for less than three months at the end of the year.
- Trusts that hold less than $50,000 CAD in assets throughout the tax year (as long as they only hold specific types of assets such as deposits, government debt obligations and listed securities).
- Mutual fund trusts, segregated funds and master trusts.
- Trusts where all the units of which are listed on a designated stock exchange.
- Trusts governed by registered plans, including the proposed first home savings accounts.
- Employer profit‑sharing plans.
- Lawyers’ general trust accounts.
- Graduated rate estates and qualified disability trusts.
- Trusts that qualify as non‑profit organizations or registered charities.
- Employee life and health trusts.
- Certain government‑funded trusts.
- Cemetery care trusts and trusts governed by eligible funeral arrangements.
Trusts that fall under the new rules are required to file a T3 trust return and disclose additional information on all “reportable entities”, which include all of the trust’s settlors, trustees, beneficiaries as well as any person who can exert control or override trustee decisions (such as a protector).
The information required includes name, address, date of birth (for individuals), country of residence and taxpayer identification number (social insurance number, trust account number, business number or foreign tax number).
The deadline is April 1, 2024 (90 days after the calendar year-end) with a penalty of $25 for each day late, with a minimum penalty of $100 and a maximum of $2,500.
The new rules also impose a significant additional gross negligence penalty where a failure to file the return was made knowingly or due to gross negligence. The additional penalty would be 5% of the maximum value of property held by the trust during the relevant year, with a minimum penalty of $2,500. This penalty would also apply to false statements and omissions amounting to gross negligence as well as a failure to respond to a Canada Revenue Agency (CRA) demand to file.
NOTE: Please understand any posts written in the past may not be reflective of the current applicable obligations, rights and benefits.