Each tax season brings the enforcement of tax changes announced in the previous year. This year, while there were no changes to the income tax treatment of trusts, there are significant additional reporting requirements for trusts with a fiscal year ending on or after December 31, 2023
Trusts that do not have earned income, dispose of property, or make distributions to beneficiaries of income or capital, will likely now be required to file a T3 Trust income tax and information return (“T3 Return”). As a result, many trusts that have never had to file are now required to do so for the first time. Other examples include corporations set up to hold the legal title of a real estate property, or assets held in trust for a child or grandchild.
For more information, please see The Bare Facts on The New Bare Trust Reporting Requirements.
Is your arrangement impacted by the new trust reporting requirements?
Trust resident in Canada, subject to limited exceptions, are impacted by these new rules. These rules apply to trusts created to hold private company shares, vacation properties, and estates that don’t qualify as a graduated rate estate (GRE).
What information must now be submitted to the Canada Revenue Agency?
Affected trusts must now file a T3 return and a Schedule 15 to provide additional information for each trust’s Settlors, Trustees and Beneficiaries. This information includes:
- Name
- Address
- Date of birth
- Jurisdiction of residence
- Tax identification type
- Tax identification number
The same information must be provided for any person who has the ability (through the terms of the trust or related agreement) to exert influence over the trustee’s decision with respect to the appointment of income or capital.
Trust Account Number
The first step for trustees that must file for the first time is to acquire a trust account number from CRA. A trust account number can be obtained via online application, using the Trust Account Registration service.
Exemptions
Trusts that have existed for less than three months as of December 31, 2023, as well as those with less than $50,000 in cash, are exempt from filing a T3. Registered charities, qualified disability trusts, mutual fund trusts, segregated funds, trusts where all the units of which are listed on a designated stock exchange, graduated rate estates (GRE) and government registered plans such as RESPs, RRIFs, RRSPs are also exempt.
Penalties
Failure to file a T3 annual return will result in a penalty from CRA of the greater of $2,500, or 5% of the maximum fair market value of the property held in the trust at any time in the year.
For further information on the new trust reporting requirements, or to determine if your trust requires the filing of a T3 return, please speak with your GGFL advisor.
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