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NEW CHANGES TO TRUST REPORTING REQUIREMENTS

Many trusts that did not previously have to file are now required to file an annual T3 Return. Navigate the changes for trusts ending after December 30, 2023.

couple discussing trust reporting requirements

What are the changes to trust reporting for taxation years after December 30, 2023?

    • All trusts, unless certain conditions are met, will be required to file an annual T3 Return with the CRA.
    • Trusts that are required to file a T3 Return may need to complete Schedule 15 in their annual T3 return to report beneficial ownership information.
    • Bare trusts are subject to the new reporting rules.

These changes may result in a situation where a trust is required to file for the first time. Where a trust is required to file for the first time, it will need to have a trust account number before being able to file a T3 Return electronically.

Which trusts are now required to file a T3 Return?

A trust that is resident in Canada must file a T3 Return annually, if:

    • Is an express trust, or
    • For civil law purposes, a trust is other than a trust that is established by law or by judgement.

For all other trusts (resident – and non-resident), including listed trusts, a T3 Return is required to be filed for taxation years in which the trust:

    • has tax payable
    • is requested to file
    • is a deemed resident trust 
    • is resident in Canada and has either disposed of, or is deemed to have disposed of, a capital property or has a taxable capital gain (for example, a principal residence, or shares in the capital stock of a corporation)
    • is a non-resident throughout the year, and has a taxable capital gain (other than from an excluded disposition described in subsection 150(5) of the Income Tax Act) or has disposed of taxable Canadian property (other than from an excluded disposition)
    • holds property that is subject to subsection 75(2) of the Income Tax Act
    • has provided a benefit of more than $100 to a beneficiary for upkeep, maintenance, or taxes for property maintained for the beneficiary’s use
    • receives from the trust property any income, gain, or profit that is allocated to one or more beneficiaries, and the trust has:
      • total income from all sources of more than $500
      • income of more than $100 allocated to any single beneficiary
      • made a distribution of capital to one or more beneficiaries
      • allocated any portion of the income to a non-resident beneficiary

What information must now be submitted on form Schedule 15?

The Schedule 15 asks for information on all trustees, settlors, beneficiaries and controlling persons for the trust (collectively referred to as "reportable entities"). For each reportable entity of the trust, the following information must be provided:

    • name
    • address
    • date of birth (if applicable)
    • country of residence, and
    • Tax Identification Number (i.e., Social Insurance Number, Business Number, Trust Number, or, in the case of a non-resident trust, the identification number assigned by a foreign jurisdiction)

Avoid penalties by filing with our Tax Experts

Failure to file a T3 Return for a trust may result in a penalty greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year. Connect with your local Liberty Tax experts to ensure that you’re accurately filing taxes related to a trust.

Common Questions and Answers

Are bare trusts now required to file an annual T3 Return and Schedule 15?
A “bare trust” for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property. Bare trusts are subject to the new trust reporting rules for tax years ending after December 30, 2023. Accordingly, a bare trust is required to file a T3 Return annually unless specific conditions are met. A bare trust is also required to complete Schedule 15 annually, unless it is a listed trust. Similar to all trusts subject to the new reporting rules, a trustee of a bare trust is required to register for a trust number.

Can the information be submitted directly to the CRA without using a T3 return or Schedule 15?
No. The beneficial ownership information will only be accepted if submitted Schedule 15, which forms part of the T3 Return. There are no alternative methods of providing beneficial ownership information at this time.

Can I file a trust return without professional help?
At this time, the availability of online tax services required for completing trust returns is very limited. You can file via XML transfer, but this requires access professional tax prep software that is typically $400-$500 per license. We recommend you have a Liberty Tax expert assess your needs and file for you.

What happens if a trust does not file a T3 Return?
Failure to file an annual T3 Return for a trust, including Schedule 15 where required, may result in a penalty. If a person knowingly or under circumstances amounting to gross negligence makes, — or participates in, assents to or acquiesces in, the making of — a false statement or omission on a return required to be filed, or fails to file a return, a new penalty may apply.

This penalty will be the greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year. When events beyond your control prevent you from meeting your tax obligations, the CRA may grant relief of penalties and interest.

How do I apply for a trust account number?
Liberty Tax can help you apply for a trust account number at any of our in-person locations. Find an office near you for support or call us at (866) 290-2222.

What are the two basic types of trusts?

Testamentary Trust: A testamentary trust is a trust or estate that is generally created on and as a result of the death of an individual. This includes a trust created under the terms of an individual’s will or by court order in relation to the deceased individual’s estate under provincial or territorial law.

Inter-vivos Trust: A living trust, also known as an inter-vivos trust, is a legal arrangement established by the trustor while they are alive, to manage their assets. It sets out a specified period for its existence and can allow for the allocation of the trustor's assets to the beneficiary either before or after the trustor passes away, as per the terms set when the trust is formed.

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