As of December 31, 2023, all trusts (with certain exceptions) are now required to file a T3 Trust income tax and information return (T3 return). This includes trusts that previously did not have an annual filing obligation. Let’s break down the details:
Who Is Affected?
All trusts (except for specific exempt categories) must comply with the new reporting requirements.
Even bare trusts, which traditionally had minimal reporting obligations, are now included.
The goal is to collect additional information, especially related to beneficial ownership, on an annual basis.
Schedule 15: Beneficial Ownership Information
Alongside the T3 return, trusts must submit a Schedule 15.
This schedule provides crucial details about the beneficial owners of the trust.
Trustees, settlors, beneficiaries, and controlling persons associated with the trust must be disclosed.
Previously, trusts with minimal income or capital transactions were often exempt from annual filings. However, this exemption no longer applies.
Exemptions
Some trusts remain exempt from the new requirements. Examples include registered plans and qualified disability trusts.
For specific guidance on exemptions, consult the Canada Revenue Agency (CRA) resources.
Important Dates
The deadline for filing the T3 return and Schedule 15 is 90 days after the trust’s tax year end.
Since most trusts have a tax year end on December 31, those with a 2023 tax year end must file by March 30, 2024 (or the next business day if March 30 falls on a weekend).
Trust Account Number
Before filing a T3 return, ensure your trust has a valid trust account number.
Include this number on all related correspondence, payments, and returns.
Obtain your trust account number through services like My Account, My Business Account, or Represent a Client.
Unintended Impact on Bare Trusts
Recognizing that the new requirements had unintended consequences for Canadians, the CRA has made an important decision:
Bare trusts will not be required to file a T3 return or Schedule 15 for the 2023 tax year, unless the CRA specifically requests these filings.
This alleviates the burden on bare trusts while ensuring overall compliance.
Further Guidance Ahead
Over the next few months, the CRA will collaborate with the Department of Finance to provide clearer guidance on trust reporting. As updates become available, the CRA will communicate directly with Canadians.
In conclusion, these changes aim to strengthen trust reporting mechanisms, promote transparency, and maintain the integrity of Canada’s tax system. Stay informed, meet your obligations, and watch for further announcements from the CRA.