The Government of Canada has introduced new reporting requirement for trusts. The change in reporting requirements requires all trust accounts (unless specific conditions are met), must file a T3 (Trust income tax and information) return and a Schedule 15 (Beneficial Ownership Information of a Trust) with CRA every year.
Before the introduction of the new reporting requirements, a trust that did not earn income, dispose of capital property, or make distributions of income or capital in year was generally not require to file an annual return. Since Schedule 15 must be filed with the T3 return, many trusts will be filing a T3 return for the first time.
Affected trust must now complete an annual T3 return which includes a Schedule 15 for tax years ending after December 30, 2023 and subsequent years.
Which trusts are now required to file a T3 Return?
A trust that is resident in Canada (including a trust deemed resident in Canada under subsection 94(3)), other than a listed trust, must file a T3 Return annually, such as express trust or bare trust.
Bare Trusts are generally considered to be an arrangement under which a trustee can reasonably be considered to act as an agent for all the beneficiaries under the trust with respect to all dealings with all of the trust ‘s property.
An example of Bare Trust could include the following:
- Joint Ventures.
- Partnerships.
- Real Estate: a nominee corporation to hold the legal title of the property in trust for the beneficial owner for commercial reasons.
- Co-signing a mortgage for a family member such as co-signing for a child’s mortgage so that they can qualify for a mortgage.
- Being named to aging parents’ or joint bank accounts.
- Financial accounts held “in trust for” another individual.
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, maintenance, and taxes of a property used or occupied by a beneficiary
- 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
A trust which is required to file a Schedule 15 still must file a T3 return regardless of if the trust has no income to report.
Trusts that hold less than $50,000 in assets throughout the taxation year (provided that their holdings are confined to deposits, government debt obligations and listed securities) and that have been in existence for less than three months are exempted from having to provide the Schedule 15, therefore T3 return is not required.
A separate T3 return, and Schedule 15 is required for each reportable trust entity.
For each reportable entity of the trust, the following information must be provided to complete Schedule 15:
- 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)
Filing Deadline
The deadline for the T3 return and Schedule 15 is 90 days after the trust’s tax year end.
Resources:
CRA Website:
https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2023/new-reporting-requirements-trusts-as-december-31-2023.html
https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/new-trust-reporting-requirements-t3-filed-tax-years-ending-december-2023.html#toc1
https://www.canada.ca/en/revenue-agency/services/tax/trust-administrators/t3-return/how-file-t3-return.html#exceptions
Other website resources
https://lrktax.ca/preparing-trust-returns-t3-for-bare-trusts/