New Trust Reporting Requirements

Joshua Laporte, CPA, CA Partner

When Bill C-32 received Royal Assent on December 15, 2022, new reporting rules for certain trusts with taxation years ending on or after December 30, 2023 came into effect.

Formerly, if a Trust did not owe any taxes and did not distribute any income or capital to its beneficiaries, the Canada Revenue Agency (CRA) did not require an annual T3 trust return to be filed. Under the new reporting rules certain trusts, including Bare trusts, will now be required to file a T3 return and all trusts obligated to file a T3 return will have to report the identity of various stakeholders, and to include more detail about beneficiaries of the trust.

The new rules require a trust to file an annual T3 return if the trust is resident in Canada and is an express trust, even if there is no activity or income in a year. An express trust is a trust created with the settlor’s express intent, such as in a will or a trust deed. Generally, all trusts are express trusts, except those that are settled by law or by judgement.

Bare trusts are included in the new reporting requirements even though a Bare trust would never have any income to report. A Bare trust holds title to trust property and retains no beneficial ownership.

Non-resident trusts that currently file an annual T3 return and all express trusts resident in Canada must report the identity of all trustees, beneficiaries, and settlors and any person who can exert control or override trustee decisions regarding the appointment of income or capital of the trust.

If you have an inactive or unnecessary trust, it may be advisable to wind-up the trust before December 30, 2023 to avoid the new reporting requirements. Some trusts may be exempt from the new reporting requirements; please contact your tax advisor to determine your filing requirement.

For further information please do not hesitate to contact us at Millards at (519)759-3511 or visit us at www.millards.com I