The New CRA Trust Reporting Rules

The New CRA Trust Reporting Rules

When the 2018 Federal Budget was released, it introduced new rules for how trusts need to be reported. This means that additional information needs to be reported to the Canada Revenue Agency to improve the collection of beneficial ownership information and help the CRA assess tax liability for the trust and its beneficiaries. Learn more about the current rules and the upcoming changes.

Current Rules

As of right now, if a trust does not earn income or make any distributions in a year, it is typically not required to file a T3 return annually. If it distributes some or all of its income or capital to beneficiaries, has tax payable, or disposes of capital property, it is required to file a T3 return. There is no current requirement for the identities of the beneficiaries to be reported.

The New CRA Trust Reporting Rules

Upcoming Changes

Once the new rules come into effect, they will apply to express trusts in Canada and to international trusts deemed to be resident in Canada that currently file a T3 return. The process used to determine whether a trust is resident can be quite complex.

Some trusts that will also be subject to the new reporting requirements include testamentary, living and inter vivos. A few trusts will be exempt, including:

  • Those that qualify as non-profit or registered charities
  • Trusts younger than three months or holding less than $50,000 in assets over the taxation year
  • Mutual fund trusts
  • Graduated rate estates

To see if your trust is exempt, speak with a member of our legal team.

If these new rules apply to your trust, it will need to file a T3 return, and also include a report of the identity of trustees, beneficiaries, settlors, and the identity of everyone who has some control over the trustee’s decisions about how income or capital is distributed. The identity document must include the individual’s name, address, date of birth, taxpayer identification number, and jurisdiction of residence.

Preparing for the New Changes

While these changes don’t come into effect right away, it is helpful to be prepared and have the information in advance. This will also provide you with the time to have your information reviewed before you submit it to the CRA. Talk to our lawyers for more information about how you can prepare for the new rules.

Additional Information

Penalties

The new rules also come with new penalties if you fail to file a T3 return. For every day it is late, a $25 fine will apply with a minimum fine of $100 up to a maximum of $2500. There will also be another fine of 5% of the maximum fair market value of any property that was held in the trust during the taxation year.

Effective as Of

The new requirements and penalties will go into effect and apply to any return filed for a tax year ending after December 30, 2021.

Speak with A Legal Professional at Kira E. Taylor Law

The changing rules can be tough to navigate on your own, which is why you need the help of a qualified legal team. We can ensure that you are in line with the new requirements and explain the changes to you. For additional help, to ask questions, or to book an appointment, please contact the office at 905-709-6892. We look forward to your call and assisting you with your legal matters.