Overview
- Federal budget released in February 27, 2018
- New reporting requirements apply to:
- Express trusts resident in Canada
- Non‐resident trusts that file T3 returns
Why is CRA doing this?
- "Some taxpayers have used trusts in complex arrangements to prevent the appropriate authorities from acquiring this required information."
‐ Budget 2018 Tax Measures
- "This change is being made to improve the collection of beneficial ownership information with respect ton trusts and to help the CRA assess the tax liability for trusts and its beneficiaries."
‐ CRA website
Reporting Requirements – Current
- Generally no need to file annual income tax (T3) return if trust does not earn income or make distributions in a year
- T3 return is filed if trust has tax payable or it distributes all or part of its income or capital to its beneficiaries
- Copy of will or trust deed must be included when trust is filing T3 return for the first time
Reporting Requirements ‐ New
- Effective for the 2021 taxation year
- In addition to filing annual T3
return, must also disclose:
- Identity of all trustees, beneficiaries and settlors
- Identity of each person who has the ability (through the trust terms or a related agreement) to exert control or override trustee decisions over the appointment of income and/or capital of the trust amongst beneficiaries
- Such as a "protector" of the trust
- Trust must file a new schedule with its T3 return to report the additional information
- Schedule form not yet released
Trusts excluded from new requirements
- Mutual fund trusts, segregated funds and master trusts;
- Trusts governed by registered plans (RRSPs, RRIFs, TFSAs, etc.);
- Lawyers' general trust accounts;
- Graduated rate estates;
- Qualified disability trusts;
- Trusts that qualify as non‐profit organizations or registered charities;
- Trusts that have been in existence for less than 3 months; and
- Trusts that hold less than $50,000 in assets throughout the taxation year;
Penalties
- $25 for each day after filing
deadline
- Minimum penalty of $100
- Maximum penalty of $2,500
- Gross negligence penalties for
failure to file T3
- Up to 5% of the maximum FMV of property held by the trust during the relevant year with a minimum penalty of $2,500
- Existing late filing penalties
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.