New Trust Reporting Requirements – RLB

The 2018 Federal budget released draft legislation relating to new trust reporting requirements applicable for trust year-ends ending on or after December 31, 2021. The draft legislation received Royal Assent to be applicable for trust year-ends ending on or after December 31, 2023. The new legislation changes the tax return filling requirements for trusts and additional trust information disclosure requirements were introduced. The new trust information disclosure requirements will be formulate part of your annual T3 Trust Tax Return on Schedule 15.

Prior to the introduction of the new legislation, trusts must file a trust tax return for a tax year if the trust has to pay tax, disposed of a capital property (e.g. shares of a corporation, real estate, etc.) and/or allocated some or all of its income or capital to beneficiaries of the trust. Under the newly enacted legislation with respect to the trust reporting rules, that is no longer the case. All trusts resident in Canada will be required to file a T3 trust tax return unless they meet one of the exemptions. An example of types of trusts that may be exempt from filing include:

• Trusts that have been in existence for less than three months at the end of the year;
• Trusts that hold assets with a total fair market value of $50,000 or less throughout the year and only assets held by the trust were:
  • Cash;
  • Certain debt obligations;
  • Shares on a designated stock exchange;
  • Shares of mutual fund corporations;
  • Units of a mutual fund trust; or
  • Interests in a related segregated fund
• Lawyers’ general trust accounts
• Graduated rate estates and qualified disability trusts
• Trusts that qualify as non-profit organizations or registered charities

Further, trusts that are required to file a trust tax return for a tax year will also be subject to additional trust information disclosure requirements. The additional information disclosure to be provided by the trust in its tax return includes:

• Name, address, date of birth, jurisdiction of residence and taxpayer identification number (e.g. SIN, BN, trust account number) for each person who in the year:
  • Is a trustee of the trust;
  • Is a beneficiary (identities are known or ascertainable with reasonable effort);
  • Is a settlor of the trust; or
  • Is a protector of the trust (person who has the ability to exert influence over trustee decisions)

The penalties associated with not complying to the new trust reporting requirements and additional information disclosures are as follows:

• Failure to file a T3 trust tax return or provide required personal disclosures
  • $25 a day – minimum $100, maximum $2,500
• Knowingly failing to file/gross negligence penalties
  • Additional penalty of 5% of the maximum value of the property held by the trust for the year – minimum $2,500 penalty

Understanding all information to be disclosed by the trust may not be available, a reasonable effort in gathering all the required information must be made to alleviate potential assessment of penalties. We encourage you to review your individual situation to determine whether the new trust reporting requirements impact you and to speak to your trusted advisor regarding next steps.

Please feel free to contact an RLB trusted advisor to discuss reviewing your individual situation and how the new trust reporting legislation may impact you.