There are new significant reporting requirements for the upcoming December 31, 2023 trust return, including bare trusts.  The affected trusts will now have to report specific information on each trustee, beneficiary, settlor, and controlling person (i.e., a protector) of the trust in their 2023 T3 return, subject to limited exceptions.  Trusts that do not meet these new requirements may be subject to significant penalties.

There are three main changes under the new rules:

• All trusts, unless certain conditions are met will be required to file an annual T3 Return with the CRA.
• Trusts that are required to file a T3 Return (other than those excluded), generally need to complete Schedule 15 in their annual T3 return to report beneficial ownership information.
• Bare trusts are subject to the new reporting rules.

The changes outlined above may result in a situation where a trust is required to file for the first time.

The following trust are excluded from these additional beneficial ownership reporting requirements:

• Mutual fund trusts.
• Trust governed by certain plans (i.e. DPSP, RDSP, RESP, RPP, RRIP, RRSP, TFSA etc.)
• Employee life and health trusts.
• Trusts that have all their units listed on a designated stock exchange.
• Certain regulated trust accounts, such as lawyers’ general trust account.
• Graduated rate estates and qualified disability trusts.
• Trusts that qualify as non-profit organizations or registered charities.
• Certain government funded trusts.
• Cemetery care trust or trusts governed by an eligible funeral arrangement.
• Trusts that have been in existence for less than three months.
• Trusts that generally hold less than $50,000 in assets throughout the taxation year.

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What information must now be submitted on form Schedule 15 – Beneficial Ownership Information of a Trust?

For each reportable entity of the trust, the following information must be provided:

• 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)

In addition, if the above information cannot be provided because the beneficiary is unknown at the time of tiling the T3 Return and Schedule 15 (for example, unborn children and grandchildren, their spouses), information must be provided on Schedule 15 under Part C detailing the terms of the trust that extend the class of beneficiaries to unknown entities.

 

What happens if a trust does not file a T3 Return or does not provide the information required on Schedule 15?

Failure to file an annual T3 Return for a trust, including Schedule 15 where required, may result in a penalty.

If a person knowingly or under circumstances amounting to gross negligence makes, — or participates in, assents to or acquiesces in, the making of — a false statement or omission on a return required to be filed, or fails to file a return, a new penalty may apply.

This penalty will be the greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year.

 

What if a trustee in holding legal title of residential property in Canada, and completes the UHT-2900 underused Housing Tax return, are they still required to file the Schedule 15 Beneficial Ownership information with he T3 return?

Yes, the UHT-2900 Underused Housing Tax Return is separate from the new trust reporting rules.  The obligation to file a T3 Return and Schedule 15 is not satisfied with a UHT-2900 filing.

More information can be found in the Government of Canada website.

 

This article is intended for general information purposes only and does not constitute professional advice.  Income tax law and regulation change frequently and the content on this article may no longer reflect the current state of the law. If you have any specific questions, you should consult a professional services advisor or email us for further advice.