Expanded Trust Reporting Rules – What You Need to Know
Effective for trusts with year ends of December 31, 2023, and beyond, the CRA has broadened the scope of trusts required to report additional information. This includes, but is not limited to, formal trusts, in-trust accounts, and bare trusts. The new rules apply to a variety of situations where an asset’s title/ownership does not directly align with the beneficiary meant to derive benefit from it.
Key Situations Affecting Clients:
- Formal trust
- In-trust accounts for minors or others, often set up by parents or grandparents.
- Assets held in trust for someone else, such as real estate, to facilitate mortgage approval or for probate purposes.
- Lawyers and real estate brokerages with specific trust accounts for clients.
- Corporations acting as bare trustees on title for real estate.
- Any arrangement where the title/ownership differs from the beneficiary.
Documentation and Reporting Requirements:
For the 2023 tax year, all affected trusts must file a T3 trust return along with a new Schedule 15 “Beneficial ownership information of a trust” by April 1, 2024. The reporting requires detailed information on trustees, beneficiaries, settlors, and any individuals with influence over the trust’s decisions. This includes names, entity types, addresses, dates of birth (if applicable), jurisdictions of residence, and taxpayer identification numbers (e.g., SIN, SSN for US residents, or other tax IDs for foreign residents).
Why It Matters to You:
The CRA is adopting temporary relief from penalties for bare trusts late filings for the 2023 tax year only, emphasizing an education-first approach. However, compliance remains mandatory, and failure to comply may result in significant penalties, including a new penalty of up to $2,500 or 5% of the maximum of property held by the trust during the year, whichever is greater.
Action Required:
If you are involved in any of the situations described above, it’s crucial to start gathering the required information now. Even if a formal document has not been prepared, the CRA will accept a “summary” document outlining the details of the arrangement for tax filing purposes.
We’re Here to Help:
Understanding these obligations and ensuring timely compliance can be complex. The SBLR team is ready to assist you in identifying your reporting obligations and the necessary information required to meet these new requirements. Early action is key to ensuring compliance and avoiding potential penalties.