New rules have been put in place for 2023 that require most trusts* to file annually, even if they have never previously filed. These new requirements apply to both express and bare trusts that are resident in Canada.

Express Trust

An express trust is a trust created when you express your intent, usually made in writing.

Example:

• Bank account that a person gets access to when they turn 21

Bare Trust

A bare trust is where legal ownership of the property is different than beneficial ownership. It is a situation where the asset or property, for all intents and purposes, is yours, but legal ownership is someone else’s (such as a corporation).

Examples:

• You own your house personally but it’s built on corporate owned land
• The municipality would not allow you to sever the house, so you transferred the farm to a corporation and kept the house personally. However, the deed for the house is registered in the corporate name.
• You purchased a vehicle in your name but used corporate money to purchase it and the company reports it as a corporate owned asset.
• Quota is legally owned by you, but it was paid for and reported by your corporation.
• Quota is legally owned by one of your corporations, but the ownership is reported in a related corporation.
• Your parent adds you to the deed of their house to help with estate planning
• Your child wishes to purchase a house, but the bank insists that your name be added to the deed. Your child pays for all the expenses, loans etc. and treats the house as if it was entirely his/hers.
• You gift an income producing asset to your spouse, but you report the income yourself as if you continued to own it (attribution).

For taxation years ending December 31, 2023, the trust return will have a filing deadline of March 31, 2024.

Reporting requirements

Trusts that fall under the new rules would have to file a T3 trust return as well as report additional information regarding all reportable entities. This includes all the trusts trustees, beneficiaries and settlors as well as any person who has the ability to exert control or override trustee decisions on the appointment of the trust’s income or capital.

Penalties

The penalty for late filing is $25 per day with a minimum penalty of $100 and a maximum of $2,500.

We at BNG can help you navigate the new requirements; please contact our office for further information.

*There are exemptions from the proposals; details can be found in the link below.

For full details see https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/blog/2022/october/new-rules-for-trust-reporting-are-coming#:~:text=The%20new%20regime%20will%20require,subject%20to%20enhanced%20reporting%20requirements.