Trust Reporting Requirements Update

What changes are being made? 

Starting 2021 and for all subsequent taxation years, certain trusts are required to file T3 tax returns. This includes, but is not limited to, trusts that are resident or deemed resident in Canada, even if the trust has no tax payable or is inactive during the year. 

Additionally, these changes require all non-resident and certain express trusts to report the identity of all trustees, beneficiaries, and each person who has the ability to exert control over trustee decisions regarding the appointment of income or capital of the trust.  

What are the penalties? 

Penalties for failure to file the T3 return start at a minimum of $100, up to a maximum penalty of $2,500. 

If a trustee knowingly fails to disclose information, or if there is gross negligence, the penalty will be equal to 5% of the maximum value of property held by the trust in the relevant year, with a minimum of $2,500. 

Other matters: 

Effective 2018, T5 slips are required for interest paid by trusts (Regulation 201(1)(b)(ii)).  This includes interest paid by a trust on a prescribed rate loan. 

If you have any questions or comments about this blog post, please feel free to contact us.

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