Article written by MARCIL LAVALLÉE for Canadian News Quarterly, a newsletter published by the Canadian member firms of Moore North America. This article on new production requirements is part of our mission to be your partner in success by keeping you up to date.
New production requirements
In the 2018 federal budget, new reporting requirements for trusts were announced to improve the collection of beneficial ownership information with respect to trusts and to help the Canada Revenue Agency assess the tax liability of trusts and their beneficiaries. The province of Quebec recently harmonized with the new federal requirements, which will come into effect for
fiscal years ending after December 30, 2021
.
Previously, a trust that generated no income and made no dispositions in a year was generally not required to file a T3 income tax return.
However, with the new measures in place, most personal trusts resident in Canada, as well as non-resident trusts, will now be required to file an annual T3 income tax return, along with the new schedule of disclosures.
New reporting requirements
On the new schedule, trusts will have to declare information on all trustees, beneficiaries, settlors and persons with the capacity to exercise control over the trustee’s decisions regarding the allocation of trust income or capital. For all these parties, full name, home address, tax identification number, province of residence and date of birth (for individuals only) must be disclosed.
Exceptions
The new filing and disclosure rules will not apply to certain trusts, including :
- mutual fund trusts, segregated funds and master trusts;
- trusts governed by registered plans;
- lawyers’ trust accounts;
- estates subject to progressive taxation;
- qualifying disability trusts;
- trusts qualifying as non-profit organizations or registered charities;
- trusts in existence for less than three months;
- trusts with assets of less than $50,000 throughout the year (as long as assets are limited to deposits, certain debt instruments and listed securities).
Penalties
Finally, it’s important to note that penalties for failure to file the T3 tax return (including the new mandatory schedule) will be $25 per day, subject to a minimum of $100 and a maximum of $2,500. In addition, in the case of gross negligence or wilful default, a penalty equivalent to 5% of the fair market value of the trust assets (minimum penalty of $2,500) may also apply.
If you have any questions about the new production requirements, please contact us!
