Article written BY MARCIL LAVALLÉE for the Canadian Overview of Q4 2021. A newsletter published by Canadian member firms of Moore North America. These articles are part of our mission to become partner of your success by keeping you informed of the news.

New reporting requirements

In the 2018 federal budget, new reporting requirements for trusts were announced to improve the collection of beneficial ownership information for trusts and to assist the Canada Revenue Agency in assessing the tax liability of trusts and their beneficiaries.  The province of Québec has recently aligned itself with the new federal requirements effective for fiscal years ending after December 30, 2021.

Previously, a T3 income tax return generally did not have to be filed by a trust that did not generate any income and did not make any dispositions during a year.

However, with the new measures in place, an annual T3 income tax return, along with the new schedule for disclosure of information, must be filed for most personal trust residents in Canada as well as non-resident trusts.

New disclosure requirements

On the new schedule, trusts must report information on all trustees, beneficiaries, settlors and persons capable of controlling the trustee’s decisions regarding the appointment of income or capital of the trust.  The full name, home address, tax ID number, province of residence and birth date (for private individuals only) must be disclosed for all parties.

Exceptions

The new reporting and disclosure rules do not apply to certain trusts, specifically:

• mutual fund trusts, segregated funds and master trusts;
• trusts governed by registered plans;
• lawyers’ trust accounts;
• graduated rate estates;
• qualified disability trusts;
• trusts qualifying as non-profit organizations or registered charities;
• trusts that have existed for less than three months;
• trusts with less than $50,000 in assets throughout the year (as long as the holdings are limited to deposits, certain debt obligations and listed securities).

Penalties

Lastly, it is important to mention that the penalties for failure to file the T3 income tax return (including the new mandatory schedule) will be $25 per day, for a minimum of $100 and a maximum of $2,500. Furthermore, in the case of gross negligence or wilful omission, a penalty equivalent to 5% of the fair market value of the trust assets (minimum penalty of $2,500) could also apply.