New reporting requirements for trusts imposed through the addition of subsection 150(1.2) to the Income Tax Act were originally announced in the July 27, 2018 Federal Budget. These new rules were to take effect on December 31, 2021 and subsequent taxation years. The implementation of these enhanced reporting requirements is currently pending.
The Canada Revenue Agency has announced earlier this year that in the interim: “The CRA will continue to administer the existing rules for trusts under enacted legislation…. [and] that the proposed beneficial ownership reporting requirements will not be part of the published 2021 T3 income tax returns.”
So, what has changed for 2022: nothing.
Rules for Subsequent Taxation Years
Once the new rules are implemented, a trust that is resident in Canada will be required to file a T3 return on an annual basis irrespective of whether the trust generated any income. These requirements extend to trusts that are deemed resident in Canada under section 94 and express trusts.
The new rules expand the reporting information requirements, requiring trusts to now include the name, address, date of birth, jurisdiction of residence and taxpayer identification number for each person who, in the taxation year is:
- a trustee, beneficiary, or settlor, or
- has the ability to exert influence over the trustee decisions regarding the appointment of income or capital of the trust.
The new rules also impose potentially significant penalties for failure to abide by the new reporting requirements – including a penalty that is equal to the greater of $2,500 and five percent of the highest fair market value of all the properties held by the trust in the taxation year for cases of gross negligence.
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