New rules for trust reporting are coming for 2023 returns
Dear Clients and Friends,
Canada Revenue Agency’s (CRA) new administration will require most trusts to file a T3 Trust Income Tax and Information Return annually for tax years ending on or after December 31, 2023. The reporting obligations have been extended to require trusts to not only have to file a T3 return, but also report additional information on a new schedule that will accompany the T3 return. Resident trusts and deemed resident trusts will need to disclose personal information regarding settlors, trustees, beneficiaries and persons who have the ability to exert control or override trustee decisions. Additionally, Canadian resident trusts and non-resident trusts are required to file a T3 Return regardless of whether income is earned in the trust.
The enhanced reporting requirements were first announced in the 2018 federal budget and three versions of draft legislation were subsequently released. These rules were originally proposed to begin to apply for 2021 T3 returns, but implementation was then deferred and will now apply to taxation years that end after December 30, 2023.
What information should you retain in order to meet the enhanced trust reporting requirements?
- The legal name, address, date of birth (individuals), jurisdiction of residence, and tax identification number of the trustees, beneficiaries, settlors, executors, administrators, and liquidators of the trust.
- The trust account number – If you do not have a trust account number, you can apply for one by completing the T3 Application for Trust Account Number form (T3APP) that can be accessed through CRA’s website using the following link (https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t3app.html#shr-pg0). The application can be submitted online through your CRA My Account.
- All sources of the trust’s income, including foreign income and property.
Penalties for Non-Compliance
Given the extent of the changes and the severity of penalties for non-compliance, taxpayers should be getting ready to meet these new obligations for 2023 T3 returns.
The penalty for failing to file a T3 return or beneficial ownership information will be equal to $25 per day late, with a minimum of $100 and a maximum of $2,500. However, knowingly failing to file a T3 return or beneficial ownership information will result in a significant additional penalty of 5% of the maximum value of property held by the trust in the particular year, with a minimum penalty of $2,500. This penalty would also apply to false statements and omissions amounting to gross negligence as well as a failure to respond to a CRA demand to file.
Clearhouse LLP can assist our clients with the preparation of T3 Returns in compliance with the new requirements. Please do not hesitate to contact us at info@clearhouse.ca or 647-969-7382 if you have any questions.
Kindest Regards,
Your Clearhouse LLP Team