New trust reporting rules first proposed in the 2018 federal budget require most trusts to file a T3 tax and information return with expanded reporting on who the settlor(s), trustee(s) and beneficiaries of the trust are. Such requirements seem benign, but the amount of information needed to be disclosed on such people can be daunting.
Draft legislation was released that summer for comment, and the Joint Committee on Taxation of The Canadian Bar Association and CPA Canada responded (I was a contributor to such a submission). The comments received by the Department of Finance were for the most part ignored or dismissed.
The scheduled implementation date of the new rules was first proposed to be the 2021 trust filing year, but it was twice postponed and now the 2023 taxation year will be the first year. These returns, including enhanced disclosures, are generally due April 2, 2024.
Given the long-delayed implementation date, the trust reporting rules didn’t attract a lot of attention when first proposed. Even when I would lecture or write about such new rules in the days, months and years afterwards, they wouldn’t attract a lot of interest because “that’s not happening for a ways down the road.”
A second round of draft legislation released a couple of years ago by the Department of Finance surprised the tax community by “clarifying” that it did want “bare trusts” to be subjected to these new rules as well. Originally, it was quite clear that bare trusts would be exempt.
Bare trusts are commonly used vehicles whereby one party often holds legal title for the benefit of someone else, but the trust effectively acts as an agent for the beneficiaries. Existing Income Tax Act rules make it clear that bare trusts are not
Read more on financialpost.com