Opinion: New CRA reporting rules for trusts are a disaster
By Allan Lanthier
Have you added your name to the legal title of your daughter’s new home to help her obtain a mortgage? Or opened an “in trust” bank or brokerage account for your grandson to help fund his education down the road? If so, you have a problem, and these are just two examples of many.
Under new tax reporting rules that apply to years ending after Dec. 30, 2023, you could be liable to a penalty of up to five per cent of the fair value of the home or “in trust” account if you don’t report the arrangement, even if there isn’t a penny of tax owing. The purpose of these rules is to counter tax evasion, money laundering and other criminal activities. Their likely effect will be to put thousands of innocent Canadians on the wrong side of the law.
Like many government initiatives, this one started with the best of intentions: greater transparency. If a person has legal title to a property but holds it for the benefit of the “true owner” — someone who controls it and is entitled to all its earnings — a reporting requirement will help the government ferret out illicit arrangements if that “someone” is a scoundrel. That was the theory. But then the bureaucrats weighed in and the rules spiralled out of control.
Under the old rules, a trust was generally only required to file a tax return if it had tax to pay or sold a property. And there was never a requirement to file where one person held legal title to an asset as agent for someone else: that “someone else” was required to declare all taxable income from the asset — and still is.
The new rules require a “bare trustee” — a person or corporation that has legal title to an asset as agent for the true owner — to file an annual trust return. There are some limited
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