Acknowledging the unintended consequences of the new reporting requirements for bare trusts on Canadians, the Canada Revenue Agency has announced that, for the 2023 tax year, bare trusts will not be required to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), unless specifically requested by the CRA.
What Are Bare Trusts? A bare trust is a type of trust where the trustee holds the property for the benefit of the beneficiary without any discretionary power. For more detailed information about bare trusts, please refer to our previous blog post.
New Reporting Requirements for Trusts
The Government of Canada recently introduced new reporting requirements for trusts to enhance the transparency and integrity of the tax system. These requirements mandate that many trusts file a T3 Income Tax and Information Return (T3 return), along with Schedule 15. The core of these new requirements is the need for detailed beneficial ownership information.
For most trusts, this new filing requirement applies to taxation years ending after December 30, 2023. Bare trusts are exempt from this filing requirement for the 2023 tax year, unless directly requested by the CRA.
Exemptions and Penalties
Trusts that have existed for less than three months or hold assets under $50,000 in certain categories are exempt from these new requirements. However, failure to comply can result in steep penalties, including a daily late filing fee and a gross negligence penalty in cases of intentional or careless non-compliance.
What Should You Do?
Determine if Your Trust is a Bare Trust: Consult with legal counsel to confirm whether your arrangement qualifies as a bare trust.
Stay Informed: Keep an eye out for further communications from the CRA regarding any updates or changes to the reporting requirements.
Be Prepared for Direct Requests: Although bare trusts are exempt for the 2023 tax year, be prepared to file a T3 return and Schedule 15 if the CRA makes a direct request."
The CRA's decision to exempt bare trusts from the new reporting requirements for the 2023 tax year is a significant relief for many Canadians. By understanding what a bare trust is and staying informed about ongoing developments, you can ensure compliance and avoid unnecessary administrative burdens.
For detailed guidance on bare trusts and the new reporting requirements, you can refer to the CRA’s website for comprehensive information and resources.
If you have further questions or need personalized assistance regarding these changes, contact us to schedule a consultation.
Clearly Financials is here to address any questions or concerns you may have regarding these new trust reporting requirements. Our team is committed to providing the guidance and support needed to navigate these changes successfully.
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Disclaimer
The information provided in this blog post is a simplified overview of complex matters and may not cover all the nuances of your particular accounting or tax situation. The content is intended for general educational purposes only and should not be taken as legal or financial advice. We strongly recommend consulting with a qualified professional before making any financial decisions based on the information provided. Please note that tax laws and regulations can change frequently, and we cannot guarantee the accuracy or completeness of the information provided in this post.
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