Certain Canadian and non-resident trusts will be required to file an annual ‘T3 Trust Income Tax and Information Return’ starting with the December 31, 2021 year end, even if there has not been any activity. In addition to the annual filing requirements, these trusts will also be subject to additional reporting requirements. Previous exemptions from the filing requirement for these trusts will no longer apply.
The new reporting rules are intended to improve the collection of beneficial ownership information with respect to trusts, to allow the Canada Revenue Agency (CRA) to assess the tax liability, if any, for trusts and their beneficiaries. Certain trusts will be exempt from the filing requirement.
The following items will form part of the annual filing requirements of the tax return each year:
Identify all trustees, beneficiaries and settlors of the trust
Identify each person who has the ability (through the trust agreement or otherwise) to exert control over trust or to override trustee decisions relating to income or capital
Disclose the relevant person’s name, address, date of birth, jurisdiction of residence, and social insurance number
Failure to file the T3 return will result in a penalty of $25 per day (minimum $100) up to a maximum penalty of $2,500. Gross negligence penalties of up to 5% of the maximum fair market value of the property held in the trust in the year (minimum penalty of $2,500) may also apply.
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