Important Update: Bare Trusts Exempt from 2023 Trust Reporting Requirements

Many unsuspecting citizens are now becoming aware of the Government’s recent roll out of the new reporting guidelines for trusts. These measures are aimed at gathering a massive amount of data about Trusts in Canada, (or what the government might call ‘enhancing transparency and accountability across the trust landscape’). The target of the data collection remains largely unclear to this day.

Similar to the last-minute pause that the government did on the Underused Housing Tax mere hours before their first announced ‘extended deadline’, the Canada Revenue Agency (CRA) today announced a significant exemption for bare trusts with regards to the new trust reporting rules. At least we have 2 business days’ notice this time.

The announcement (link here):

In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency (CRA) will not require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request for these filings.

We disagree that the “impact” was “unintended” as the government took several cracks at this legislation, the result of which was a large-scale warning by the tax community about the exact and specific impacts of these rules and requesting clarification on the treatment of Bare Trusts. The government has delayed their rollout several times before specifically including Bare Trusts in the final version of their legislation, despite many (many) warnings from the tax community, which have resulted in today’s announcement.

We view today’s announcement as a huge win for the average, unsuspecting citizens (and their tax advisers) who are a party to a Bare Trust without even knowing it, and a huge hit on the integrity of Canada’s tax system.

We commend CPA Canada, and specifically John Oakey, for his advocacy on this matter.

Are you unsure whether your trust qualifies as bare trust?

Determining the classification of your arrangement depends on various factors and applicable laws. Seeking legal advice can offer clarity on your trust’s status and obligations.

What are the implications of the new trust reporting requirements?

These regulations apply to trusts with tax years ending after December 30, 2023. Affected trusts must file a T3 return, including Schedule 15, with some trusts facing this requirement for the first time.

Mark your calendars

The deadline for submitting the T3 Return and Schedule 15 for most trusts is March 30, 2024. In the event March 30 falls on a Saturday, submissions will be considered timely if received by the CRA or postmarked on or before April 2, 2024 (the following business day).

Notably, bare trusts are exempt from this filing obligation for the 2023 tax year, unless specifically requested by the CRA.