Bear Trust and Expanded T3 Reporting Rules

The Government of Canada has introduced new reporting requirements for trusts on December 15, 2022 through Bill C-32. According to the new rules, all trusts, unless specific conditions are met, must file a T3 return for tax years ending after December 30, 2023. You may have a bare trust if you have one or more of the following situations (This is not exclusive list):

        ▪An adult child adds parents in legal title of house to get mortgage 

        ▪Two spouses are living in a house but one spouse on title 

        ▪Corporate account opened by the shareholder 

        ▪A corporate is on title of an individual’s vehicle, or vise versa. 

        ▪A partner holds the title to the property for the partnership

The bare trust has the following features: 

        ▪The trustee has no significant power or responsibilities 

        ▪The trustee can take no action without instruction from the beneficiary 

        ▪The trustee’s only function is to hold legal title to the property 

        ▪There is no trust deeds/instruments

The filing deadline is 90 days after the trust's year end. If a bare trust fails to file a trust return under the new legislation, the late-filing penalty will be:

        ▪Return of income penalty

                ▪Outstanding x 5% +outstanding x 1% x months, <=12 months 

        ▪Information return penalty 

                ▪Max ($100, $25 x days), <=100 days 

        ▪New gross negligence penalty 

                ▪Max ($2500, 5% x highest Fair Market Value)