In August, the Canada Revenue Agency (CRA) released proposed legislation (that was first introduced in 2018) that if enacted will expand annual trust reporting requirements beginning with the 2022 taxation year (for trusts that have a December 31 year end). Under the proposed legislation, unless excluded from the rules, trusts will be required to file a T3 return annually that discloses additional information about the trustee(s), beneficiaries and settlor of the trust. This change is being made to improve the collection of beneficial ownership information with respect to trusts and to help the CRA assess the tax liability for trusts and their beneficiaries. Notably, the reporting requirement applies even if the trust has no tax liability and made no distributions or allocations during the year. Accordingly, a trust subject to the new requirement will need to file an annual return to disclose such information even if that trust would not have been required to file a T3 under the current rules. Trusts excluded from the new reporting requirements include mutual fund trusts, trusts with units listed on a designated stock exchange as well as registered savings plans. You can read more about the trust reporting rules in this BLG publication.
In addition to the new trust reporting rules, after December 31, 2022, all trusts filing returns in Québec (including non-Québec situs trusts reporting allocation of income to Québec beneficiaries) are required to include a trust identification number issued by Revenue Québec (in addition to the federal trust account number issued by CRA) when making tax filings. The trust identification number is included in the notice of assessment for trusts that have previously filed returns in Québec or can be obtained by completing an application with Revenue Québec. Until December 31, 2022, for trusts that have been formed in 2022 or that will be filing a Québec income tax return for the first time in 2022, Revenue Québec is permitting the return to be filed without including the trust account number and trust identification number and these numbers will be issued by CRA and Revenue Québec, respectively, when the return is processed and included in the notices of assessment for use in returns going forward. Failure to comply with the new trust reporting requirements once enacted or the requirement to provide a Québec trust identification number when making tax filings after December 31, 2022, could result in the imposition of penalties. Additional details about the Québec trust identification number requirement can be found here. For more information about how these rules may impact your particular trust, please contact your usual AUM lawyer who can make an introduction to a member of BLG’s tax group.
September 28, 2022