There will be new and enhanced trust reporting requirements that will apply to taxation years ending on or after December 31, 2021.

Which Trusts Are Affected?

The requirements are applicable to all express trusts that are resident in Canada. An express trust is a trust created with the settlor’s express intent, such as through a trust deed or a will.

EXCEPTIONS

There are a few trusts that are exempt from the filing requirements, these include:

A trust that has been in existence for less than three months,
A trust that holds less than $50,000 in assets throughout the taxation year (provided that their holdings are confined to deposits, government debt obligations and listed securities),
A trust that is a registered charity,
A graduated rate estate, and
A qualified disability trust

What Are The Reporting Requirements?

Affected trusts will be required to provide additional information about each person who is a trustee, beneficiary, and settlor. The information to be provided includes:

Name,
Address,
Date of birth,
Jurisdiction of residence,
Taxpayer identification number (ex. Social insurance number, business number, trust account number or a taxpayer identification number used in a foreign jurisdiction).

Trusts will be required to file an income tax return each year with the above information, even if the trust does not have any income to report.

Since some of the above information may not be readily available, we recommend that Trustees and Executors start compiling this information well in advance of the filing deadline for taxation years ending on or after December 31, 2021.

Penalties

The CRA will apply additional penalties for those who knowingly or due to gross negligence, make a false statement or omission on the trust income tax return. The penalty will also apply to those who fail to comply or fail to file an income tax return.

The additional penalties will be calculated as the greater of:

5% of the total fair market value of all the property held by the trust in the year and
$2,500

The current existing penalty for failing to file a trust income tax return is $25 per day with a minimum of $100 and can increase up to $2,500.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.