In Case You Missed It: Bare Trust Reporting Requirements for Tax Year 2024 and Beyond

In recent years, there has been significant discussion about new trust reporting rules that require most trusts to provide additional disclosure to the CRA including the names, addresses, dates of birth, jurisdictions of residence and taxpayer identification numbers of those involved with the trust, including settlors, trustees, beneficiaries and any persons who can exert influence on the trust. The new annual reporting requirements took effect for the 2023 tax year for trusts with a year end of December 31, 2023.

The above rules caused concern in the tax and trust community as they were extended to “bare trusts,” an arrangement under which a trustee can reasonably be considered to act as agent for beneficiaries under the trust with respect to dealings with the trust’s property. Given the bare-trust-type structure of certain arrangements (such as in-trust accounts for minors and certain jointly held arrangements), Canadians began to wonder if these arrangements would also be subject to the new reporting rules. On March 28, 2024, the CRA indicated that it “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.” Read the official announcement here.

Will bare trusts be subject to the new reporting requirements for tax year 2024 and beyond?

On August 12, 2024, the Department of Finance announced an intention to “significantly reduce the number of Canadians with bare trusts who would have to file [the new disclosure], and ease the related administrative burden.” Specifically, the following administrative relief measures were announced:

• Similar to 2023, bare trusts would be exempt from the filing requirements for 2024.
• A new exception would be introduced for trusts and deemed trusts (e.g., bare trusts) where:
  • The trustee is an individual,
  • Each beneficiary is an individual and related to the trustee(s).
  • The total fair market value of the property of the trust does not exceed $250,000 throughout the year, and,
  • The trust’s only assets held throughout the year are one or more excluded assets which would include, among others, money, securities traded on a designated stock exchange, mutual fund trusts and mutual corporations and segregated funds. It would also now include GICs issued by a Canadian bank or trust company incorporated under federal or provincial law, as well as personal use property.
• · The creation of a new “deemed trust” rule containing several explicit exclusions, including one where certain trust property is real property held by one or more related legal owners and is a principal residence of one or more of the related legal owners, and one where real property is held for the benefit of a spouse or common-law partner and is a principal residence of the legal title holder.

While, as of October 2024, the above announcement  was a proposal that had not yet passed, on October 29, 2024, the Canada Revenue Agency (CRA) issued a note confirming that it “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 2024 tax year, unless the CRA makes a direct request for these filings. This is a continuation of the exemption from the trust reporting requirements that was issued for bare trusts for the 2023 tax year.”

For 2025 and beyond, subject to the passing of the above mentioned relief measures, certain bare trusts – those not eligible for the measures – may become subject to the new reporting requirements.

Other affected trusts still required to report

The new trust reporting requirements still apply to other affected trusts with taxation years ending after December 30, 2023. These affected trusts are required to file a T3 return, including Schedule 15, unless specific conditions are met. For more information about these requirements, see here.

Our Tax, Retirement and Estate Planning (TREP) team will continue to monitor these developments and communicate material updates. For more information, or to address questions in the meantime, please reach out to TREP via your CI GAM sales team.