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bare trust reporting 2024

A Bare Trust is required to file a T3 Trust Return under the new expanded filing requirements on or before April 2nd, 2024, for the 2023 tax year, to avoid any gross negligence penalties.
A Bare Trust commonly exists – whenever a person is on the legal title of a property(ies) but is not the true beneficial owner of the property(ies). The beneficial owner is the person who is entitled to proceeds from the property. The property could include real property, bank accounts, investment accounts, gold or silver coins, and any other property that you can trade for money or other considerations.

Unsure if you have a Bare Trust? If you answer “YES” to any of the following questions, then a Bare Trust exists.

  1. Are you listed on a bank account on behalf of someone else i.e. parent, child, grandchildren, or corporation?
  2. Are you listed on an investment account on behalf of someone else i.e. parent, child, grandchildren, or corporation?
  3. Are you listed on the legal title of a real estate property on behalf of someone else i.e. parent – for Estate planning purposes only?
  4. Are you listed on the legal title of a real estate property on behalf of someone else i.e. child – for financing purposes only?
  5. Are you listed on the legal title of a real estate property on behalf of a corporation, partnership, joint venture, or another Trust?
  6. Are you listed on the legal title of a real estate property on behalf of your spouse or common-law partner?
  7. Are you listed as the owner of a vehicle on behalf of someone else i.e. parents, children, grandchildren, corporation?
  8. Are you holding ANY other property on behalf of someone else i.e. parent, child, grandchildren, corporation?
  9. Are you a member of a Joint Venture holding property on behalf of the Joint Venture or other joint venturers?
  10. Are you a member of the Partnership holding property on behalf of the Partnership or other partners?

Note that this list is not exhaustive and may not cover all situations and/or arrangements.  “You” referred to in the Questions includes – Yourself, Corporation, Trustee, Partner of Partnership, Partnership, etc.
Highlights of the New Rules Include:
Expanded Filing Obligations: Every “express trust” resident in Canada must file a T3 Trust Income Tax and Information Return annually, regardless of income or property dispositions. This term covers a broad range of trusts including various personal trusts and “Bare Trusts”.   

Additional Reporting:
 Trusts filing a T3 return are required to provide more information about trustees, beneficiaries, settlors, or individuals influencing trust distributions.

Inclusion of Bare Trusts:
 The requirement to file a T3 return and to report settlor, trustee, beneficiary, and information would apply to “Bare Trust” and agency relationships, even though such arrangements are deemed not to be a trust for other purposes under the Income Tax Act. 

What is considered a Bare Trust?   
A Bare Trust is commonly used to separate legal and beneficial ownership over property, where legal title and beneficial ownership are held by separate entities or individuals.

A Bare Trust arises when legal ownership is held by a trustee acting as an agent for beneficiaries. Previously exempt from most aspects of the Income Tax Act, the new rules necessitate T3 filing by the legal owner (trustee) along with information return, applicable.

Common Bare Trust arrangements include: 
  • An individual has legal title to a property, but a corporation has beneficial ownership and reports income and loss from the property for tax purposes. 
  • A general partner holds legal title to real property held by a limited partnership.
  • A property is legally owned by one corporation (i.e., a nominee corporation), and another corporation has beneficial ownership. 
  • Parents are on title for their child’s property only for banking purposes, with an agreement that on a future sale, all proceeds will go to the child.
  • An individual holds registered title to a vehicle whose beneficial owner is a corporation.

Are any trusts exempt from the new rule?  
Some of the relevant exemptions from a trust return filing requirement include: 
  • Trusts that have been in existence for less than three months
  • Trusts holding no more than $50,000 in certain assets, at ANY time during the taxation year (such as cash, bonds, and securities listed on a stock exchange); does not apply to Bare Trust situations
  • Lawyers’ general trust accounts (except for separate trust accounts maintained for particular clients)
  • Registered charities or non-profit associations
  • Mutual fund trusts, segregated funds, and master trusts; and 
  • Graduated rate estates and
  • Qualified disability trusts

What are the enhanced reporting requirements?  
Going forward, trusts must report additional information on Schedule 15 for all reportable entities, including trustees, beneficiaries, settlors, and any person with the ability to exert control over or override trustee decisions over the appointment of trust income or capital. Information now required is as follows:
  1. Name  
  2. Description of the entity (corporation, trust, individual) 
  3. Address  
  4. Date of birth  
  5. Country of residence
  6. Tax identification number (such as the Social Insurance Number or Business Number) 

Beneficiaries also include those named as residual or contingent beneficiaries in the trust document.
You can view our Schedule 15 Data Sheet here

Ensure timely filing within 90 days of the tax year’s end to avoid penalties, starting at $25 per day, with a minimum of $100 and a maximum of $2500. In addition to that CRA may assess gross negligence and other penalties equal to the greater of $2,500 and 5% of the highest total fair market value of all property held by the trust in the year.

Due Date:
The due date for 2023 T3 Returns is 90 days after the year-end for the trust. Most trusts have December 31 year ends and will therefore have a filing deadline of April 02, 2024.

Trust Account Numbers:
All Trusts are required to have a Trust Account Number issued by the Canada Revenue Agency.

If this is the first time filing for a Trust, a T3 Application for a Trust Number will need to be filed.

CRA Online 

The Canada Revenue Agency has created an online portal for Trusts called “ My Trust Account”. Trustees may register for access to the My Trust Account if they have a Represent a Client account. For more information, click here.

For more information on the Trust Return requirements, please
contact your Empire CPA partner.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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