New Trust Reporting Obligations – What Trustees And Advisors Need To Know

For tax years ending on or after December 31, 2021, new reporting rules established by the Canada Revenue Agency (the "CRA") will require heightened disclosure and transparency for trusts. Trustees and advisors should be aware of the rules summarized below to ensure ongoing compliance.

Current Rules

Under the current rules, a trust is generally required to file a T3 return if the trust has tax payable or distributes all or part of its income or capital to its beneficiaries during the year. An inactive trust or one that has no income or tax payable during the year is generally not required to file a T3.

New Trust Reporting Obligations

For taxation years ending on or after December 31, 2021, an express trust (created through a Trust Deed or Will) that is resident or deemed resident in Canada will be required to file a T3 return even if the trust does not have any income to report.