The federal government proposed new tax reporting rules for
trusts in the 2018 budget, which have now come into effect for the
2021 and subsequent taxation years. These rules impact the required
income tax filings of trusts for taxation years ending on or after
December 31, 2021. Failure to comply with the new
requirements could result in penalties to the trustee.
Reporting Requirements: Old and New
Prior to these changes, a trust was only required to file an
annual income tax (T3) return for a given year if it had tax
payable or if it distributed all or part of its income or capital
to its beneficiaries.
For 2021 and all subsequent taxation years, all non-resident
trusts required to file a T3 return and certain express trusts
(generally a trust created with the settlor's express intent,
usually made in writing) that are resident in Canada must provide
additional information on an annual basis. As a result, certain
trusts will have to file a T3 return where
