Changes to the Income Tax Act in 2023 will require bare trusts to report annual beneficial ownership information. These new rules, and other changes to trust reporting requirements, were discussed in a prior client insight from our Canadian Tax group, which you can access here.
Under previous rules, bare trusts were not required to file a T3 Return. Subject to a few exceptions, bare trusts must now file a T3 Return annually, even if there is no income to report, which identifies all trustees, settlors, beneficiaries and controlling persons on an accompanying Schedule 15. For bare trusts with a December 31, 2023 year end, filings must be completed by March 31, 2024.
For the purpose of the new rules, a bare trust is an arrangement under which a trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property. This includes structures commonly used to own real estate, where legal title to land is registered in the name of a nominee company on behalf of beneficial owners.
Due to the broad definition of "settlor" for the purpose of the reporting – being any person who has contributed property to the trust, excepting by way of a commercial loan or a transfer for value by an arm's-length person – it may be necessary to report information regarding parties who previously interacted with the trust and prior owners. It will be important to review existing ownership structures to identify situations where a bare trust exists and to determine the parties involved and the extent of reporting required.
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