In the 2018 Budget, the federal government first proposed expanding the annual reporting requirements for trusts. These new trust reporting rules were meant to come into effect for trusts with taxation years ending on December 31, 2021, and after; however, draft legislation was not released by the Department of Finance until February 7, 2022.
Under this new draft legislation, these rules are expected to come into effect for trusts with taxation years ending on or after December 31, 2022.
Under the new rules, all non-resident trusts that currently have to file a Canadian income tax return and most resident trusts must now identify all trustees, beneficiaries, and settlors of the trust, along with any person who can control the trust’s appointment of income or capital.
The following information is likely to be required for each person:
The new rules also require many trusts that previously did not file income tax returns to now file. Failure to file under these new rules could result in penalties of up to $2,500 per return and/or 5% of the fair market value of the trust’s property if the failure to file is done knowingly or the result of gross negligence.
Under the February 7, 2022, draft legislation, bare trusts and arrangements are now also considered trusts for the purposes of the new trust reporting rules.
Not all trusts are required to report under the proposed new rules. Some of the more notable exceptions are:
This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.
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