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New reporting and disclosure rules will come into effect in 2021 for certain trusts. For trusts in existence as of January 1st 2021, trustees must report specific information including names, addresses, birthdates and tax identification numbers for the creator of the trust (settlor), all trustees, all beneficiaries (including those with only a contingent interest), and anyone who has the ability to influence the decisions of the trustees. These details must be reported on a schedule to the T3 return.

Prior to 2021, only trusts that were active during the year (such as by having tax payable or having made distributions during the year) were required to file a T3 tax return. A trust that had no tax payable or that had not distributed income or capital during the year was generally not required to file a T3 return. The new reporting and disclosure requirements apply to express trusts resident in Canada even if they were inactive or had no income during the year.

Certain trusts are exempt from the new reporting and disclosure requirements including qualified disability trusts, graduated rate estates, trusts that are registered plans (for example, RRSPs, TFSAs and RDSPs), trusts that have existed for less than three months, trusts that qualify as registered charities or non-profit organizations, and trusts with less than $50,000 in assets, provided that these assets are publicly traded securities, government debt obligations or bank deposits.

These new rules mean that trusts that may have previously not had to file a T3 return may now be required to do so. There are penalties for non-compliance. If a trustee knowingly fails to disclose the required information, the penalty is the greater of 5% of the highest fair market value of the trust assets, or $2,500. Trustees should ensure that they familiarize themselves with the new requirements and comply where necessary.

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