Canada enacts new trust reporting and disclosure rules from 2021

New Canadian trust reporting and disclosure rules will come into effect in 2021, imposing a filing obligation both on non-resident trusts that currently have to file a Trust Income Tax and Information Return (also known as “T3 return”, which needs to be filed if the trust has tax payable or distributed any of its income or capital to its beneficiaries) and on certain trusts that are resident in Canada. The aim of these rules is to help the Canada Revenue Agency in the assessment of the tax liability for trusts and its beneficiaries, together with enabling a more efficient collection of beneficial ownership information relating to trusts.

Specifically, the new rules will require non-resident trusts that currently file a T3 return to file an additional schedule providing more information, including the name, address, date of birth (for individuals), jurisdiction of residence and taxpayer identification number (TIN) of the following:

  • the settlor of the trust;
  • the trustees;
  • the beneficiaries; and
  • any subject exerting over the appointment of income or capital of the trust (for example a protector).

Failure to file the T3 return and the additional schedule could result in a penalty of CAD 25 per day (up to a maximum penalty of CAD 2,500); with an additional penalty of 5% of the maximum fair market value of the trust’s assets (with a minimum penalty of CAD 2,500) in case of deliberate or grossly negligible failure.