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Update from CRA as of March 28, 2024:

In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency (CRA) will not require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request for these filings.

Over the coming months, the CRA will work with the Department of Finance to further clarify its guidance on this filing requirement. The CRA will communicate with Canadians as further information becomes available.

Additional information can be viewed here.

There is new legislation that will impact many individuals and corporations who may not be aware of relationships they have where a bare trust arrangement exists.

For tax years ending on or after Dec. 31, 2023, bare trust arrangements now have to file trust tax returns. In these relationships, the person or entity listed as the owner of an asset is not the beneficial owner of the asset, but the holder of legal title for the property.

There are many situations where a bare trust arrangement exists. Here are five common examples:

1.  A parent is on title of a child’s home or a child is on title of a parent’s home.
2. A parent or grandparent is on title of an investment or bank account in trust for a child or grandchild.
3. A child is on title of a bank account for a parent.
4. One spouse is on title of a house, but both spouses own the home.
5. An individual or a corporation is on title of an asset, but the asset is being used by another party.

This is not an exhaustive list of bare trust arrangements, but if any of the above (or similar) situations apply to you, a trust tax return will need to be filed for 2023 unless an exemption applies. If you have a requirement to file but fail to file a return, penalties could apply. Please contact us if you believe you have a bare trust arrangement or you aren’t sure, and we will determine if you have a filing obligation.

The late filing penalty is $25 per day, with a minimum penalty of $100 and a maximum of $2,500. An additional penalty ⁠–⁠ equal to five per cent of the maximum fair market value of property held during the year by the trust, with a minimum penalty of $2,500 ⁠–⁠ will be applied if a failure to file the trust tax return was made knowingly or due to gross negligence.*

(*Credit: Baker Tilly Windsor LLP)

If you have any questions or believe you have a bare trust arrangement, please please give our office a call at 905-877-7200.