Canada Withdraws Bare Trusts Reporting Requirement for 2024 - Introduction
In an unexpected turn of events, the
Canada Revenue Agency (CRA) has announced the retraction of the newly implemented rule requiring trustees of Canadian bare trusts to submit a trust return for the tax year 2023.
This decision, unveiled just a day before the deadline for filing, comes as a response to the unintended consequences the reporting requirements have imposed on Canadians.
What's the context?
The broad context of the enhanced trust reporting requirements can be
seen here.
This latest move follows a March 2024 concession that promised no penalties for trustees who filed late, barring instances of serious misconduct.
Initially introduced in 2023, these regulations mandated extensive annual T3 return filings, starting with tax years ending on or after December 31, 2023.
The mandate aimed to include a broader spectrum of trusts, such as bare trusts and foreign trusts with ties to Canadian property or residents, necessitating many to file a T3 return and the Schedule 15 (Beneficial Ownership Information of a Trust) form for the first time.
However, the latest update specifies that the withdrawal of the filing requirement applies exclusively to bare trust arrangements under the new subsection 150(1.3) of the federal Income Tax Act. Other trusts, particularly express or other trusts based or deemed to be resident in Canada, remain subject to the original filing and tax payment obligations by April 2, 2024.
What's next?
Over the next few months, the CRA plans to collaborate with the Department of Finance to refine and elaborate on the guidelines concerning the bare trust filing requirements.
Despite the recent announcement, bare trusts must prepare to meet the filing expectations, including Schedule 15 submissions, for the 2024 tax year and beyond.
Canada Withdraws Bare Trusts Reporting Requirement - Conclusion
As the CRA promises further clarity on this matter, stakeholders in bare trusts and the broader tax community await detailed guidance, hoping for smoother compliance paths in the future.
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