As your trusted partners in navigating the intricacies of regulatory requirements for not for profit organizations (NPOs) and Charities, we want to ensure you are well-informed about the latest developments that might impact your filing responsibilities. In this regard, we would like to draw your attention to the upcoming NEW requirement to file T3 Tax Returns for bare trusts.
Starting this year, bare trust arrangements will be viewed as trusts and required to file a tax return. These arrangements are commonly used to hold legal title of real estate with one organization, but not beneficial ownership. However, this is not just limited to real estate and can also include holding other assets such as bank accounts.
New Reporting Obligations
As part of the new filing rules, trusts will now be required to report information on the trust settlor, trustees, and beneficiaries of the trust. The information is straight-forward (name, address, date of birth, tax identification number), however, obtaining this information may take time.
Unfortunately, this T3 reporting requirement may also extend to charities and NPOs as well. The CRA could potentially grant an administrative exemption to charities/NPOs. However, in the absence of any exemptions, we are recommending that charities/NPOs begin to gather relevant information for the potential of preparing these Trust Returns. This includes identifying any bare trust relationships your organization may be involved with.
Trust Returns must be filed within 90 days of the end of the year – for the upcoming year, this means April 1, 2024 (March 30, 2024 lands on a Saturday).
Organizations that fail to file a trust income tax and information return will be subject to penalties, ranging from $100 to 5% of the maximum fair market value of property held during the relevant year by the trust. Penalties are the responsibility of the Trustee of the Trust. The penalties are real and substantial. We encourage you to comply with this new filing regime.
Please consider the following questions:
- Is your organization the registered title holder of Canadian real property* yet the beneficial owner of the property is NOT your organization?
- Is your organization the registered title holder of Canadian real property* “IN TRUST” for someone other than your organization?
- Do you hold funds “IN TRUST” for anyone else? This could include a bank account or investments held for or with someone else.
Please contact us immediately if you answered YES to any of the questions above or if you think that you meet the definition of a bare trust. We also recommend you discuss any potential bare trust relationships your organization has with your legal counsel to confirm it meets the definition of a bare trust. We want to take proactive steps to prepare for this filing requirement in case the CRA does not grant an administrative exemption to NPOs/Charities.
Please also note, that due to the complexities of this new filing requirement, there will be extra time necessary to gather the information and prepare the trust return, and as a result, our fees for trust preparation will reflect the time needed to comply with these new filing requirements.
If we do not hear from you, we will assume your organization is not the registered owner of any Canadian real property* and that your organization is not on legal title of any Canadian real property in trust for another party.
*real property can be land, buildings, equipment, other assets