In addition to new tax legislation for individuals, business and charities, the 2018 Budget brings forth extensive reporting requirements for Canadian-resident express trusts, including most family trusts, and non-resident trusts.
As a result of these changes, many trusts that were not previously required to file an annual return, may now be required to and a failure to do so could result in hefty penalties.
Specifically, these changes will require trusts to report the identity of all:
- Trustees – individuals or groups with powers to administer the trust
- Beneficiaries – recipient of the benefits of the trust
- Settlors – creator of the trust
- Other persons with the ability to exert control over decisions with respect to the assignment of income or capital
It is important to note that some trusts will be excluded from these reporting requirements. Excluded trusts include:
- Mutual Fund Trusts
- Segregated funds
- Master trusts
- Trusts governed by registered plans (RRSP, RESP, etc.)
- Lawyer General Trust Accounts
- Graduated Rate Estates
- Trusts qualifying as registered charities or NPOs (non-profit organizations)
- Trusts less than 3 months old
- Trusts with less than $50,000 in assets such as deposits, listed securities, or government debt obligations
- Disability trusts (must be qualified)
In addition to these proposed reporting requirements, new penalties will also be added to tax legislation regarding the filing of returns for trusts.
If you fail to file a trust return, where required, you could be charged with a late filing penalty of $25 per day to a maximum of $2,500. Furthermore, if it is determined that you knowingly failed to file or failed to file due to gross negligence, you could be subject to an added penalty of 5% of the FMV starting at a minimum of $2,500.
For more information on how these proposed trust requirements could affect your trust, contact us today.
