New Trust Reporting Requirements
We are writing to bring to your attention important changes to trust filings and new information requirements that will impact the reporting of trusts moving forward. These reporting changes will impact trusts beginning with their December 31, 2021 taxation year-end.
It is important that you take notice of these changes for two reasons:
• Substantial and punitive penalties can result from non-compliance.
• Trusts will likely be subject to increased scrutiny from the Canada Revenue Agency going forward.
For reasons above, we ask that you carefully consider the contents of this communication and contact us immediately should you have any questions or concerns.
New Reporting Requirements
Beginning December 31, 2021, trusts will be required to disclose the:
• Name
• Address
• Date of birth
• Jurisdiction of residence
• Social insurance number / business number of any:
o Trustee
o Beneficiary
o Settlor
o Any individual with the ability to influence a trustee’s decision
For the purposes of this reporting, the definition of a settlor is very broad and includes any person who has made a loan or transfer of property to a trust, with the narrow exception of a loan at a reasonable rate of interest or a transfer made at fair market value consideration by a person who deals at arm’s length with the trust. Please note, a non-arm’s length party who has loaned or transferred property to a trust will remain a settlor for reporting purposes indefinitely, notwithstanding whether any loan remains outstanding.
These rules apply to all trusts with limited exceptions for certain trusts, including:
• Trusts that were in existence for less than three months
• Trusts that own property with a fair market value of $50,000 or less provided the property consists of cash, government debt obligations, publicly listed securities, or mutual funds
• Graduated rate estates
Under the old trust reporting rules, not all trusts were required to file returns. With these new rules, many more trusts will be required to file a return. For example, a cottage trust must now file.
Penalties for Non-Compliance
Failure to file the required information discussed above will result in a penalty of $25 per day, with a minimum penalty of $100, to a maximum of $2,500. Additionally, if it is deemed that the failure to file was made knowingly or because of gross negligence, there will be an additional penalty equal to the greater of $2,500 and 5% of the fair market value of all the property held by the trust.
If we are missing any of this information, we will be contacting you.
It is recommended that you take action now – review trust deeds and contact those persons for whom information will be required. For trusts that will be reporting for the first time, locate the trust document and arrange for the CRA to issue the trust account number. There is a link HERE for a form to be completed. Please complete this and send back to your LCA advisor.
As always, we are happy to assist you in any way that we can in meeting these new trust reporting requirements. Should you have any questions or concerns, please do not hesitate to contact a member of the LCA team.