One of the most prevalent tax trends in recent years has centered on the concept of transparency. The need for transparency and the desire to enhance transparency is something that has been informing the changes being made by governments in Canada—as well as internationally—in an attempt to reduce tax evasion.
Enhancing transparency has often meant increasing taxpayer reporting requirements, with the most recent change being the increased trust reporting requirements originally announced in the 2018 federal budget.
Legislation surrounding these changes was recently released and taxpayers should be aware as those who are party to a trust may face a larger administrative burden with respect to that trust going forward.
What are the changes?
Generally, under the previous system, a trust would only have to file a T3 trust return in the case that it received income or made distributions to beneficiaries in the year.
This requirement is now being expanded to require that certain express trusts (described below) file a T3 return annually. Furthermore, certain parties to the trust will now be required to provide personal identification information such as their name, address, date of birth, tax identification number (such as social insurance number or business number) and jurisdiction of residence as part of the annual T3 trust return process.
The parties required to provide this information are
- settlors and
- persons who have the ability to exert control over trustee decisions regarding the appointment of income or capital of the trust (such as protectors).