In a pre-Easter act of generosity, the Canada Revenue Agency on Thursday announced that bare trusts will be exempt from trust reporting requirements for 2023.

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

CRA reverses course, exempts bare trusts from new regulations Back to video

We apologize, but this video has failed to load.

Try refreshing your browser, or
tap here to see other videos from our team.

Play Video

This will come as a huge relief to thousands of Canadians who were scrambling to file a T3 trust return for the first time for their bare trusts, and may even allow some accountants to take off part of the long weekend, rather than spend it preparing such returns by the April 2, 2024, deadline.

Enhanced reporting rules for trusts, including bare trusts, were recently enacted and require all trusts (with limited exceptions) to start filing returns for tax years ending on Dec. 31, 2023. Those returns are due on Tuesday.

While there is no definition of a bare trust in the Income Tax Act, the CRA has defined it as a “trust arrangement under which the trustee can reasonably be considered to act as agent for the beneficiaries,” and can reasonably be considered to occur “when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property.”

There was concern amongst the legal and accounting community that this definition could be applicable to certain arrangements where a relative went on a property title in order to assist a borrower with obtaining mortgage financing (for example, a parent on title with an adult child), or an adult child was made a joint account holder with an elderly parent on a bank or investment account.

The CRA on Thursday said it “will not require bare trusts to file a T3 Income Tax and Information Return (T3 Return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request for these filings.”

The CRA’s new position was taken “in recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians.” In addition, the CRA indicated it will work with the Department of Finance over the coming months to further clarify its guidance on this filing requirement, and that it will communicate with Canadians as further information becomes available.

“The CRA heard our concerns along with concerns of many other stakeholders,” John Oakey, vice-president of tax at CPA Canada, said in a statement. “(We are) encouraged by CRA’s willingness to modify their trust reporting requirements and will continue to advocate for changes based on concerns brought to our attention by our members and other external stakeholders.”

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters financialpost.com.