The federal government is granting another exemption for bare trust tax filings after a last-minute pause to the requirements earlier this year.
The Canada Revenue Agency (CRA) announced Tuesday that Canadians with bare trusts won’t be required to file a T3 tax form for the 2024 tax year.
A bare trust relationship is one where a person, known as a trustee, has legal ownership of a property or asset but doesn’t hold beneficial ownership. In such a relationship, a “trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property,” according to the government’s definition.
New tax requirements for trusts were introduced as part of the government’s 2022 fall economic statement and were set to be enforced for the 2023 tax year — meaning anyone with a bare trust was told they had to file their forms by April 2.
The new rules were meant to target money laundering, terrorist financing and tax avoidance. But a number of Canadians who had rather simple bare trust relationships found themselves scrambling to file the forms.
With just days to go before the April 2 deadline, the CRA announced it would be pausing the requirements for bare trusts due to an “unintended impact on Canadians.” That pause is now being extended for this tax year.
More than 40,000 Canadians filed the T3 tax form this year despite the 11th hour pause in March. Many had paid pricey tax filing fees to complete their forms before the exemption was announced.
The last minute pause prompted Canada’s Taxpayer’s Ombudsperson François Boileau to launch an investigation into the matter.
Boileau said Wednesday that he is pleased there will be an extended exemption on bare trust filing requirements.
“The CRA exempted bare trustees from their 2023 reporting requirements because it had an unintended impact on Canadians, and it was necessary to bring the exemption back for 2024,” Boileau said in a statement.
Some Canadians could still have to file a T3 form for a bare trust if the CRA makes a direct request.
