What is a bare trust?
a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property.
A common example of a situation where a bare trust arrangement can exist is when, for privacy reasons, a property developer establishes a bare trust arrangement that will hold registered title to real property, while the developer retains beneficial ownership.
Are bare trusts now required to file an annual T3 Return and Schedule 15?
Bare trusts are subject to the new trust reporting rules for tax years ending after December 30, 2023. Accordingly, a bare trust is required to file a T3 Return annually unless specific conditions are met. A bare trust is also required to complete Schedule 15 annually, unless it is a listed trust.
Similar to all trusts subject to the new reporting rules, a trustee of a bare trust is required to register for a trust number.
The filing deadline for the 2023 tax year
For the 2023 tax year, where the tax year of the trust ends on December 31, 2023, the filing deadline of March 30, 2024, is extended to April 2, 2024, the first business day after the deadline.
Updated 2024-03-28: In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency (CRA) 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.
Filing penalty
A late filing penalty: when a person fails to file an information return on time, a penalty equal to $25 per day may apply, subject to a $100 minimum and a $2,500 maximum
A gross negligence filing penalty: this penalty will be the greater of $2,500 and 5% of the highest amount of the fair market value of all the property held by the trust at any time in the year.
Filing exception - subsection 150(1.2):
trusts that have been in existence for less than three months;
trusts that hold assets with a total fair market value that does not exceed $50,000 throughout the year, where the only assets held by the trust throughout the year are one or more of cash, certain government debt obligations, a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, and an interest in a related segregated fund
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