Canada Revenue Agency Halts Implementation of New 'Bare Trust' Reporting Mandate Days Prior to Filing Deadline

Canada Revenue Agency Halts New 'Bare Trust' Reporting Mandate Amid Unintended Impact Concerns

In a surprising move, the Canada Revenue Agency (CRA) has decided to put the brakes on a new reporting requirement regarding "bare trusts," just days before the looming deadline. Originally slated for the 2024 tax season, the new regulations mandated the filing of a T3 tax return form, specifying trustees, beneficiaries, and settlors for each trust by April 2.

However, with only four days left before the deadline, the CRA made an unexpected announcement, citing concerns about the unintended consequences of the new reporting measures. "In recognition that the new reporting requirements for bare trusts have had an unintended impact on Canadians, the Canada Revenue Agency will not require bare trusts to file a T3 … for the 2023 tax year, unless the CRA makes a direct request for these filings," stated the tax agency.

John Oakey, a vice president at the Chartered Professional Accountants of Canada, expressed frustration over the lack of communication from the government regarding these changes. "There's no advertising from the government saying these are coming. You don't see an ad on the television. You don't see ads in magazines," he remarked, highlighting the reliance on advisers and financial institutions for awareness.

Bare trusts, undefined in the Income Tax Act, are described by the CRA as arrangements where the trustee acts as an agent for all beneficiaries concerning the trust's property. Unlike express trusts, which are typically deliberate legal arrangements, bare trusts can arise inadvertently, such as when a parent co-signs a mortgage for a child or designates partial ownership of their property to heirs.

Oakey emphasized that even something as simple as a shared bank account could constitute a bare trust. "If I put my name on bank account in order to help them pay their bills, that creates a trust relationship," he explained. However, such trusts often do not generate income for the trustee to report in a given tax year.

Canada Revenue Agency Halts New 'Bare Trust' Reporting Mandate Amid Unintended Impact Concerns

In a surprising reversal, the Canada Revenue Agency (CRA) has suspended the implementation of a recent reporting requirement regarding "bare trusts," just days before the imminent deadline. Initially scheduled for the 2024 tax season, the new regulations mandated the submission of a T3 tax return form, detailing trustees, beneficiaries, and settlors for each trust by April 2.

This decision comes amidst concerns over the unintended repercussions of the new reporting measures. While Canadians wouldn't have faced taxation on a trust's value, failure to report membership in a bare trust could have incurred a hefty fine of $2,500 or five percent of the total trust property value, whichever is higher. The primary objective of this requirement was to combat tax avoidance practices, particularly by corporations and affluent individuals who utilize bare trusts to circumvent property transfer taxes.

John Oakey, a vice president at the Chartered Professional Accountants of Canada, suggested that the move was likely also aimed at addressing issues related to money laundering. Nevertheless, the CRA has pledged to revisit and refine its guidance on this filing requirement in the coming months.

For further inquiries, CBC Journalist Darren Major, a senior writer for CBC's Parliamentary Bureau, can be reached via email at This email address is being protected from spambots. You need JavaScript enabled to view it..

With additional contributions from Yvette Brend, Audience Relations, CBC.

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In conclusion, the suspension of the "bare trust" reporting requirement by the Canada Revenue Agency underscores the complexity and potential unintended consequences of tax regulations. While intended to address tax avoidance and money laundering concerns, the abrupt halt to the mandate highlights the need for clear communication and thorough consideration of the impact on taxpayers. As the CRA works to refine its guidance on this matter, stakeholders are urged to stay informed and seek guidance to ensure compliance with evolving tax obligations.