Many Canadians felt relieved when the Canada Revenue Agency postponed bare trust reporting requirements for the 2023, 2024 and 2025 tax years. However, these reporting rules are returning for the 2026 tax year, and some individuals and businesses may be surprised to learn that they may be impacted.
WHAT IS A BARE TRUST?
A bare trust generally exists when one person is registered as the legal owner of property, but someone else is the “true” owner who benefits from and controls that property.
Many ordinary personal and business arrangements can potentially meet the definition of a bare trust.
Some common examples may include:
- An adult child added to a parent’s bank account for convenience or estate planning purposes;
- A parent appearing on title to a child’s home to assist with financing;
- One spouse holding legal title to a family home that is jointly owned in substance; and
- A corporation holding legal title to property on behalf of another person or company.
DO YOU HAVE A BARE TRUST REPORTING REQUIREMENT?
The good news is that some common arrangements are specifically excluded from the new reporting requirements or may qualify for other filing exemptions. Examples may include certain family home ownership arrangements, some joint ownership situations, and qualifying partnership property.
Additional exemptions may also apply where:
- The arrangement existed for only a very short period (i.e., less than 3 months);
- The value of trust property is relatively small (i.e., less than $50,000); or
- The trust only holds certain qualifying assets as well as meets other conditions including a valuation threshold (i.e., $250,000) and trustee/beneficiary relationship criteria.
Note that because these exemptions depend on specific facts and property values, an arrangement may be exempt one year and reportable the next.
WHAT IF A REPORTING REQUIREMENT EXISTS?
If a reporting requirement exists, a T3 Trust Income Tax and Information Return must be filed. This is generally an information return only. The beneficial owner of the property, not the bare trust, continues to report any income and capital gains on their own tax return.
The T3 filing will also require disclosure of information about all persons involved in the arrangement (i.e., trustee, settlor, beneficiary), including names, addresses, tax identification numbers, and other details.
For the 2026 tax year, the T3 filing deadline is March 31, 2027.
WHAT IF A REPORTING REQUIREMENT IS MISSED?
Failure to file a required T3 return will result in a late-filing penalty of $25 per day, with a minimum of $100 and a maximum of $2,500.
In addition, where the failure to file is considered to be made knowingly or through gross negligence, the penalty is the greater of $2,500 and 5% of the fair market value of the property held by the trust.
WHAT SHOULD YOU DO NOW?
If you own property jointly with others, have added family members to bank/investment accounts or real estate titles, use nominee corporations, or have any arrangement where the legal ownership differs from beneficial ownership, it may be time to review your situation.
Discussing these arrangements with your tax and/or legal advisor before the end of 2026 can help determine whether a reporting requirement will arise and ensure any necessary information can be gathered in advance of the filing deadline.
LOOKING FOR MORE DETAILS?
This article provides only a very high-level overview of the new bare trust reporting requirements. The legislation contains numerous potential filing exemptions and technical rules that may significantly impact whether a filing requirement exists. For a more detailed discussion of the rules including common examples of bare trust scenarios, filing requirements and potential filing exemptions please refer to our Tax Memo A Practical Guide to Bare Trust Reporting.
As always, please contact your Welch LLP advisor to discuss your specific circumstances.
