Article September 14, 2021

New trust compliance rules are coming

In its February 27, 2018 budget, the federal government announced its commitment to improve information collection from inter vivos trusts for tax years ending after December 30, 2021

These new trust compliance measures follow a guidance issued in the context of combating abusive tax avoidance. Since the complex structure of trusts previously limited access to information, the Canada Revenue Agency now wishes to obtain relevant information on the beneficial ownership of trusts in order to better determine the tax payable of the trusts and their beneficiaries.

The information gathered will allow tax authorities to identify the components of complex structures and thus to identify the possible dependencies and risks associated with transactions involving such trusts.

As a result of this information becoming available, some companies may see their business limit reduced and consequently shared with other companies.

Failure to comply with the new measures could result in a late filing penalty of $25 per day, with a minimum threshold of $100 and a maximum threshold of $2,500.

It is important to note that in the case of gross negligence, an additional penalty representing 5% of the maximum fair market value (FMV) of the property held by the trust in the fiscal year could apply. The minimum threshold for the latter is $2,500, but no maximum threshold has been specified.

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