CRA Webpage, Enhanced reporting rules for trusts and bare trusts: Frequently asked questions, updated on 14 March 2025

3.5. Will the CRA provide any relief for penalties if a bare trust does not file their 2023 T3 Return and Schedule 15 by the filing deadline as required? …

As some bare trusts may be uncertain about the new requirements, the CRA is adopting an education-first approach to compliance and providing relief to bare trusts by waiving the penalty payable under subsection 162(7) of the Income Tax Act for the 2023 tax year in situations where the T3 Return and Schedule 15 are filed after the filing deadline for reasons other than gross negligence. …

This proactive relief is for bare trusts only and only for the 2023 tax year.

CRA went on to also refer to potential relief from the gross negligence penalty under s. 163(5) for late filing by bare trusts for their 2023 taxation year

3.5. “Will the CRA provide any relief for penalties if a bare trust does not file their 2023 T3 Return and Schedule 15 by the filing deadline as required?”

After referring to relief from the s. 162(7) penalty for late filing by bare trusts for their 2023 taxation year otherwise than where there was gross negligence, CRA then stated:

While the Act also includes a gross negligence penalty under subsection 163(5), as part of the CRA’s education-first approach, the CRA will only apply this penalty in the most egregious cases where a bare trust fails to file. Imposing such penalty would only occur in the context of a compliance action, such as an audit, where all factors and circumstances of the taxpayer’s particular situation are considered together. A gross negligence penalty for failing to file will be subject to oversight and approval by Headquarters, following a mandatory referral.

Under the Act, the gross negligence penalty is equal to the greater of $2,500 and 5% of the highest amount at any time in the year of the fair market value of all the property held by the trust.

Meaning of express trust

2.4. What is an express trust?

Generally, an express trust is a trust created with the settlor's express intent, usually made in writing (as opposed to a resulting or constructive trust, or certain trusts deemed to arise under the provision of a statute). Many types of trusts are express trusts.

Waiver of bare trust return filing for 2024

3.2. Are bare trusts now required to file an annual T3 Return and Schedule 15? Updated: October 29, 2024

Updated 2024 Tax year: As announced in the Tax Tip issued October 29, 2024, 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 2024 tax year, unless the CRA makes a direct request for these filings. This is a continuation of the exemption from the trust reporting requirements that was issued for bare trusts for the 2023 tax year.

Meaning of trust

1.1. What is a trust? …

Separation of legal and beneficial ownership

Ordinarily, a person who has legal title to a property also has the ability to use, enjoy and “benefit from” the property. Under the law of equity in common law provinces and territories (i.e., outside the Province of Québec), a trust is a relationship in which the legal and beneficial ownership of property are separated, meaning that the person who holds legal title to the property is generally not the same person as the person who is or may be beneficially interested in it.

This separation of legal and beneficial ownership means that in an “ordinary” (non-bare) trust such as a family trust, the trustee exercises control over the trust property and is under a fiduciary duty to act for the benefit of the beneficiaries according to the terms of the trust. The beneficiaries have rights against the trustees to enforce the terms of the trust. …

Trust vs. agency and bare trusts

Trust relationships are distinct from agency relationships, even though both trustees and agents act on behalf of other persons. While a trustee administers property on behalf a beneficiary under a trust, an agent acts on behalf of a principal under an agency agreement. An agent may manage or deal with the principal’s property but does not usually acquire legal title to it. A person who is required to manage and dispose of trust property and who can exercise independent discretionary power over the property is a trustee rather than an agent. The trustee of a bare trust, in contrast, acts as an agent for the beneficiaries when dealing with trust property.

Meaning of "bare trust"

3.1. What is a bare trust?

The term "bare trust" is not defined in the Income Tax Act. However, a bare trust for income tax purposes is 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 trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.

Requirement to report non-beneficiary reportable entities (paras. 1.6 and 1.7)

• Unlike the accommodation by the rules for beneficiaries who are not known or ascertainable with reasonable effort, CRA notes that the Regulations “do not include a relieving provision where the person making the return does not know the identity of a particular reportable entity” (other than a beneficiary).

s. 163(5) gross negligence penalty could be imposed for failure to file a return

1.10 … Errors or omissions may be identified by the CRA based on a review of the information filed. If the trust is not a listed trust and a person knowingly or under circumstances amounting to gross negligence makes, — or participates in, assents to or acquiesces in, the making of — a false statement or omission on a return required to be filed, or fails to file a return, a penalty may apply under subsection 163(5). This penalty is calculated based on 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.

Scope of 3-month trust

2.5 … The following trusts are considered to have been in existence for less than three months at the end of the taxation year:

• Trusts that ceased to exist during the particular taxation year, at a date which is less than three months after the trust was created
• Trusts that were created less than three months before the end of the particular taxation year.