The new trust reporting rules for 2025 introduce significant changes to the filing and disclosure obligations for trusts, including bare trusts.
We have provided a summary of the key details for the 2025 tax year, based on the most current enacted legislation, legislative proposals, and administrative guidance.
Requirement to File
- For taxation years ending after December 30, 2025, most trusts resident in Canada (including bare trusts) are required to file a T3 Trust Income Tax and Information Return annually, regardless of whether the trust has income, tax payable, or has previously filed a return.
- The T3 Return will need to include Schedule 15 (Beneficial Ownership Information of a Trust), which requires detailed information (name, address, date of birth, tax residence, tax number) about the trust’s settlor(s), trustee(s), and beneficiaries.
- Trusts are required to file a T3 tax return within 90 days of the end of the taxation year. For most trusts, this will be March 31, 2026.
Bare Trusts
- Bare trusts, which are a subset of trusts that are required to file T3 returns, are specifically included in the reporting regime unless an exception applies. A “bare trust” is an arrangement where the trustee can reasonably be considered to act as agent for all the beneficiaries with respect to all dealings with all of the trust’s property. The trustee must have no significant powers or responsibilities, can take no action without instructions from the beneficiaries, and the only function is to hold legal title to the property.
- The CRA previously provided administrative relief extending the bare trust filing exemption for the tax year ending December 31, 2024, meaning that bare trusts did not have to file a T3 trust return for the 2024 tax year. This is a continuation of the exemption from the trust T3 filing requirement for the 2023 tax year. We understand that the CRA intends to require the T3 filing for bare trusts for the 2025 tax year and no further exemptions will be provided.
Key Exemptions for 2025
The 2025 rules introduce several new and expanded exceptions, meaning many trusts (including many bare trusts) may not be required to file a T3 Return or Schedule 15 if they meet certain criteria. The main exceptions are:
a) Small Trust Exception ($50,000 Asset Threshold)
- Trusts that hold assets with a total market value not exceeding $50,000 throughout the year are exempt, regardless of asset type
b) Family Trust Exception ($250,000 Asset Threshold)
Trusts are exempt if, throughout the year:
- Each trustee and beneficiary is an individual,
- Each beneficiary is related to each trustee,
- The total fair market value of trust property does not exceed $250,000 throughout the year,
- The only assets held are cash, GICs, certain debt obligations, listed securities, mutual fund units, personal-use property, and the right to receive income from these assets
c) Professional Trust Accounts
- Trusts required under professional conduct rules or law to hold funds for regulated activities (such as law firm general trust accounts) are exempt, provided the trust is not maintained as a separate trust for a specific client
- For specific client accounts (deposits held by a law firm paid for real estate purchase), such trusts are exempt from filing if the only asset in the trust consists of cash, deposits in a Canadian bank or credit union, and/or a GIC (issued by a Canadian bank, trust company or credit union incorporated under the laws of Canada or of a province) and the value does not exceed $250,000 throughout the year
Other Specific Exemptions
- Trusts in existence for less than three months at year-end,
- Registered charities,
- Clubs, societies, or associations described in paragraph 149(1)(l) of the Income Tax Act,
- Mutual fund trusts, related segregated fund trusts,
- Graduated rate estates,
- Qualified disability trusts,
- Trusts under or governed by registered plans (RRSP, RRIF, TFSA, FHSA, etc.),
- Employee ownership trusts
Bare Trust-Specific Exemptions
- All beneficiaries are also all legal owners, and vice versa (e.g., joint bank accounts for the use and benefit of all holders),
- Legal owners are related individuals and the property is real property that could be designated as a principal residence of at least one owner,
- The legal owner is an individual, the property is real property held for the use or benefit of their spouse or common-law partner, and the property could be designated as the owner’s principal residence,
- The property is held pursuant to a court order,
- The property is held solely for the use or benefit of a partnership by its partners, and a T5013 tax return is filed for the partnership,
- Canadian resource property is held solely for the use or benefit of publicly listed companies (or certain subsidiaries/partnerships),
- Non-profit organizations holding government funds for the use or benefit of other non-profits
Penalties for Non-Compliance
- Late T3 Filing Penalty: $25 per day, minimum $100, maximum $2,500.
- Gross Negligence Penalty: If the failure to file is knowing or due to gross negligence, the penalty is the greater of $2,500 and 5% of the highest fair market value of all property held by the trust at any time in the year
Note that the above information is subject to change based on whether certain draft legislation is enacted, or other changes to the legislation that may apply in the future.
Should you have any questions or concerns, please contact your Rise Advisor.
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