Principal Issues: 1) Whether a trust that does not meet the preamble of subsection 150(1.2) but is described in one of the paragraphs of subsection 150(1.2) and is otherwise required to file a T3 return pursuant to subsections 150(1) and (1.1) is required to provide the additional information as required by Regulations 204.2?
2) Whether a trust that does not meet the preamble of subsection 150(1.2), is not described in one of the paragraphs of subsection 150(1.2) and is otherwise required to file a T3 return pursuant to subsections 150(1) and (1.1) is required to provide the additional information as required by section of the 204.2 Regulations?
Position: 1) No. 2) Yes.
Reasons: 1) Such a trust is a trust subject to one of the exceptions listed in paragraphs 150(1.2)(a) to (o) even though subsection 150(1.2) does not apply to the trust. Because it is subject to one of the exceptions, it is not subject to Regulations 204.2.
2) Such a trust is not a trust subject to one of the exceptions listed in paragraphs 150(1.2)(a) to (o) and is therefore subject to section of the 204.2 Regulations, even though subsection 150(1.2) does not apply to the trust.
FINANCIAL STRATEGIES AND FINANCIAL INSTRUMENTS ROUNDTABLE, 3 NOVEMBER 2023
2023 APFF CONFERENCE
7. Trusts - Filing of additional information and exceptions
Pursuant to subsection 150(1.2) of the Income Tax Act (“I.T.A.) (footnote 1), certain trusts that were not previously required to file a Trust Income Tax and Information Return (footnote 2) will be required to file such a return for taxation years ending after December 30, 2023. In addition, subsection 204.2(1) of the Income Tax Regulations (“I.T.R.”) (footnote 3) requires trusts with taxation years ending after December 30, 2023, but subject to certain exceptions, to provide a significant amount of information about their trustees and beneficiaries on the T3 Return.
More specifically, subsection 150(1.2) I.T.A. provides that subsection 150(1.1) does not apply to a taxation year ending after December 30, 2023 of a trust that is resident in Canada and that is an express trust, or for civil law purposes, a trust other than a trust that is established by law or by judgment, unless it falls within one of the exceptions described in paragraphs 150(1.2)(a) to (o).
Subsection 204.2(1) I.T.R. applies to any person who controls or receives income, gains or profits as trustee, or in a capacity analogous to that of trustee, in respect of a trust, other than a trust that falls within one of the exceptions listed in paragraphs 150(1.2)(a) to (o).
Questions to the CRA
(a) Must a trust that does not come within the preamble to subsection 150(1.2) (for example, a Quebec trust that is established by law or by judgment), but that is a trust described in any of paragraphs 150(1.2)(a) to (o), provide the information set out in subsection 204.2(1) I.T.R.?
(b) Must a trust that does not come within the preamble to subsection 150(1.2) (for example, a Quebec trust that is established by law or by judgment) and that is not a trust coming within one of the exceptions described in paragraphs 150(1.2)(a) to (o), provide the information set out in subsection 204.2(1) I.T.R.?
CRA Response
A trust that is resident in Canada and that is an express trust or, for civil law purposes, a trust that is not established by law or by judgment, and that does not otherwise fall within one of the exceptions listed in paragraphs 150(1.2)(a) to (o), must file a T3 Return for any taxation year ending after December 30, 2023, without regard to subsection 150(1.1).
On the other hand, a trust to which subsection 150(1.2) does not apply, either because it does not come within the preamble to that subsection (because it is not resident in Canada or is not an express trust or, for civil law purposes, is a trust established by law or by judgment) or because it falls within one of the exceptions listed in paragraphs 150(1.2)(a) to (o), may nevertheless have to file a T3 Return. This could be the case, for example, if tax is payable by the trust for the year under Part I of the Income Tax Act, in which case a T3 Return is required pursuant to subsection 150(1) and subparagraph 150(1.1)(b)(i)
Pursuant to subsection 204.2(1) I.T.R., a trust that is required to file a T3 Return pursuant to subsection 150(1) for a taxation year ending after December 30, 2023, whether or not subsection 150(1.2) applies to the trust, must provide on its T3 Return all of the information required by subsection 204.2(1) I.T.R. (taking into account subsection 204.2(2) I.T.R.), unless it is a trust that falls within the exceptions listed in paragraphs 150(1.2)(a) to (o).
Consequently, a trust that does not come within the preamble to subsection 150(1.2), but that is a trust described in any of paragraphs 150(1.2)(a) to (o), if it is otherwise required to file a T3 Return under subsection 150(1) for a taxation year ending after December 30, 2023, will not have to provide the information set out in subsection 204.2(1) I.T.R. On the other hand, a trust that does not come within the preamble to subsection 150(1.2) and that is not a trust described in any of paragraphs 150(1.2)(a) to (o), but is otherwise required to file a T3 Return under subsection 150(1) for a taxation year ending after December 30, 2023, must provide the information set out in subsection 204.2(1) I.T.R.
Mélanie Beaulieu
November 3, 2023
2023-099423
FOOTNOTES
Due to the requirements of our systems, the footnotes contained in the original document are reproduced below:
1 R.S.C. 1985, c. 1 (5th Supp.) ("I.T.A.").
2 CANADA REVENUE AGENCY, T3 RET Return "T3 Trust Income Tax and Information Return" ("T3 Return").
3 C.R.C., c. 945 ("I.T.R.").