When is the T3 trust return due in Canada?

The 90-day rule

Unlike corporations, which get six months, a trust must file its T3 return within 90 days of its tax year-end. Almost all personal trusts use a calendar year-end of December 31, which puts the filing deadline at March 31. Any balance of tax owing is due on that same date.

The 90-day window is short, and because it falls in the middle of personal tax season it is easy to overlook. Trustees are personally responsible for filing, so the obligation does not disappear if it is missed.

The new expanded trust reporting rules

Reporting rules were significantly expanded for tax years ending after December 30, 2023. Many trusts that previously did not have to file, including bare trusts and trusts with no income or activity, are now generally required to file a T3 and a new Schedule 15 disclosing beneficiaries, trustees, settlors and controlling persons.

The CRA has provided some relief and exemptions along the way, and the treatment of bare trusts in particular has shifted year to year. This is a fast-moving area, so a trust that did not need to file two years ago may need to now.

Penalties for late or missed filing

The standard late-filing penalty is 5% of the unpaid balance plus 1% per month. But the expanded rules added a much steeper penalty for failing to file the beneficial ownership information: up to 5% of the trust's total property value, with a minimum, where the failure is made knowingly or through gross negligence.

That property-value penalty is what makes the new rules serious even for trusts with no income, because the penalty is not tied to tax owing.

Types of trusts that must file

Common filers include family trusts used for income splitting or holding shares, testamentary trusts arising from a will, alter ego and joint spousal trusts, and now many bare trusts holding property for another party. A graduated rate estate has its own rules and can use an off-calendar year-end for its first 36 months.

Whether your arrangement is a trust for tax purposes is itself sometimes the question, particularly for informal holding arrangements that turn out to be bare trusts.

What the return reports

The T3 reports the trust's income and how it was allocated. Income kept in the trust is taxed in the trust, generally at the top marginal rate for most trusts. Income paid or made payable to beneficiaries is deducted by the trust and taxed in the beneficiaries' hands, reported to them on a T3 slip. Getting the allocation right is where trust planning earns its keep.