Filing Requirements, Deadlines, Bare Trust Changes, and Penalties
If you own a business through a corporation, hold property in a family trust, or act as an executor for an estate, the T3 Trust Income Tax and Information Return may be relevant to your tax obligations. Over the past three years, the CRA has significantly expanded who needs to file a T3 return and how much information must be disclosed, and the rules continue to evolve.
At Cassar CPA, we work with incorporated professionals and small business owners across the Greater Toronto Area who frequently encounter trusts in their planning structures, whether through family trusts holding corporate shares, estates passing through probate, or informal arrangements that many people do not even realize qualify as trusts. This article provides a practical overview of the T3 filing landscape for the 2025 and 2026 tax years, including the significant changes introduced through Bill C-15.
The trust reporting rules have been a moving target since 2023. This article reflects the CRA’s guidance as of March 2026. Because some of the underlying legislation (Bill C-15) has not yet received Royal Assent, certain provisions discussed below are based on proposed legislation that the CRA has confirmed it will administer. If the legislative changes are not enacted, the CRA has stated it will provide further direction.
What Is a T3 Return?
The T3 Trust Income Tax and Information Return is the tax return used to report income earned by a trust in Canada. It is to trusts what the T1 is to individuals and the T2 is to corporations. A trust must file a T3 return to report items such as interest, dividends, capital gains, rental income, and business income earned on assets held within the trust, as well as amounts distributed to beneficiaries.
When income is distributed to beneficiaries, the trust issues T3 slips to each beneficiary, who then reports that income on their personal tax return. It is important to distinguish between the T3 return (the full filing for the trust itself) and the T3 slip (the information slip provided to each beneficiary). These are related but separate documents.
Who Must File a T3 Return?
Historically, only trusts that had taxes payable, distributed income or capital to beneficiaries, or disposed of capital property were required to file a T3 return. The expanded reporting rules, first effective for taxation years ending after December 30, 2023, broadened this obligation substantially.
Under the current rules (as modified by proposed amendments in Bill C-15), a T3 return is generally required for express trusts resident in Canada, subject to certain exemptions. An express trust is one that is intentionally created, typically through a trust deed, a will, or another written instrument, as opposed to a resulting or constructive trust that arises by operation of law.
In practical terms, the following types of trusts commonly encountered by small business owners and professionals typically need to file:
Family trusts used to hold shares of a private corporation, whether for estate freezes, income splitting, or succession planning. Even if the trust earned no income and made no distributions during the year, it is generally required to file.
Testamentary trusts and estates created upon an individual’s death. If you are the executor of an estate that has not been wound up, a T3 return is likely required for each year the estate remains open.
Inter vivos trusts such as alter ego trusts, joint partner trusts, and other living trusts established for estate or tax planning purposes.
Bare Trusts: A Complicated and Evolving Story
The treatment of bare trusts has been one of the most discussed, and most confusing, aspects of the enhanced trust reporting rules. A bare trust exists when a person holds legal title to property but has no significant powers or responsibilities beyond acting as agent for the beneficiary. Common examples include a parent added to the title of a child’s home to help qualify for a mortgage, a nominee corporation holding real estate for a joint venture, or an adult child named on a parent’s bank account.
When the expanded reporting rules first took effect for the 2023 tax year, bare trusts were technically caught by the filing requirement. However, the CRA quickly recognized that this created an unintended compliance burden for many everyday Canadians and provided administrative relief: bare trusts have not been required to file a T3 return for the 2023, 2024, or 2025 tax years, unless the CRA makes a direct request.
What changes for 2026: Based on proposed legislation in Bill C-15 (tabled November 18, 2025), certain bare trusts will be required to file T3 returns for taxation years ending on or after December 31, 2026. The first bare trust T3 returns under these rules would be due by March 31, 2027.
Bill C-15 also proposes several exemptions that would narrow the scope of which bare trusts must file. The proposed exemptions include situations where all beneficiaries are also legal title holders (and vice versa), where related individuals jointly own a principal residence, and where a spouse occupies a home but title is in only one spouse’s name. These exemptions are designed to exclude many common family arrangements from the filing requirement.
However, bare trust arrangements that involve nominee or holding structures for rental or investment property, corporate nominee arrangements within related groups, and administrative bare trust structures where a trustee holds assets for unrelated parties would generally still be required to file under the proposed rules.
Important legislative status note: As of March 2026, Bill C-15 has passed concurrence at report stage in the House of Commons (February 25, 2026) but has not yet received Royal Assent. The CRA has confirmed it will administer the proposed changes in advance of enactment and has updated the 2025 T3 return forms and T4013 Trust Guide to reflect the proposed amendments. If the legislation is not enacted, the CRA has stated it will provide further direction.
Schedule 15: Beneficial Ownership Reporting
One of the most significant additions to the T3 filing process is Schedule 15, titled “Beneficial Ownership Information of a Trust.” This schedule requires trusts to disclose detailed information about their settlors, trustees, beneficiaries, and any person who has the ability to exert control or override trustee decisions regarding the appointment of income or capital (sometimes called a protector).
For each reportable individual or entity, the trust must provide: name, address, date of birth (for individuals), country of residence, and taxpayer identification number (such as a Social Insurance Number, Business Number, or foreign taxpayer identification number). Information that is subject to solicitor-client privilege is excluded.
Under the proposed amendments in Bill C-15, certain trusts may be exempt from filing Schedule 15 even if they are still required to file a T3 return. Key proposed exemptions for Schedule 15 include trusts that have been in existence for less than three months, trusts holding assets with a total fair market value below $50,000 throughout the year (regardless of asset type, an expansion from the current rule), and a new exemption for trusts where all beneficiaries and trustees are related individuals, total assets do not exceed $250,000, and the assets consist solely of certain low-risk holdings such as cash, GICs, or exempt life insurance policies.
For trusts that do not meet any exemption, Schedule 15 must be filed with the T3 return. Failing to provide the required beneficial ownership information can trigger significant penalties.
Filing Deadlines
The T3 return is due 90 days after the trust’s taxation year-end. For most trusts with a December 31 year-end, the filing deadline is March 31 of the following year. For the 2025 tax year (trusts with a December 31, 2025 year-end), the deadline is March 31, 2026.
| Tax Year-End | T3 Filing Deadline |
|---|---|
| December 31, 2025 | March 31, 2026 |
| December 31, 2026 | March 31, 2027 |
| Other year-end (e.g., June 30) | 90 days after year-end |
T3 slips must also be issued to beneficiaries by the same deadline, March 31 for trusts with a December 31 year-end. Trusts must obtain a trust account number from the CRA before they can file electronically.
Penalties for Non-Compliance
The penalty regime for T3 returns has been strengthened alongside the expanded filing requirements. There are two tiers of penalties to be aware of.
Late-filing penalty (no tax owing): $25 per day for each day the return is late, with a minimum of $100 and a maximum of $2,500. This penalty applies even if the trust had no income and owes no tax, which catches many trustees off guard.
Late-filing penalty (tax owing): If the trust has an unpaid balance on the filing deadline, the standard penalty is 5% of the unpaid tax, plus 1% for each full month the return remains outstanding, up to a maximum of 12 months. For repeat late filers (where a demand to file has been issued and a late-filing penalty was assessed in one of the three preceding years), the penalty increases to 10% of unpaid tax plus 2% per month, up to 20 months.
Gross negligence penalty: If a trust that is not a listed trust fails to file knowingly, or under circumstances amounting to gross negligence, an additional penalty may apply. This penalty is equal to the greater of $2,500 and 5% of the highest fair market value of all property held by the trust at any time during the year. For trusts holding significant assets, such as a family trust with corporate shares or real estate, this penalty can be substantial.
Given the severity of these penalties, particularly the gross negligence provision, it is important to determine whether a filing obligation exists and to meet the deadline. In our experience, the most common mistake is simply not knowing that a trust requires a T3 filing. Many clients assume that if the trust did not earn income or make distributions, no return is necessary. Under the current rules, that assumption is often incorrect.
Why T3 Returns Matter for Incorporated Business Owners
If you operate your business through a corporation, you may wonder why trust returns are relevant to you. The answer lies in how trusts interact with common tax and estate planning structures.
Family trusts holding corporate shares. A family trust that holds shares of your professional corporation (or a holding company) is one of the most common structures we see among incorporated professionals in Ontario. These trusts are typically established for estate freeze purposes, to facilitate the multiplication of the lifetime capital gains exemption among family members, or to provide flexibility in distributing dividends. Each year the trust exists, a T3 return (and likely Schedule 15) must be filed, regardless of whether any income was earned or distributed.
Estate administration. If you are the executor of a deceased family member’s estate, the estate is treated as a testamentary trust for tax purposes. A T3 return is required for each year until the estate is wound up and all assets are distributed to beneficiaries.
Nominee arrangements. If your corporation holds real estate in a nominee capacity for another entity (such as a joint venture or a related company), this may create a bare trust that, starting with the 2026 tax year, could trigger a T3 filing obligation under the proposed rules.
In-trust-for (ITF) accounts. If you have set up informal in-trust-for investment accounts for your children, these may be considered bare trusts. Under the current CRA administrative relief, no filing has been required for 2023 through 2025. The 2026 treatment will depend on whether the proposed Bill C-15 exemptions apply to your specific arrangement.
Practical Steps for the 2025 and 2026 Filing Seasons
For 2025 T3 returns (due March 31, 2026): If you are the trustee of a family trust, testamentary trust, or other express trust with a December 31, 2025 year-end, confirm with your accountant whether a T3 return and Schedule 15 are required. The CRA has confirmed that it will administer the proposed Bill C-15 exemptions for 2025 filings. Bare trusts are not required to file for 2025.
For 2026 planning: Begin identifying any bare trust arrangements that may trigger a filing obligation starting with the 2026 tax year. Common situations include nominee arrangements for investment property, corporate nominee structures, and in-trust-for accounts that do not meet the proposed exemptions. If you are unsure whether an arrangement constitutes a bare trust, this is worth reviewing with your accountant before year-end.
Gather Schedule 15 information early. The beneficial ownership information required by Schedule 15, including names, addresses, dates of birth, countries of residence, and taxpayer identification numbers for all settlors, trustees, beneficiaries, and controlling persons, can take time to compile, particularly for trusts with multiple beneficiaries or family members who live in different jurisdictions. Starting this process well before the filing deadline reduces the risk of incomplete or late filings.
Obtain a trust account number. If the trust has not previously filed a T3 return, you will need to apply for a trust account number from the CRA before filing electronically. This can be done through the CRA’s online services (My Account or Represent a Client) or by submitting the T3APP form.
How Cassar CPA Can Help
Trust compliance is an area where the consequences of getting it wrong, particularly the gross negligence penalty, far outweigh the cost of professional assistance. At Cassar CPA, we help clients across the Greater Toronto Area determine their T3 filing obligations, prepare and file T3 returns and Schedule 15, and review their trust structures to ensure ongoing compliance with the evolving rules.
Whether you need to file a T3 return for a family trust holding corporate shares, an estate you are administering, or a bare trust arrangement that may be caught by the new reporting requirements starting in 2026, our team can guide you through the process.