DFK Tax Newsletter

Issue 3 - 2025 Edition - August 15, 2025 - Beth Porter, FCPA, CA, CFP – Noseworthy Chapman

Bare Trust Tax Reporting – Get Ready for 2025 Filing Season

This is an update to information previously published in DFK Tax Digest articles from August 2024 and December 2023.

A Brief History 

A bare trust is a simple legal arrangement in which a trustee holds property on behalf of a beneficiary but has no discretion over the assets. The trustee simply follows the instructions of the beneficiary, who is considered the true owner for tax purposes.  Previously, bare trusts were generally not required to file tax returns, however the concept was first introduced in Budget 2018.  

In February 2022, legislative proposals were announced that that would require bare trusts to file tax returns commencing with years ended December 31, 2023, with a filing deadline of March 31, 2024.  This requirement caused a flurry of discussion for taxpayers and advisors as common “in trust for” situations would then be included, such as the following:

  • Parents listed on the property title of an adult child’s home
  • Real estate held by a nominee for a corporation
  • Family members holding investments or assets on behalf of another

Under the initial proposals, these situations would require the filing of a trust income tax return. Also complicating these filings, was the new requirement for Schedule 15-Beneficial Ownership Information of a Trust to be filed along with certain trust tax returns, which required detailed information on all parties involved in the trust arrangement.

In mid-March 2024, three weeks prior to the filing deadline, it was announced that penalties for non-filing of most bare trust returns would be waived unless the CRA issued a request to file. In August 2024, clarifications to the legislation were announced which exempted many of the common “in trust for” arrangements.

What bare trusts are exempt?

Certain bare trusts are exempt from the new reporting rules, such as:

  • Trusts that exist for less than three months
  • Trusts that hold assets worth less than $50,000 throughout the year (cash and publicly traded shares only)
  • Certain regulated financial institutions or lawyer-client trusts

What’s new since August 2024?

On October 29, 2024, the CRA announced that bare trusts would not be required to file a T3 Income Tax and Information Return including Schedule 15 for the 2024 taxation year unless requested by the CRA.

On March 14, 2025, the CRA updated its Frequently Asked Questions area on its website to provide additional information and guidance on trust reporting requirements, including bare trusts.

While this new information did not change the reporting rules themselves, it clarified when bare trusts are not required to file a T3 return and Schedule 15, under the administrative relief for the 2023 and 2024 tax years and provided more descriptive guidance around the conditions under which the relief applies and how to comply.

Some of the updates to the FAQ include the following information:

  • Clarification to help identify bare trusts.
  • Reminder that CRA is not able to provide legal advice on the existence of a trust arrangement.
  • Guidance on how to complete Part B of Schedule 15 including situations where the identity of beneficiaries or other reportable entities is not known or ascertainable with reasonable effort.
  • Section 3 of the FAQ now includes guidance for those that voluntarily filed returns for bare trusts in 2023 or 2024.  The CRA will process these returns as normal, and it also outlined steps to be taken to close a trust account number, if necessary, which include either filing a trust return to report the date of windup, or sending a letter to report the windup. 

The updated FAQ also provides clarity regarding wording in paragraph 150(1.2) (a) “had been in existence for less than three months at the end of the year” and whether this only related to trusts that were created within three months of December 31st.  The CRA has stated that this would include:

  • 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. 

It would seem that after many false starts over the last several years, the requirement for certain bare trusts to file income tax returns and related schedules is finally becoming a reality commencing with the 2025 reporting year.  Given this will add volume to an already busy March 31st filing deadline, clients and advisors should be aware of their requirements to file and get an early start on gathering any required information in the last half of 2025 to help streamline an already hectic tax filing season.