Principal Changes for 2022 in the Trust Income Tax Return
A trust has to enter the identification number from a notice of assessment we issue in its Trust Income Tax Return (TP-646-V).
If the trust does not have an identification number, it must get one before filing its income tax return. It can apply for a number using:
- the online service in My Account for individuals, My Account for businesses or My Account for Professional Representatives;
- form LM-58.1.2-V, Application for a Trust Identification Number.
As of 2018, a trust must also:
- enter the trust account number appearing on federal form T3RET, Trust Income Tax and Information Return, in its income tax return or information return;
- provide the trust account number to any person (including any related person) or partnership (including a tax shelter) that is required to file an information return in which this number must be entered.
As of March 26, 2021, the trust identification number and account number must be included in all returns, reports or other documents the trust is required to file under tax legislation.
Failure to provide this information may result in a penalty.
The dividend tax credit rate applicable to the grossed-up amount of ordinary dividends for dividends received or deemed received after December 31, 2021, is decreasing from 4.01% to 3.42%.
If the trust receiving eligible or ordinary dividends is a testamentary trust whose taxation year began in 2021, use the dividend tax credit rates that apply to eligible and ordinary dividends for 2021.
The gross-up rates for dividends have not been changed.
For more information, see the instructions for lines 326 and 328 of Schedule B in section 5.2 of the Guide to Filing the Trust Income Tax Return (TP-646.G-V).
A health and welfare trust is a trust established by an employer for the purpose of providing health and welfare benefits to its employees. As the tax treatment of such a trust is not explicitly set out in the federal Income Tax Act, we have adopted the administrative policy of the Canada Revenue Agency for this type of trust to the end of 2021.
As of 2022, health and welfare trusts that were established before February 28, 2018, and were not converted into employee life and health trusts or wound up are subject to the normal income tax rules for trusts.
Transitional rules are in place for winding-up and conversion to employee life and health trusts.
For more information, see Health and Welfare Trust.
Transactions such as confidential transactions, transactions involving conditional remuneration or contractual coverage and specified transactions must be disclosed, subject to certain conditions.
As of December 18, 2021, any transaction that is intended to obtain a refundable tax credit is an excluded transaction for the purposes of the definition of “transaction involving conditional remuneration.” As a result, this type of transaction no longer needs to be disclosed in form TP-1079.DI-V, Mandatory Disclosure of a Confidential Transaction or a Transaction Involving Conditional Remuneration or Contractual Coverage.
The change applies to any application for a refundable tax credit made using the form containing prescribed information with a filing deadline after December 17, 2021.
For taxation years ending after December 30, 2023, a trust that is resident in Canada (other than a trust created by law or by a judgment) must provide additional information about each person who, over the course of the year, is:
- a trustee;
- a beneficiary;
- a settlor;
- a person who can exert control over the decisions made by the trustee with respect to the allocation of income or capital from the trust under the terms of the trust deed or a related agreement.
Due to this new requirement, certain trusts that were previously not required to file a tax return will now be required to file one.
However, the following trust types are exempt from the requirement to provide such information:
- trusts that have existed for less than three months;
- trusts that hold property with a fair market value (FMV) of less than $50,000 throughout the taxation year, if the only assets they hold over the year are one or more of the following:
- certain government debt securities,
- a share, debt or right listed on a designated stock exchange,
- a share of the capital stock of a mutual fund corporation,
- a share of a mutual fund trust,
- an interest in a related segregated fund trust,
- an interest as a beneficiary under a trust whose units are all listed on a designated stock exchange;
- trusts that are required under rules of professional conduct or the laws of Canada or a province to hold funds for the purpose of any activity that is regulated under those rules or laws, provided the trusts are not administered as separate trusts for a particular client or particular clients (an exception is made for general trust accounts held by an attorney, but not for specific client accounts);
- trusts that are registered charities;
- trusts that qualify as non-profit organizations;
- mutual fund trusts;
- segregated fund trusts;
- trusts whose units are all listed on a designated stock exchange;
- master trusts;
- graduated rate estates (GREs);
- qualified disability trusts (QDTs);
- employee life and health trusts;
- certain government funded trusts;
- trusts established under the following plans:
- deferred profit-sharing plan (DPSP),
- pooled registered pension plan (PRPP),
- registered disability savings plan (RDSP),
- registered education savings plan (RESP),
- registered pension plan (RPP),
- registered retirement income fund (RRIF),
- registered retirement savings plan (RRSP),
- tax-free savings account (TFSA),
- employee profit-sharing plan (EPSP),
- registered supplementary unemployment benefit plan (RSUBP),
- tax-free first home savings account (FHSA),
- cemetery care trusts and trusts governed by an eligible funeral arrangement.
If a trust fails to file the income tax return with the required additional information by the deadline, it is liable to a penalty of $1,000 and, starting on the second day, an additional penalty of $100 per day until the return with the additional information is filed, to a maximum of $5,000.