New Bare Trust Filing Rules: What You Need To Know

A trust must file an income tax return within 90 days of the end of its tax year, separate from any personal tax filings. Historically, only certain types of formal trust arrangements triggered this filing requirement.

Earlier this year, the federal government passed Bill C-15 into law, clarifying which types of trusts are required to file a return. Starting with the tax year ending December 31, 2026, certain bare trusts that were not previously required to file under the old rules and CRA administrative positions will now need to file a trust income tax return before the end of March 2027.

What Is a Bare Trust?

What constitutes a trust isn’t always black and white, and it depends on the relevant facts and circumstances. The CRA’s position is that a bare trust is generally a relationship where one person holds legal title to a property while another person holds beneficial ownership of it. In the CRA’s view, beneficial ownership can mean holding any combination of the risks and rewards of ownership, along with control over the property.

Some examples of this separation between legal title and beneficial ownership include a parent co-signing on their child’s mortgage and being added to the title of the child’s home, or a corporation holding title to a residence that is beneficially owned by its shareholder.

The bare trust rules were originally introduced to improve transparency and support investigations into aggressive tax avoidance, tax evasion, and money laundering. In practice, however, the original proposed rules created a filing requirement for many ordinary, everyday transactions. Bill C-15 expanded the exceptions to exclude some of these common arrangements.

Exceptions to the Filing Requirement

Bare trusts that meet any one of the following exceptions should not be required to file a tax return:

• The total value of the trust’s assets did not exceed $50,000 at any point during the year.
• The total value of the trust’s assets did not exceed $250,000 at any point during the year, the trust’s assets consist only of qualifying assets (generally cash and marketable securities), and the parties involved are related individuals. Related individuals, for tax purposes, are typically blood relatives. This exception can apply, for example, when a parent adds their child to an investment account to simplify the administration of the parent’s estate.
• The trust existed for less than three months during the year.
• The trust’s property consists solely of real property that could be designated as one of the legal owners’ principal residence, and the legal owners are related individuals. This generally covers the scenario above, where a parent co-signs their child’s mortgage.

There are a few additional exceptions, but these are the ones we see come up most often.

How Do You File a Tax Return for a Bare Trust?

Although the form a bare trust must file is called a tax return, filing it should not result in any additional income tax payable. The beneficial owner of the property is still responsible for reporting any income, loss, or capital gain related to the property on their own personal tax return.

Penalties for Not Filing

Failing to file a bare trust return that includes a complete Schedule 15 can result in a penalty of $25 per day, up to a maximum of $2,500 per year. This penalty applies even if there is no tax payable.

Our comments are based on current tax law, including judicial and administrative interpretation. Tax law is subject to change, at times on a retroactive basis, which may result in changes to, or increases in, taxes, interest, or penalties. This post does not constitute professional advice and should not be taken as a substitute for professional advice.