The Canadian Revenue Agency (“CRA”) announced on Friday, November 10, 2023 that the new trust reporting requirements set to start after January 1, 2024, will not apply to internal trusts held by charities.
The CRA will not require registered charities to file the T3, Trust Income Tax and Information Return, for internal trusts. Internal trusts are created when a charity:
- receives property as a gift that is subject to certain legally enforceable terms and conditions; and,
- holds that property as the trustee of the trust.
This news comes as a great relief for many registered charities that were dreading new trust reporting rules applying to trusts with a taxation year ending after December 31, 2023. There are significant financial penalties for not complying with the new rules that apply to other trusts, not registered charities.
Some charities hold a few designated funds that could be considered trusts; while others, including major universities, hold hundreds, even thousands of such funds. Canadian charities were concerned that the potential need to file a T3 return for each such fund would increase their administrative burden and costs. For charities run by volunteers, this added burden would have been problematic.
Note that charities will continue to be required to file a T310 Registered Charity Information Return. CRA has advised that a new version of form T3010 (version 24) will be released sometime in January 2024. Therefore, it is imperative that charities with fiscal periods ending on or after December 31, 2023 do not use old versions but use the new version of Form T3010. It is possible that there will be additional disclosure obligations in the new T3010 form.
The T3010, Registered Charity Information Return, is the only way that the CRA receives information from registered charities on their finances and activities. The T3010 annual return contains information about all the property a charity holds, including internal trusts. These returns contain important public information and help the CRA to ensure compliance.
For more information about the Form T3010 filing requirements, visit the CRA website directly: T3010 charity return – Before you file – Canada.ca
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