Personal tax reminders and Changes to Corporation and Trust filings
Personal Income Tax Instalment
If you are required to make personal income tax instalments, the final payment for 2021 is due no later than December 15, 2021.
Ontario Corporations Information Act Annual Return
The Ontario Corporations Information Act requires all Ontario corporations and certain entities doing business in Ontario to submit an annual return within six months of their fiscal year-end. The purpose of this annual return is to confirm details such as the directors, officers, and registered office of the corporation. Previously, this annual return was submitted to Canada Revenue Agency as part of the T2 corporation income tax filing. SRC LLP completed the required forms on your behalf and submitted them with your annual tax return.
As of May 15, 2021, the annual return is no longer submitted to Canada Revenue Agency. Effective October 19, 2021, the Government of Ontario launched the new Ontario Business Registry. All annual returns due on or after this date must now be submitted through the Registry.
SRC LLP can no longer submit these annual returns on your behalf. This annual filing should be submitted by you by creating an online profile on the Registry, contacting your corporate lawyer to submit on your behalf or using one of the authorized service providers listed on their website. If you are accessing your profile for the first time, you will need its company key. To request a company key, complete and submit the Company Key Request Form. You can access the Ontario Business Registry website using this link https://www.ontario.ca/page/ontario-business-registry-all-services .
Changes to Trust Tax Return Filing and Reporting Requirements
Significant changes have been announced to the filing and reporting requirements for trust tax returns for years ending on or after December 31, 2021. As a result of these changes, many trusts which did not previously have an annual filing obligation must now submit a T3 Trust Income Tax and Information Return within 90 days of year-end.
Previously, most trusts which did not have activity during the year, did not distribute property to its beneficiaries, and did not have any income taxes payable were not required to file a Trust return. Beginning December 31, 2021, “express trusts” resident in Canada will be required to file an annual return. An express trust is generally created with the express intent of the settlor, either during their lifetime or through their will. Certain trusts, such as trusts holding title to a vacation property or private company shares, may not have filed a tax return in the past but will be required to on a go-forward basis.
As part of the Trust return, trusts will be required to report the name, address, date of birth, jurisdiction of residence and taxpayer identification number (social insurance number, business number, trust account number, or foreign tax identification number) for each settlor, trustee, beneficiary, or other person who can exert influence over trustee decisions regarding appointment of income or capital of the trust. The additional reporting requirements are intended to assist Canada Revenue Agency in assessing the filing requirements and income tax liability of the trust and its beneficiaries.
Certain trusts will continue to be exempt from the filing requirements, such as graduated rate estates, lawyers’ trust accounts, qualified disability trusts, trusts that have been in existence for less than three months, trusts that hold certain assets (such as cash, government debt obligations, and listed securities) with a fair market value less than $50,000 during the year, trusts that qualify as non-profit organizations or registered charities, and others.
Failure to file a complete trust return by the due date, including the additional reporting requirements, could result in penalties for non-compliance. The late-filing penalty for T3 returns is $25 per day, subject to a $100 minimum and $2,500 maximum. Gross negligence penalties could apply if you knowingly make a false statement or omission or fail to comply with a demand to file request. These penalties could be assessed at 5% of the highest fair market value of the trust’s property during the year, subject to a $2,500 minimum.
Due to these new rules, trustees must assess if each trust now has a filing requirement and must assemble the additional information to comply with the new reporting requirements. It may take additional time to gather this information so you should begin the process as soon as possible.
Do not hesitate to contact us if you have any questions regarding how any of the above impacts you. We would be happy to help you navigate these recent changes and assist you in determining your obligations.