What Is T3 Trust & Estate Tax Filing?

The T3 Trust Income Tax and Information Return (T3RET) is the annual tax return used to report income earned by a trust or estate in Canada. It includes reporting of income, capital gains, allocations to beneficiaries, and required disclosures. T3 filings are regulated by the Canada Revenue Agency and must be completed accurately to remain compliant with Canadian tax law. 

Recent changes to Canadian tax rules have expanded reporting requirements for certain trusts, making proper T3 filing more important than ever. 

Who Needs to File a T3 Return in Canada?

In Canada, most express trusts resident in Canada must file an annual T3 Trust Income Tax and Information Return, even if the trust earned no income during the year, as required by the Canada Revenue Agency. 

A T3 Return is generally required if the trust:

• Is a resident express trust, such as a family trust or estate planning trust

• Is a deemed resident trust for Canadian tax purposes

• Has total income from all sources exceeding $500

• Allocates more than $100 of income to any single beneficiary

• Makes a distribution of capital to one or more beneficiaries

• Disposes of capital property or realizes a taxable capital gain

• Is requested by the Canada Revenue Agency to file a return

Bare Trust Exemption (2025 Tax Year)

For the 2025 tax year (filed in 2026), bare trusts are exempt from filing a T3 Return and Schedule 15 under CRA administrative relief. Most trusts with a December 31 year-end must file their T3 Return by March 31, 2026. Failure to file when required may result in penalties and interest.

What Is Reported on a T3 Return?

A T3 Trust Income Tax and Information Return reports both a trust’s financial activity and its ownership and beneficiary information. For the 2025 tax year (filed in 2026), trusts that are required to file must report the following key information in accordance with rules set by the Canada Revenue Agency.

Trust Income and Capital Gains

Trustees must report all income earned by the trust from Canadian and foreign sources. This commonly includes:

• Investment income, such as interest and dividends

• Capital gains or losses from the sale of property, shares, or other assets

• Business and rental income earned by the trust

• Estate-related income, including pension income, employer death benefits, or CPP/QPP death benefits received after death
  
  

Beneficial Ownership Information (Schedule 15)

Effective for 2023 and subsequent tax years, most trusts are required to file Schedule 15 to disclose information about the trust’s reportable entities, even if there have been no changes from the previous year. 

Reportable entities include:

• Settlors – individuals or entities that established the trust or contributed property

• Trustees – persons responsible for managing the trust

• Beneficiaries – all current and contingent beneficiaries

• Controlling persons – individuals who can influence trustee decisions, such as a trust protector

For each reportable entity, the trust must provide details such as name, address, date of birth (for individuals), country of tax residence, and a tax identification number (SIN, Business Number, or Trust Account Number)

Deductions & Allocations (T3)

The T3 Return also details how trust income is handled for tax purposes, including distributions, deductions, and expenses.

• Distributions
  Income or capital gains allocated to beneficiaries are reported through T3 slips, allowing beneficiaries to report the amounts on their own tax returns.

• Deductions
  In many cases, the trust can deduct income that is paid or payable to beneficiaries, resulting in the income being taxed in the hands of the beneficiary rather than the trust.

• Trust Expenses
  Deductible expenses may include carrying charges, management fees, and legal or professional fees incurred to earn trust income.

T3 Filing Deadlines

• For most trusts, the tax year-end is December 31, making the T3 filing deadline March 31 (or the next business day if it falls on a weekend or public holiday).

• A Graduated Rate Estate (GRE)—an estate within 36 months of an individual’s death—may have a non-calendar year-end. In such cases, the final T3 Return is due 90 days after the final distribution date.

Late or missing T3 filings can result in significant penalties, especially under the new enhanced reporting rules.

Common Penalties for Non-Compliance 

Failure to file a required T3 Return or Schedule 15 can result in significant penalties, including late-filing penalties and additional fines for incomplete or missing beneficial ownership disclosures. Penalties may apply even if the trust has no income or tax payable, as enforced by the Canada Revenue Agency.

Why Professional T3 Filing Matters 

Trust tax filings involve complex reporting and enhanced disclosure rules. Professional T3 preparation helps ensure accurate income reporting, proper beneficiary allocations, compliance with Schedule 15 requirements, and timely filing. This reduces the risk of penalties, reassessments, and audits, while ensuring the trust’s tax obligations are handled correctly.

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