What Penalties Apply When a Bare Trust Fails to Report in Canada?

You may be a trustee, or the person named on title, and you have realized that a Schedule 15 was not filed. Before worrying about penalties, it helps to know which tax year you are talking about, because the rules for bare trusts have changed recently.

This article explains when the filing duty applies, what the late-filing and gross negligence penalties are, and practical ways to limit your exposure. It is general information, not advice on your situation.

This article covers Canadian federal tax law, which applies in every province.

First, check whether a filing was actually required

A bare trust is an arrangement where the trustee acts only as an agent for the beneficiaries and holds legal title. Such an arrangement is generally not treated as a trust for the Income Tax Act, with some exceptions.

For taxation years ending in 2025, the CRA does not expect bare trusts to file a T3 return, including Schedule 15. The CRA's guide and FAQ also say bare trusts are not subject to the trust reporting rules for taxation years ending on or after December 31, 2024 and before December 31, 2026.

Reportable bare trusts are subject to the trust reporting rules for taxation years ending on or after December 31, 2026, so the first returns are for the 2026 year and are due 90 days after year-end. If your missed filing relates to an earlier year, there may be no filing to be late on, though it is worth confirming your facts.

Who is a reportable bare trust

The CRA describes a reportable bare trust as an express trust where the legal owner can reasonably be considered to act as agent for the beneficiaries, including an arrangement that would not otherwise be a trust under the Act. The Act deems the legal owner to be a trustee and the users or beneficiaries to be beneficiaries for this purpose.

Several arrangements are carved out of that rule:

• Every beneficiary is also a legal owner and no legal owner is a non-beneficiary, such as a joint bank account held by family members for each of their use and benefit.
• Related individuals holding real property that would be the principal residence of one or more of them, which the CRA says covers a parent on title so a child can get a mortgage.
• An individual holding real property for a spouse or common-law partner where it would be the owner's principal residence.
• Certain partnership, court-ordered, resource property, government fund and regulated dealer or trust company arrangements.

Whether a bare trust exists is a question of fact, and the CRA suggests consulting a legal advisor if you are unsure.

Late-filing penalties

The T3 return is due no later than 90 days after the trust's year-end. If the T3 or the Schedule 15 information is not filed by then, the general penalty is 5% of the unpaid tax when the return was due, plus 1% of that tax for each full month late, to a maximum of 12 months.

A repeat-offender rule is harsher. If the CRA issued a demand to file and already assessed a late-filing penalty for any of the three preceding years, the penalty may be 10% of the unpaid tax plus 2% for each full month late, to a maximum of 20 months.

A bare trust usually has no tax payable, so the alternative penalty is the likely one: $25 a day, with a minimum of $100 and a maximum of $2,500.

Gross negligence and other penalties

For a non-listed trust, a person who knowingly, or with gross negligence, makes a false statement or omission, or fails to file, faces a penalty of the greater of $2,500 and 5% of the highest fair market value of the trust property. Whether this penalty applies to you depends on your situation, so it is worth confirming with a lawyer before you decide how to proceed.

A reportable entity who fails to give their tax identification number, such as a SIN, to the trustee may be liable to a $100 penalty for each failure. The CRA also says missing specified Schedule 15 information, such as tax identification numbers, leaves the schedule incomplete, so the trust has not met its filing obligations.

A reportable bare trust that is also a listed trust is not required to file unless the CRA requests it.

How to reduce your exposure and what to do next

Penalties generally grow with time, so acting promptly matters. Schedule 15 asks for the name, address, country of residence and tax identification number of all trustees, settlors, beneficiaries and controlling persons, plus the date of birth of each one who is an individual. Gathering that information early is often the slowest step.

• Confirm the taxation year and whether a filing was required for it.
• Confirm whether your arrangement is a bare trust or falls within an exception.
• Collect the Schedule 15 details, including tax identification numbers.
• Report income, gains and losses from the property on the beneficial owner's return, not on the trust's T3.
• Ask a lawyer or accountant whether any relief from a penalty may be available.

Information protected by solicitor-client privilege does not have to be disclosed under these reporting provisions. If you have already received a notice from the CRA, keep it and get advice before responding.

Frequently asked questions