Today’s Blog was written by Rahul Sharma, Partner, Fasken LLP, Toronto
About three years ago, at this time of year, I wrote about T1141s and T1142s: Don’t Forget the T1141s and T1142s! – All About Estates. These forms have been updated for the 2025 and future taxation years. Details of the new forms and requirements are provided on the government of Canada’s website: About Form T1141 – Canada.ca and About Form T1142 – Canada.ca.
In brief, for new form T1141:
- If more than one person is required to file the form in respect of the same non-resident trust, a joint election can be made for the form to be filed by one person in a single filing;
- Information and supporting documentation is required as regards certain sections of the form. This includes details of settlors, trustees and beneficiaries, including the need to answer questions regarding the availability of supporting documentation; and
- Such supporting documentation is to be provided if available, with boxes in section F of the T1141 Supplement to be checked in respect of the specific kinds of supporting documents that are appended. Section E provides a “Due diligence exception” for information that is requested but not available. A box can be filled in to explain why requested information has not been provided and the steps taken to attempt to obtain the information.
Similarly, for new form T1142:
- Additional information is required about a non-resident trust and its settlors;
- Additional details must be disclosed regarding the non-resident trust’s administration; and
- As with new Form T1141 requirements, supporting documentation is requested and to be attached if available.
The foregoing constitute considerable changes to the forms in terms of the information and, most notably, supporting documentation that are requested to be provided. A notable question from tax preparers is what “supporting documentation” means and what really needs to be given. The answer will invariably depend on the circumstances, but could include a letter from the trustees explaining, for example, the settlor, trustees and beneficiaries of the trust, as well as distributions made to beneficiaries and the categorisation of such distributions as between income and capital, as well as other documentation pertaining to the trust or that is responsive to the questions posed in the new forms.
The trustees of foreign trusts may need to better understand that Canadian resident beneficiaries now face additional questioning, as well as the need to provide, as best as possible, supporting documentation in respect of a foreign trust and the distribution that they are receiving. Foreign trustees will need to carefully balance these new requirements against the their duties, as well as the actual rights that beneficiaries may have to certain documentation pertaining to non-resident trusts and trustee decision making. It must be stressed that a beneficiary may not have a right to certain documentation pertaining to a foreign trust.
Time will tell how the Canada Revenue Agency deals with the responses that it receives to the questions raised in new Forms T1141 and T1142, as well as the supporting documentation (or lack thereof) provided by Canadian resident beneficiaries or contributors. The Agency has, of recent, shown a keen interest in foreign trusts and Canadian taxpayers with foreign interests and investments. All that said, taxpayers who need to file forms T1141 and/or T1142 for a particular taxation year should engage competent accountants or tax preparers and ensure that their obligations are, to the greatest extent possible, properly met. In the event of an audit or inquiry from the Canada Revenue Agency relating to a foreign trust and/or form T1141 or T1142 filings, Canadian resident taxpayers should immediately seek proper advice, including the engagement of counsel who is well versed in the area.
