Does a family trust with no income have to file a T3 return?
The filing obligation is settled by the trust's facts, not by whether there is tax to pay, so a quiet year does not switch it off. It is worth being clear about why. A large part of the modern return is disclosure rather than arithmetic: who the beneficiaries are, who settled the trust, who controls it. None of that is affected by the trust having earned nothing. A trustee who files only in the years with income leaves gaps in exactly the record the return exists to build, and those gaps are what get asked about later.
Our trustees live abroad, so is the trust still resident in Canada?
Possibly, and the deed will not decide it. Trust residence follows where central management and control actually sits: who takes the decisions, where they take them, and whether the named trustees are in substance doing the deciding. Where the trust was settled, and which law governs it, are facts about the document rather than about residence. In practice we read the minutes, the correspondence and the investment decisions over several years, because the answer tends to be shown by conduct. If control has moved, the filing obligation can move with it, in either direction.
Who is responsible for filing the T3, the trustee or the beneficiary?
The trustee. The return is a trustee obligation, and it does not transfer to a beneficiary because the beneficiary is the one who ends up taxed. A beneficiary reports what is allocated to them, and they can only do that from what the trustee produces. Where there are several trustees, the practical question is which of them holds the records and instructs the preparer, and that is worth settling in writing before a year end rather than during one. Trustees who are themselves outside Canada still carry the obligation if the trust is inside the Canadian net.
Does a foreign trust with Canadian income have to file a T3?
It can. Two separate routes bring a non-Canadian trust into the return: Canadian income, and deemed Canadian residence. They are tested differently and one can apply without the other, so the first piece of work is usually to find out which of them, if either, is in play. A trustee abroad who assumes the trust is outside Canada because it was settled elsewhere is answering the wrong question. Establish the residence position and the source of the income on the facts, and the filing question answers itself.
What do we need to know about the beneficiaries before we can file?
More than most trustees have to hand. The beneficiary and settlor disclosures are part of the return itself, not background for the file, so they have to be complete and consistent from year to year. That means identifying details for the people involved, and the residence of anyone who might receive a distribution, since a beneficiary outside Canada changes what the trustee has to do at the point of payment. Gathering this while the people are contactable is far easier than reconstructing it years later, which is the usual situation we are handed.
We have never filed for an old family trust, so where do we start?
With residence and the record, in that order. Establish where central management and control has actually sat across the period, because that decides which years are Canadian years at all, and there is no point preparing returns for years that belong somewhere else. Then assemble the deed, the accounts, and whatever exists on the beneficiaries and the settlor. Only after that does anything get prepared. Taking the years in order, from the earliest, keeps the trust's reported position consistent, and the fee is agreed in writing before any of it starts.
Which country do I pay tax to first?
Generally the source country — where the income arises — taxes first, often by withholding before you receive it. Your country of residence then taxes the same income and credits what the source country took. That order is why timing matters: a residence-country return filed before the source-country tax is settled has nothing to credit yet. Getting the sequence right is most of the work. See international tax planning.
Is double taxation legal?
Yes. Nothing prevents two countries from taxing the same income under their own domestic law — each is exercising its own jurisdiction. What treaties and credit systems do is relieve the outcome rather than prohibit the charge, and relief is generally something you must claim on a return or a form, not something applied automatically. Miss the claim and the double charge stands. Double taxation explains the mechanism.
