Transferring legal title of your Ontario real estate to a bare trust corporation can offer privacy and estate planning benefits. However, following the enactment of Bill C-15 in March 2026, many standard bare trusts are now permanently exempt from annual T3 reporting. Non-exempt trusts must still comply with strict rules to avoid massive Land Transfer Tax bills and severe CRA penalties.
Many property investors in Ontario use a specific legal structure known as a bare trust corporation to hold their real estate. 🏘 In this setup, a nominee corporation holds the legal title “on paper,” while you retain the true beneficial ownership. This strategy is highly popular in cities like Toronto, Mississauga, and Ottawa for keeping the true owner’s name off the public land registry and simplifying the probate process.
However, what used to be a simple and highly private strategy has recently become a major target for the Canada Revenue Agency (CRA). Following years of policy changes and administrative relief, the enactment of Bill C-15 on March 26, 2026, permanently narrowed federal trust reporting rules. While some complex bare trusts must still report, many standard bare trusts are now completely exempt from annual CRA filings, meaning you can utilize these planning tools with far fewer compliance headaches if structured correctly.
If you are planning to transfer an investment property or family cottage into a corporation, you must proceed with extreme caution. 📋 Below is a detailed, step-by-step guide explaining the tax risks and procedural requirements for using a bare trust in Ontario. Most applicants in this province choose to hire an experienced real estate and estate planning law firm from our directory to set this up safely.
Step-by-Step Process for Setting Up a Bare Trust in Ontario
Properly separating legal title from beneficial ownership requires precise legal drafting. If the documentation is vague, the government may assume you actually sold the property to the corporation, triggering huge taxes.
Step 1: Drafting the Bare Trust Agreement
The foundation of this strategy is a rock-solid Bare Trust Agreement (also called a Declaration of Trust). This legal document explicitly states that the corporation has no real power, earns no income, and simply holds the property “in trust” for you. Without this document, the CRA will treat the corporation as the true owner, which could trigger a massive capital gains tax event upon transfer.
Step 2: Navigating the Land Transfer Tax (LTT) Exemption
Ontario charges a hefty Land Transfer Tax (LTT) whenever real estate changes hands. 💰 If you transfer legal title to a bare trust corporation, you can generally claim an exemption from LTT because the beneficial ownership has not changed. However, if your property is in Toronto, you must also satisfy the municipal Toronto Land Transfer Tax rules. A lawyer must submit a special affidavit to the Ministry of Finance to prove no money changed hands.
Step 3: Registering a Trust Account with the CRA (If Not Exempt)
Under the updated tax rules, only those bare trusts that are not permanently exempt must register for a Trust Account Number (TAN) with the CRA. Following years of administrative relief (covering the 2023, 2024, and 2025 tax years), only certain bare trusts must report for the 2026 tax year and onwards. If your trust requires filing, your accountant or law firm will handle this registration process online.
Step 4: Filing the Annual T3 Return (If Required)
This is where the biggest recent changes lie. 📝 Bill C-15 permanently exempted a large number of standard bare trusts from filing an annual T3 Return and Schedule 15. For taxation years ending on or after December 31, 2026, exemptions apply to trusts with assets under $50,000 CAD, or related-family trusts with assets under $250,000 CAD holding specific low-risk investments. However, if your bare trust does not qualify for these exemptions, failing to file can still result in devastating penalties, sometimes calculated as a percentage of the property’s total value.
Step 5: Managing the Property Income Properly
Because it is a bare trust, the corporation itself should not have a bank account or report rental income. All rent cheques from your tenants in London or Hamilton must go directly to you (the beneficial owner), and you report the income on your personal T1 tax return. If the corporation starts paying expenses or collecting rent, the CRA may revoke the bare trust status entirely.
How Much Does it Cost in Ontario?
Setting up and maintaining a bare trust involves both upfront legal fees and ongoing accounting costs. 💵 Do not attempt to use a cheap DIY template for this.
- Corporate Incorporation: Setting up the Ontario numbered company to act as the trustee usually costs between $1,000 CAD and $1,500 CAD.
- Bare Trust Agreement: A law firm will typically charge $1,500 CAD to $3,000 CAD to draft a custom Declaration of Trust and register the title transfer.
- Annual CRA Filing (T3): If your bare trust is not exempt, expect to pay your accountant between $500 CAD and $1,200 CAD annually to prepare and file the T3 return.
- Late Filing Penalties: For non-exempt trusts, the CRA penalty for late filing can be $25 CAD per day, up to a maximum of $2,500 CAD, or 5% of the property’s highest value for gross negligence.
How Long Does the Process Take?
While the initial setup is fast, the compliance obligations last for as long as you own the property. ⏱️
| Phase of Process | Estimated Timeline in Ontario |
|---|---|
| Drafting and Title Transfer | 2 to 4 weeks |
| CRA Trust Registration (If Not Exempt) | 1 to 3 weeks |
| T3 Annual Filing Deadline (If Not Exempt) | Usually 90 days after year-end (March 30/31) |
Frequently Asked Questions (FAQ)
Does a bare trust corporation pay capital gains tax?
No. Because you are the beneficial owner, any capital gains tax triggered when the property is eventually sold will be reported on your personal tax return, not the corporation’s return.
Can I use a bare trust for my primary residence?
Yes, it is possible, but extreme care must be taken. If structured incorrectly, you could accidentally lose your Principal Residence Exemption (PRE), costing you hundreds of thousands in taxes.
Do I have to pay Land Transfer Tax to move my property into a bare trust?
Generally, no. As long as the true beneficial ownership remains exactly the same, Ontario provides an exemption for Land Transfer Tax. However, a lawyer must file the correct exemption affidavits during the transfer.
What happens if I miss the T3 filing deadline?
For non-exempt bare trusts, the CRA imposes strict financial penalties for late T3 filings. If you fail to file due to gross negligence, they can charge a penalty equal to 5% of the highest value of the property held in the trust. However, many standard bare trusts are now permanently exempt from filing under Bill C-15.
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