One of the many tasks associated with the administration of trusts is making sure all tax payments are made on a timely basis to protect the trust and its beneficiaries from avoid interest and penalties. In this regard, most trusts are required to make installment payments.

Prior to 2016 only inter vivos trusts (other than grandfathered inter vivos trusts) were legislatively required to make instalment payments under the relevant sections of the Income Tax Act. For the 2016 and subsequent taxation years, all inter- vivos trusts and testamentary trusts (other than a graduated rate estate trusts) are required to make instalment payments.

Recently, the Canada Revenue Agency (“CRA”) was asked whether it will continue with its practice of not assessing interest and penalties where a trust does not make instalment payments as required under the relevant sections of the Income Tax Act.

In response, the CRA will continue to not assess interest and penalties where a trust does not make sufficient instalment payments consistent with the current administrative practice.

However, the CRA stated that all administrative practices related to the new trust rules announced in Budget 2014 would be reviewed and that any changes to these practices would be introduced in conjunction with these new rules. If there is any change to their administrative practices in the future, the CRA indicated that sufficient information will be made available to trustees and estate administrators to assist in meeting the instalment filing requirements.

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