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Taxation law

Finance Quebec released measures to deal with aggressive tax planning

Aug 2nd, 2019

By Joel Goldman

On May 17, 2019, Finance Quebec released measures to deal with combating aggressive tax planning. These measures deal with sham transactions, the mandatory disclosure of prescribed transactions and the mandatory disclosure of nominee or prête-nom agreements.

Under Quebec Civil law, a prête-nom agreement is a contract of mandate where a person (the agent) acts on behalf of another person (the principal). The agent in its name acts for the principal. This is known as an undisclosed mandate.

Going forward from May 17, 2019, all prête-nom agreements entered into on or after that date must be disclosed to Revenu Québec. This disclosure will be made via a prescribed information return which must be filed with Revenu Québec. As at this time, the prescribed information form has not yet been published. The bulletin indicated that the prescribed information must include the following:

  • The date of entering into of the agreement;
  • The identity of the parties to the agreement;
  • A factual description of the transaction;
  • Any other information which is prescribed.

Any party to the agreement who files the prescribed information form will be deemed to have done it for all other parties to the agreement. The filing of this prescribed information form (or the provision of the information, if there is no prescribed form available) must be done within 90 days of the conclusion (execution) of the nominee agreement. There is no prescribed form yet released by Revenue Quebec. Until such form is available, the disclosure should be made by way of a letter.

In addition, prête-nom agreements entered into before May 17, 2019, and that relate to transactions that continue to have tax consequences on or after May 17, 2019, will also need to be disclosed. This new disclosure applies even if the existence of the prête-nom agreement was previously disclosed to Revenue Quebec on a CO-17, Corporation Income Tax Return.  This disclosure must be made no later than September 16, 2019.  

There are significant penalties for failure to report on a timely basis. Additionally, the normal statute barring period will be suspended for the year in which the prête-nom agreement is executed (on the assumption that the agreement produces tax consequences) and any subsequent year (where tax consequences result from the prête-nom agreement) until the prescribed information is provided.

We recommend that you review your past history of transactions to determine whether or not there is an old nominee agreement in force and if tax consequences still flow from such an agreement.

Please contact any member of our firm for further assistance.