Mandatory disclosure for nominee agreements enters into force in Québec

The Bill provides that taxpayers party to a nominee agreement with tax consequences under the provinces Taxation Act must disclose certain information to the tax authority, Revenu Québec (the Revenue). It also includes members of a nominee agreement in the case of a partnership.

According to the Revenue, “tax consequences” is interpreted as income tax consequences where the tax jurisdiction is Québec. The disclosure rules will apply to many common nominee agreement arrangements including: the majority of commercial transactions; real estate transactions in the province; and nominee agreements in respect of property located outside Québec if one of the parties is subject to Québec income tax.

Under the Bill, disclosure to the Revenue applies to new nominee agreements entered into on or after May 17, 2019, with a deadline of either 90 days after the execution of the agreement or December 23, 2020 (whichever is later).

Nominee agreements entered into prior to this date, but for which there are ongoing “tax consequences of the transaction or a series of transactions to which the nominee agreement relates” on or after May 17, must be disclosed to the Revenue no later than December 23, 2020.

Information to be disclosed to the Revenue includes: the date the nominee contract was entered into; the identity of the parties to the nominee contract; a description of the facts of the transaction with enough detail to allow analysis of the tax consequences; the identity of any other person or entity for which the transaction has tax consequences; and a copy of the nominee agreement.

Failure to comply with the obligation to disclose this information could result in penalties from CAD1,000 to CAD5,000.

Sources

• Davies Ward Phillips & Vineberg
• Stikeman Elliott