Deadline for disclosure of a nominee agreement

Written by Aubie J. Herscovitch and Lisa-Marie Gauthier

On May 17, 2019, the Quebec Minister of Finances announced the implementation of new rules regarding the disclosure of nominee agreements to Revenu Québec. These new rules, disclosed in Information Bulletin 2019-5, are intended to “protect the integrity and fairness of the Québec tax system”.

On September 24, 2020, Quebec Bill No. 42, An Act to give effect to fiscal measures announced in the Budget Speech delivered on 21 March 2019 and to various other measures, received Royal Assent, giving effect to new disclosure requirements for nominee agreements.

Under these new rules, the parties to a nominee agreement entered into in the context of a transaction with tax consequences under the Quebec Taxation Act must disclose the contract and the transaction to Revenu Quebec by filing a prescribed form.

To this effect, any nominee agreement entered into prior to September 24, 2020 must be disclosed no later than December 23, 2020.

For nominee agreements entered into on or after September 24, 2020, disclosure must be made no later than the 90th day after the agreement is entered into.

Failure to produce the form within the prescribed delay may result in a penalty of $1,000 for the parties to the contract and, starting on the second day following the expiration of the delay, an additional penalty of $100 per day, up to a maximum of $5,000.

Furthermore, if the disclosure is not filed within the required time, the prescription period that would otherwise be applicable will be suspended. In other words, Revenu Québec will be able to redetermine the tax, interest and penalties for a given year despite the expiry of the normal reassessment period with respect to the tax consequences arising from a transaction or series of transactions that occurred during that year and concerns the nominee contract.

Following these legislative changes, if you are a party to a nominee agreement or intend to enter into one, your team at De Grandpré Chait is available to help you meet these new compliance requirements and provide you with the appropriate tax advice.