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Québec announces new anti-avoidance measures

Tuesday, 9 July, 2019

The Ministry of Finance of Québec (Ministère des Finances du Québec) has announced new anti-avoidance tax measures via Information Bulletin 2019-5, cracking down on sham transactions and nominee agreements.

The Bulletin details the measures that will be taken to counter sham transactions. The Revenue Agency of Québec (Agence du Revenu du Québec) will now have between six and seven years to issue reassessments for transactions involving a sham, while there be more severe penalties for taxpayers and advisors: for the taxpayer, whichever is greater out of CAD25,000 or 50 percent of the tax benefit generated by the sham transaction, and for the advisor, 100 percent of the fees paid for the transaction.

Further, taxpayers and advisors who are the subject of final assessments in a sham transaction will be registered in the Register of Enterprises Ineligible for Public Contracts.

The Bulletin also states that nominee agreements will now be subject to mandatory disclosure: any such agreements must be reported to the revenue agency within 90 days of conclusion, applicable to all nominee agreements entered on or after May 17, 2019. For agreements entered into prior to this date that have ongoing tax consequences, the deadline for disclosure is September 16, 2019.

The form for disclosure must include the following information:

  • the date of the nominee's contract;
  • the identity of the parties to the nominee agreement;
  • a complete description of the facts relating to the transactions for which the nominee agreement has been made; and
  • the identity of any person or entity in respect of whom the transactions entail tax consequences.

The penalty for failing to disclose this information to the revenue agency will be between CAD1,000 and CAD5,000, with an additional daily penalty of CAD100 for each day that the non-disclosure continues.

In terms of transactions deemed “aggressive” in their approach, Information Bulletin 2019-5 has confirmed that tax legislation will be updated to extend the scope of the mandatory disclosure mechanism implemented in 2015.