22 May 2019 13:30
Photo : Freepik
The Quebec government has announced new measures to strengthen its fight against the financial planning aggressive (PFA), and thus better protect québec’s tax system.
Detailed in a newsletter published on 17 may 2019, these measures relate to three areas : the operations of trompe-l’oeil, the operations of the nominee and the mechanism of mandatory disclosure. They provide penalties higher and longer periods of prescription.
Mandatory disclosure : the strengthening mechanism
The government first announced the extension of the mechanism of mandatory disclosure of certain transactions, originally introduced in 2009.
Until the 17th may last, three types of operations were to be the subject of a disclosure : the transaction in which the advisor requires confidentiality on the part of his client, the transaction for which the consultant’s compensation is conditioned upon the occurrence of certain events and the transaction with contractual protection ” in protecting the client against certain contingencies.
Since 17 may, the minister of Revenue may determine other operations that will be subject to the mandatory disclosure. When operations are to be ” prescribed “, that is to say, subject to disclosure, they will appear on a list to be made public by Revenu Québec.
Therefore, taxpayers engaged in a transaction that is prescribed will be required to complete an information return with Revenu Québec within the prescribed period. They shall, in particular, indicate the identity of all parties involved. In the case of non-disclosure, the taxpayer will incur a penalty for failure to produce capped at $ 100,000, as well as a penalty equal to 50 % of the amount of the tax benefit it received in the framework of the prescribed operating non-disclosed.
The advisors and promoters who are marketing or promoting a transaction prescribed will also be required to complete a statement of information. The one who will not make such disclosure will incur a penalty for failure to produce the $ 100,000 maximum amount, as well as a penalty equal to 100% of his fees.
Nominee : the parties to the contract will need to declare it
The list of operations to be the subject of mandatory disclosure is already maximized. Transactions involving a contract of nominee are now part. This is the second novelty announced by the government.
The parties involved in a contract of nominee entered into on or after 17 may have 90 days following the date of conclusion of this contract to disclose their situation to Revenu Québec. For the contracts and nominee agreements entered into prior to may 17, disclosure is required only when the tax consequences arising from this contract is continuing on or after may 17. In this case, the disclosure must be made no later than the September 16, 2019.
In the case of non-disclosure, the parties assume liability, jointly and severally, a penalty of up to $ 5,000. “The disclosure made by one of the parties to the contract of nominee will be deemed to have been made by the other party,” says the government.
Trompe l’oeil : creating a special regime
The third measure announced aims of the operations of trompe-l’œil, that is to say, operations in which the true nature or identity of the taxpayer concerned is hidden to the tax authorities. In order to combat this type of tax fraud, the government has put in place since may 17, a special scheme providing for three deterrent measures.
First, the government is introducing “harsher penalties” for taxpayers and advisers involved in a system of trompe-l’oeil, but also to the promoters of this system.
Furthermore, Revenu Québec has more time to identify an operation of trompe l’oeil and quantify the tax consequences that flow from it. The government has effectively introduced a limitation period of three additional years. This is in addition to the normal time-limits for three or four years currently applied for the issuance of a new contribution in respect of a person or of a company involved in a transaction of trompe-l’oeil.
Finally, taxpayers, advisors and promoters who have been sanctioned for their participation in an operation of the trompe-l’oeil will be prohibited from being a supplier to the State. They will be listed in the Register of enterprises ineligible (RENA) from the public procurement Authority.
A struggle long-term
All of these additional measures are the result of several measures introduced in the legislation over the years, says the government.
They are particularly in line with the action Plan to ensure tax fairness, a series of measures, made public in November 2017, aimed at combating tax evasion.