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New obligation to disclose nominee agreements and postponement of the deadline

September 5, 2019
Category :  Articles

What is a nominee agreement?

A nominee agreement is a contract that allows one person, the nominee, to sign acts in place of the other person, the actual contractor. For example, this common practice in the real estate field hides the real owner of a building in the eyes of third parties.

Since the end of 2011, Revenu Québec required the disclosure of nominee agreements, in order to be fiscally recognized, at the same time as the income tax return for the current year upon the conclusion of the said agreement.

What are the new obligations?

The newsletter published in May 2019 by the Ministry of Finance announced that the parties of a nominee agreement will be required to provide to the government, through the production of a prescribed form, the following information:

  • The date of the nominee agreement
  • The identities of the parties of the nominee agreement
  • A complete description of the facts relating to the transaction or series of transactions to which the nominee agreement relates
  • The identity of any person or entity to which this transaction or series of transactions has tax consequences
  • Any other information requested in the prescribed form.

Note that as of the date of this article, the prescribed form has not yet been made available by the Ministry.

What is the disclosure deadline?

It was originally intended that any existing nominee agreement be disclosed prior to September 16, 2019. However, on August 22, the deadline was extended to the latest of the following dates:

  • 90 days after the conclusion of the contract
  • 90 days after the date of the sanction of the bill to come

How important is the production of the form?

Failure to submit the form may result in joint penalties of $1,000 to $5,000 and the suspension of the limitation period relating to the tax consequences of the parties, generally established at three (3) years. In other words, Revenu Québec would have the ability to assess taxes from transactions that have occurred many years ago.

To make sure you are not subject to penalties, or to find out more, communicate with your FBL representative.

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