New obligation to disclose nominee contracts

Have you signed a counter-letter? Not respecting your new obligations could cost you dearly!

On May 17, the Ministère des Finances du Québec announced new measures requiring parties to a nominee agreement, commonly known as a "counter-letter", to disclose its existence to Revenu Québec.

Under Quebec civil law, a prête-nom contract is a mandate in which the mandatary acts on behalf of the principal, but gives the impression that he is acting in his own name.

The measures announced provide that the parties to such a contract must disclose the following information using the prescribed form:

• The date of the nominee agreement;

• The identity of the parties to the nominee agreement;

• A full description of the facts surrounding the nominee and the identity of the taxpayers in respect of whom the nominee has tax consequences.

With certain exceptions, these new measures apply to nominee contracts in existence on 16 May 2019 and to those entered into after that date.

Disclosure of such contracts must be made to Revenu Québec by the latest of the following dates:

• The 90th day following the date of conclusion of the contract;

• The 90th day following the date of assent to the forthcoming bill containing these new measures.

In the event of failure to provide the information within the prescribed period, the parties to the nominee agreement will be jointly and severally liable for a penalty of $1,000, up to a maximum of $5,000, plus an additional penalty of $100 for each day, starting on the second day, that the failure lasts. As long as the disclosure is not made, the limitation period otherwise applicable to a taxation year of a person participating in the nominee contract will be suspended with respect to the tax consequences, for that year, of a transaction or series of transactions occurring in that year and falling within the scope of the nominee contract.

Don't hesitate to contact your Mallette tax specialist, by clicking on the "Contact us" link, to ensure that you meet all your obligations.

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