Mandatory disclosure of nominee agreements

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On September 24, the Quebec government assented Bill 42, putting in place the mandatory disclosure measures for nominee agreements announced on May 17, 2019.

Agreements covered by these measures

In Québec civil law, a nominee agreement is a mandate by which the agent acts on behalf of the principal, but allows others to believe that he is acting in his own name.

The announced measures apply to any nominee agreement entered into on or after May 17, 2019. They also apply in respect of the nominee agreements entered into prior to May 17, 2019 where the tax consequences continue on or after such date. 

This obligation applies even if the existence of the nominee agreement has already been disclosed to the QRA in a corporation’s CO 17 tax return. The mandatory disclosure also applies retroactively and without any time limit. For example, a nominee agreement entered into in 1990, where the tax consequences continue on or after May 17, 2019, must be disclosed.

Contents and form of the disclosure

The announced measures provide that the parties to a nominee agreement must disclose the following information to the QRA:

  • The date of the nominee agreement;
  • The identity of the parties to the nominee agreement;
  • A full description of the facts of the transaction or series of transactions to which the nominee agreement relates and the identity of any person or entity for which such transaction or series of transactions has tax consequences; and
  • Any other information requested in the prescribed form TP-1079.PN Disclosure of a nominee agreement.  

Filing deadline

Due to the assent of Bill 42, the 90-day limit for complying with the requirement to disclose nominee agreements covered by these measures has therefore been triggered.

Nominee agreements must be disclosed at the latest of the following dates:

  • The 90th day following the conclusion of the nominee agreement;
  • On December 23, 2020, i.e., the 90th day following the day Bill 42 received assent.

For nominee agreements concluded prior to September 24, 2020, the disclosure deadline is December 23, 2020.

Sanctions for failing to disclose

Failing to provide the prescribed information within the applicable time period, the parties to the nominee agreement will be jointly liable to a $1,000 penalty and an additional penalty of $100 per day for the duration of the omission, up to a maximum of $5,000. Furthermore, non disclosure may also result in the suspension of the limitation period with respect to the tax consequences of the nominee agreement.

Take the necessary steps

We advise you to generally notify your entire clientele of the existence of this new disclosure obligation as soon as possible. In addition, we recommend that you also review your records individually and inform the clients or former clients who are affected by these measures of their disclosure obligation.

To find out more about the new measures designed to protect the integrity and fairness of Québec’s tax system, please consult Finance Québec’s Information Bulletin