Bill 42: New measures from Revenu Quebec in regards with nominee agreement and impacts on the tax compliance for taxpayers

On September 24, 2020, the Government of Quebec assented Bill 42, An Act to give effect to fiscal measures announced in the Budget Speech delivered on March 21, 2019 and to various other measures. Among the various measures included in the bill, there are important measures relating to taxpayers who have entered into a nominee agreement.

According to Section 2130 of the Civil Code of Quebec, a nominee agreement is a mandate under which the agent acts on behalf of another person (the principal), but by letting third parties believe that he is acting on his own behalf. The actual intentions of the parties to the nominee agreement are outlined in a separate contract which is only known to the parties involved in this situation.

Following assent to the bill, taxpayers who ratified this type of agreement on May 17, 2019 (or after that date) will now have to submit a prescribed form to Revenu Québec to indicate the details[1]. This form published by Revenu Québec is Form TP-1079.PN-V Disclosure of a Nominee Agreement. The information requested in this form is as follows:

• The date of the agreement of the contract and the end date of the contract (if an end date is provided for in the contract)

• The object of the contract

• The taxation year covered by the contract

• The name and address of the parties involved in the contract with their identification number relevant for Revenu Québec tax purposes (example: social insurance number, identification number, etc.)

• Information of all taxpayers who have tax consequences arising from the nominee agreement.

• A complete and detailed description of all the facts and all the tax consequences relating to the nominee contract.

• A copy of the nominee contract, counter letter or apparent contract relating to this agreement.

Considering the fact that the bill was assented to on September 24, the 90-day period to comply with these new directives began on that date. Consequently, the nominee contracts must be disclosed and submitted, with form TP-1079.PN-V, to Revenu Québec on 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 of the bill including the measures relating to the disclosure obligation of a nominee contract (i.e. December 23, 2020)

In the event that the prescribed forms and information have not been disclosed within the applicable time period announced by Revenu Québec, the parties will incur a basic penalty of $ 1,000 and an additional penalty of $ 100 will be added for each day that the omission lasts to a maximum of $5,000. This non-disclosure may also suspend the statute of limitation period in these cases with respect to the tax consequences of the nominee.

Should you have any questions or for any additional information about this new measure, please do not hesitate to contact your Mazars tax advisor.

[1] These measures also apply to nominee contracts entered into before May 17, 2019 but which are still in effect and must also be disclosed.