Introduction by Revenu Québec of a Mandatory Disclosure Mechanism Regarding Nominee Agreements or Prête-Nom Agreements

On May 17, 2019, the Minister of Finance of Quebec released an information bulletin implementing, among other items, a mandatory disclosure mechanism with respect to nominee agreements or prête-nom agreements. This disclosure mechanism affects agreements entered into after May 16, 2019 and also all existing agreements that continue to have tax consequences after this date.  The information bulletin does not specify to whom this measure applies; it may therefore be prudent to assume that it will have broad applicability.

In order to ensure that Revenu Québec is promptly notified of any transaction involving a nominee, tax legislation will be amended so that the parties to a nominee agreement made as part of a transaction or series of transactions have the obligation to disclose the situation to Revenu Québec. In this regard, the disclosure made by one of the parties to the nominee agreement will be deemed to have been made by the other party as well.

The disclosure of a nominee agreement must be made through the form prescribed by the Minister of Revenue (which has not been released yet) and must include:

• 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;
• any other information requested in the prescribed form.

This information return must be filed with Revenu Québec no later than 90 days after the date on which the nominee agreement was concluded.

If the parties to the nominee agreement fail to file this information return within the prescribed time limit, they will be jointly liable for a penalty of $1 000 and an additional penalty of $100 per day, up to a maximum of $5 000, starting on the second day of the omission.

Tax legislation will be amended so that, in cases where this information return is not duly filed with Revenu Québec as previously stipulated, the prescription period otherwise applicable to a taxation year for a person participating in a nominee agreement will be suspended with respect to the tax consequences, for that year, arising from a transaction or series of transactions that occurred that year and that are part of the nominee agreement.

These amendments will apply to nominee agreements concluded after May 16, 2019.

In addition, these amendments will apply in respect of a nominee agreement concluded prior to May 17, 2019 where the tax consequences of the transaction or series of transactions to which the nominee agreement relates continue after May 16, 2019. In this case, the disclosure containing the information described above must be filed with Revenu Québec no later than September 16, 2019.

In addition to the above-mentioned measure, the information bulletin implemented certain other measures regarding sham transactions and the mandatory disclosure of certain prescribed transactions to be determined from time to time by Revenu Québec.