Following on its "Green Paper" released in January 2009, Quebec's Department of Finance announced its intention to amend Quebec's tax legislation, effective October 15, 2009, to combat aggressive tax planning. Among the proposed measures are.
- A mandatory requirement to report, by the taxpayer's filing due date for the taxation year in which a transaction occurs, a transaction which results in a tax benefit of more than $25,000 (or an impact on the income of the taxpayer of more than $100,000) and which meets the criteria of either a confidential transaction or a transaction with conditional remuneration. Failure to disclose may result in a penalty ranging from $10,000 to $100,000.
- For transactions which are not disclosed on a timely basis, a three year extension of the normal three or four year limitation period under which a reassessment may be made based on Quebec's general anti-avoidance rule ("GAAR").
- Where the GAAR applies to a transaction and the transaction was not disclosed on a timely basis, in addition to a denial of the tax benefit, the taxpayer will pay an additional penalty equal to 25% of the amount of the denied tax benefit, while a person who promoted or marketed the transaction will pay a penalty equal to 12.5% of the consideration received for the transaction.
These measures are designed to provide the Quebec government with more effective tools to combat aggressive tax planning. Taxpayers and their advisers will need to consider the potential application of these new rules in the context of any tax planning.
To read Finance Quebec's Information Bulletin outlining these measures, please click here.
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