Effective May 17, 2019, all nominee agreements made as part of a transaction or series of transactions must be disclosed to Revenu Québec ("RQ") within 90 days of execution, and agreements already in place on May 17, 2019, must be disclosed by September 16, 2019 ("New Disclosure Requirement"). Failure to comply with the New Disclosure Requirement will result in penalties, including penalties that accrue daily, as well as the suspension of the limitation period on assessments.

The New Disclosure Requirement was first mentioned in the March 21, 2019 Québec Budget and further details were announced by the Ministère des Finances in Information Bulletin 2019-5 released on May 17, 2019.

What is a "Nominee Agreement"?

Under Québec civil law, a nominee agreement is a contract of mandate where an agent acts on behalf of a principal but does not disclose the agency relationship to third parties. Rather, the agent gives the appearance that he acts in his own name.

Parties to a nominee agreement therefore express their true intention in a contract that remains secret. These "secret contracts", also referred to as "prête-nom" contracts, are lawful and common in the real estate sector.

Given the nature of nominee agreements, disclosed-agent relationships (e.g., a relationship between a client and his lawyer or security broker) are not subject to the New Disclosure Requirement. However, agreements where only certain parties are aware of the existence of a nominee relationship (e.g., where a lessee knows that there is a nominee agreement in place but the general public is led to believe that the nominee acts in his own name) would still be subject to the New Disclosure Requirement.


As noted above, as of May 17, 2019, it is mandatory to disclose the following nominee agreements within these prescribed timeframes:

  • Nominee agreements concluded on or after May 17, 2019 must be disclosed to RQ no later than 90 days after the date on which the nominee agreement was concluded.
  • Nominee agreements concluded prior to May 17, 2019 must be disclosed to RQ no later than September 16, 2019 where the tax consequences of the agreement continue after May 17, 2019.

In a July 11, 2019 Canadian Tax Foundation presentation, RQ specified that the term "tax consequences" refers only to "income tax consequences" and not other tax consequences such as sales or land transfer taxes.This should provide small comfort, as most instances that attract sales or land transfer tax consequences also attract income tax consequences. RQ gave the following example of a situation where tax consequences continue after May 17, 2019 and compliance with the New Disclosure Requirement is mandatory:

The nominee under a nominee agreement acquires a rental property in July 2018 and still holds legal title to the property after May 17, 2019. The beneficial owner collects rent and incurs expenses with respect of the property after that date and consequently the nominee agreement must be disclosed.

However, in the view of RQ, if the parties to the nominee agreement had disposed of the property prior to May 17, 2019, the tax consequences of the agreement would have ceased at that time and no disclosure of the nominee agreement would be required.

Disclosure Steps

The party that discloses the agreement must do it through a prescribed form. Until the prescribed form is made available by RQ, disclosure of a nominee agreement should be made by way of letter 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 (when this becomes available).

This is not a recurring obligation and the prescribed form needs to be submitted only once. The disclosure of a nominee agreement made by one of the parties to the agreement is deemed to have been made by all of the other parties.

Previously, the existence and content of nominee agreements, for example in the real estate sector, were disclosed to RQ on the CO-17, Corporation Income Tax Return ("Form CO-17"), in order to prevent the nominee from having to pay income tax on the revenue generated by the real property and to facilitate the collection, remittance and claim-back of GST and QST by the beneficial owner. The New Disclosure Requirement is different and replaces the disclosure of nominee agreements by means of Form CO-17.  Parties that have already disclosed the existence and content of their nominee agreement to RQ using Form CO-17 must disclose it again.

Consequences of Failing to Disclose

If the nominee agreement is not disclosed in the prescribed form within the prescribed time period the parties to the nominee agreement will be solidarily liable for a discretionary penalty of $1,000 and an additional discretionary penalty of $100 per day, starting on the second day of the omission, up to a maximum of $5,000. Parties that fail to comply with the New Disclosure Requirement can ask RQ to waive or cancel the penalties under the usual administrative relief provisions.

More importantly, if the required disclosure is not made, the new rules indefinitely suspend the assessment period with respect to the tax consequences resulting from the agreement. Where the disclosure is filed late, the assessment period begins to run again from the filing date.

Consider, as an example, a rental property acquired on July 17, 2019 subject to a nominee agreement. The disclosure of the agreement must be made by October 15, 2019 otherwise, the assessment period is suspended with respect to the rental income earned by the beneficial owner for the 2019 and all subsequent taxation years until the disclosure is made.

Given the comments of RQ with respect to "tax consequences" referring to "income tax consequences", the authors query whether the assessment period will be suspended with respect to only the income tax consequences of the agreement or also with respect to other resulting tax consequences, for example, the applicable Quebec Sales Tax on the rental income.

If you are a party to an agreement that could qualify as a "nominee agreement", you should immediately speak to your tax advisors to make sure you comply in a timely manner with the New Disclosure Requirement.

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