One year ago, Quebec released its proposals to fight aggressive tax planning and The Tax Issue was there to explain it all.
This week, Revenu Québec has released the form to be used to report your questionable series of transactions.
Form TP-1079.DI is a comprehensive form of no less than 11 pages, designed to allow the government full access to every aspect of your tax plan.
For corporations established in Quebec, the form must be completed in French (or at least the French version of the form must be used).
The form sets out the criteria required for mandatory reporting, which should be reviewed by anyone promoting a tax shelter.
Then comes all of the information reporting, and it is exhaustive, to say the least. Your are asked for the names of all parties involved, identification of your tax advisors, dates, tax consequences and a separate section asking for a detailed step-by-step analysis of the series of transactions (add attachments if the room provided is not sufficient).
The form goes on to ask you to identify specifically what taxes you avoided through this series of transactions. (Frankly, I’m surprised it doesn’t feature a remittance slip to allow you to immediately pay back the taxes plus interest.)
Tax shelter promoters who fall into the mandatory filing requirements will have no choice but to comply. I would be very curious, however, to see how many taxpayers will be voluntarily reporting their tax planning transactions as a protective measure. It’s a catch-22, of course. If a transaction is questionable enough to consider filing the form, then you can bet that Revenu Québec will be predisposed to applying the GAAR if they receive the information. If, on the other hand you decide not report, then you escape automatic and immediate scrutiny, but become exposed to the 25% additional penalty as well as the extended reassessment period.
One thing is for certain. Clients and their advisors must be made aware of this law and its inherent risks and the cost of implementing a complex tax plan will rise as a result of these onerous reporting obligations. (OK, that was at least two things 🙂 )