Since 2021, taxpayers must disclose to Revenu Québec the specified transactions they have carried out. A specified transaction may be an arrangement, an event or a series of transactions where the form and substance of the facts concerning the taxpayer are similar to the transactions determined by the Government of Quebec.
To date, the first four determined transactions have been published. Revenu Québec has also announced excluded transactions that are intended to be transactions or series of transactions that are not included in the specified transactions.
- Multiplication of the capital gains deduction: In general, the determined transaction targets the following two types of planning strategies:
- A person uses accommodators to claim multiple capital gains deductions, often through a trust, and receives all or part of the accommodators’ gains;
- The shareholder’s spouse becomes a shareholder in order to claim multiple capital gains deductions by manipulating the attribution rules between spouses.
Note that Revenu Québec considers that the transfer to a taxpayer of an amount equal to or less than the non-taxable portion of the realized capital gain is an excluded transaction.
- Tax attribute trading: Generally, the determined transaction targets the following planning strategies:
- The use of one taxpayer’s tax attributes (for example, operating losses, tax credits that can be carried forward and the balance of scientific research and experimental development expenses) by another taxpayer that is not affiliated with the taxpayer immediately before the start of the series of transactions.
- The use, resulting in a loss, of tax attributes by a corporation or trust further to its capitalization by a third party in order to carry on a new business, if there is a relationship between the capitalization and the use of the corporation’s or trust’s tax attributes.
Again, Revenu Québec has disclosed certain excluded transactions, including the use of tax attributes generated in respect of a taxpayer by another taxpayer that is related to the original taxpayer immediately before the series of transactions began.
- Avoidance of deemed disposal of trust property: Generally, the determined transaction targets planning strategies used to get around the deemed disposition and postpone taxation of the accumulated gain.
- Payment to a non-treaty country: In general, the determined transaction targets one or more payments, totalling $1,000,000 or more during the year, which are made by a person or partnership to an entity with which it is not dealing at arm’s length and which is located in a jurisdiction that has not entered into a tax treaty with Canada.
Finally, determined transactions must be disclosed within the prescribed timeframe by taxpayers, advisors and promoters using the forms (TP-1079.CP and TP-1079.DI) from Revenu Québec. Any failure to disclose carries significant consequences.
Written by Nicolas Déziel Belleville, M. Fisc. and Martin Gaudet CPA, CA, LL.M. Fisc. from Marcil Lavallée.This document was written for our quarterly bulletin, Canadian Overview, published by Canadian member-firms of Moore North America.