Where the bankrupt is registered for the GST and the QST on the date of bankruptcy, the registration remains in effect for the activities covered by the bankruptcy (continuation of business and liquidation of assets). If the bankrupt is not registered for the GST and the QST on the date of bankruptcy because it is a small supplier, the trustee can request that we register it for liquidation purposes.
If, after the date of bankruptcy, the bankrupt begins carrying on new activities that are not covered by the bankruptcy, the bankrupt must register for the GST and the QST in regard to those new activities.
The trustee is required to file all returns that have not been filed, from the final return for the previous fiscal period to the date of bankruptcy, even if there is no net tax payable to report.
If the bankrupt holds a permit in the fuel or tobacco sector, you must inform us of the bankruptcy by doing one of the following:
- filing form LM-4-V, Information Update (Fuel Tax Act and Tobacco Tax Act)
- sending us a letter providing the necessary information
In addition, if the corporation holds an IFTA license, you must request that the license be cancelled.
Source deductions and employer contributions
Where an employer is bankrupt, the trustee must remit to us all source deductions and amounts paid by the employer for
- contributions to the Québec Pension Plan (QPP)
- Québec parental insurance plan (QPIP) premiums
- the contribution to the health services fund
- the contribution to the financing of the Commission des normes de travail
- the contribution to the Workforce Skills Development and Recognition Fund, if applicable
The trustee must also remit to us the employer's periodic payments for the Commission de la santé et de la sécurité du travail (CSST).
If the bankrupt employer has withheld QPP contributions, QPIP premiums or Québec income tax from the amounts it paid to employees before the bankruptcy and has not remitted the withheld amounts to us, the trustee must hold them in trust. Such amounts are not included in the bankrupt's assets.
If the trustee continues to run the business in place of the bankrupt, the trustee must obtain a new registration number and continue to deduct and remit employer contributions and Québec income tax according to the bankrupt employer's usual remittance frequency. The trustee must also produce RL-1 slips in the usual manner.
The amounts paid by a trustee to the employees of a bankrupt business further to a request for payment of salaries or wages that were not paid by the bankrupt employer are considered to be other taxable income. Such amounts are not subject to source deductions and must be reported in box O of the RL-1 slips.
Income tax – Individuals in business
An individual in business is not distinct from the business he or she operates. Thus, the bankruptcy of a sole proprietorship is considered a personal bankruptcy.
Income tax – Corporations
The bankruptcy of a corporation entails changes to how its income tax return is filed. For more information, click Requirements for Bankrupt Corporations.
As a director of a corporation, you are liable for your actions (for example, when you distribute a corporation's property).
Partnership information return
A partnership composed of two individuals can be dissolved if one of the members declares bankruptcy and no new member joins the partnership within 120 days following the bankruptcy. In such a case, you must file a final information return for the fiscal period ending on the date the partnership was dissolved.
Where a partnership has two or more members and one of the members declares personal bankruptcy, the partnership can continue to carry on its activities if the concerned parties reach an agreement.