Mandatory or Preventive Disclosure
Any taxpayer that carries out a confidential transaction, a transaction involving conditional remuneration, a transaction involving contractual coverage or a specified transaction (or that is a member of a partnership that carries out such a transaction) must disclose the transaction to us (mandatory disclosure).
A taxpayer may choose to disclose a transaction that the taxpayer (or a partnership of which the taxpayer is a member) has started to carry out (preventive disclosure).
If the transaction was carried out by a limited partnership, the general partner is responsible for making the disclosure.
If the transaction was carried out by a partnership other than a limited partnership, each member of the partnership is responsible for making the disclosure. If one member discloses the transaction, all members are deemed to have disclosed it.
Such a transaction, other than a specified transaction, must be disclosed by the filing deadline for the related return, which differs depending on whether the transaction is carried out by the trust or a partnership of which the trust is a member. The disclosure deadline is thus the filing deadline for:
- the trust's income tax return for the taxation year in which the transaction resulted in a tax advantage or had an impact on the trust's income (mandatory disclosure) or the taxation year in which the transaction began to be carried out (preventive disclosure); or
- the partnership's information return for the fiscal period in which the transaction resulted in a tax advantage or had an impact on the partnership's income (mandatory disclosure) or the taxation year in which the transaction started (preventive disclosure).
If the tax advantage obtained for a given taxation year is a refundable tax credit, the trust must make a mandatory disclosure no later than the deadline for filing the form that contains the information pertaining to the tax credit.
In other cases, if the transaction was carried out after the deadline for filing the trust income tax return for the taxation year in which the transaction resulted in a tax advantage or if it had an impact on the trust's income, the trust must make a mandatory disclosure no later than the date on which the transaction was carried out.
The trust must file mandatory disclosures for specified transactions by the later of the following dates:
- 60 days after the day determined by the Minister and from which the obligation to disclose the specified transaction applies;
- 120 days after the day on which the Minister published the determined transaction to which the specified transaction relates in the Gazette officielle du Québec.
For information on the consequences of failing to make a mandatory or preventive disclosure where circumstances so require or allow, see form TP-1079.DI-V, Mandatory or Preventive Disclosure of Tax Planning.
Adviser or promoter
A mandatory disclosure must be filed by any adviser or promoter that commercialized or promoted a determined transaction if the transaction has not required a significant modification to its form and substance to adapt it for implementation with various taxpayers or partnerships. For more information, see form TP-1079.CP-V, Mandatory Disclosure of Tax Planning by an Adviser or Promoter.
As part of our efforts to fight aggressive tax planning, we impose a penalty on trusts to which we have issued a notice of assessment under the general anti-avoidance rule (GAAR). A trust is liable to a penalty of 50% of the amount of the tax benefit denied if it is involved in an avoidance transaction that was not the subject of a mandatory or preventive disclosure and to which the GAAR applies.