Consumer Taxes. Disclosures Program, which is available on the CRA website.

Transcription

1 INTERPRETATION AND ADMINISTRATIVE BULLETIN CONCERNING THE LAWS AND REGULATIONS Consumer Taxes ADM. 4/R7 Voluntary Disclosure Program Date of publication: November 7, 2016 This version of bulletin ADM. 4 supersedes the version of May 22, The bulletin has been revised solely because the Direction principale des divulgations volontaires (DPDV) has moved. New contact information for the DPDV can be found at the end of form LM-15-V. This bulletin explains Revenu Québec s voluntary disclosure program. It sets out the terms and conditions under which a person that makes a disclosure in respect of Québec fiscal legislation can benefit from the relief measures offered under the program. Where a voluntary disclosure concerns the goods and services tax and harmonized sales tax (GST/HST) provided for under the Excise Tax Act (R.S.C. 1985, c. E-15), Revenu Québec applies the guidelines of the Voluntary Disclosures Program administered by the Canada Revenue Agency (CRA). For more information, refer to the current version of information circular IC00-1, Voluntary Disclosures Program, which is available on the CRA website. OBJECT OF THE PROGRAM AND RELIEF MEASURES 1. Revenu Québec s mission is to ensure that all taxpayers pay their fair share toward the funding of public services; its goal is tax fairness for all. With that in mind, Revenu Québec therefore considers spontaneous compliance with fiscal legislation to be a cornerstone of the tax system. That is why it encourages any person that has failed to meet one or more fiscal obligations to report and pay any unpaid amounts under the voluntary disclosure program. 2. In addition to having to pay the applicable duties and interest, failure to meet one s fiscal obligations (be it in the form of an omission, a false statement or an incomplete statement in a return) can lead to one or more penalties being imposed or to legal proceedings being instituted. 3. To encourage persons to rectify their tax situation voluntarily, the relief measures listed below can be granted in respect of the disclosed facts, provided the disclosure meets the conditions of the program and is submitted in accordance with the terms set forth in this bulletin. Revenu Québec will choose not to impose the penalties provided for under fiscal legislation or institute penal proceedings.

2 Revenu Québec may choose not to impose interest in respect of a taxation year (within the meaning of the Taxation Act (CQLR, c. I-3)) where, on the date the voluntary disclosure file is opened (see point 19 of this bulletin), the statutory filing deadline for the return for that year has been elapsed for at least three years (four years in the case of a mutual fund trust or a corporation other than a Canadian-controlled private corporation). In the case of an amount collected or withheld but not remitted during a reporting period where, on the date the voluntary disclosure file is opened, the statutory filing deadline for the return for that period has been elapsed for at least four years (see point 19 of this bulletin), Revenu Québec may choose to impose interest only as of the statutory filing deadline that immediately precedes that four-year period. SITUATIONS IN WHICH THE PROGRAM DOES NOT APPLY 4. While the voluntary disclosure program generally applies in any situation where a penalty could be imposed, it cannot be used as a means to avoid paying a penalty for filing a return after a statutory filing deadline or in any situation that, in the opinion of Revenu Québec, goes against the object and spirit of the program. The program does not, for example, apply in the following situations: Situations involving only the filing of an original or amended return for a person s taxation year or reporting period, where less than a year has elapsed between the statutory filing deadline and the date the voluntary disclosure is received. For example, a voluntary disclosure concerning only the filing of an original income tax return in which there is a balance due for 2013, the statutory filing deadline for which is April 30, 2014, cannot be accepted until May 1, Likewise, a voluntary disclosure concerning only the late filing of the original consumer tax return for October 2014, the filing deadline for which is November 30, 2014, cannot be accepted until December 1, However, if the disclosure concerns a series of returns and, for at least one of them, the statutory filing deadline has been elapsed for more than a year on the date the voluntary disclosure is received, then the entire series of returns can be accepted in order to ensure complete disclosure of the tax situation to be rectified. Situations concerning only the late filing of returns that are not used to establish additional duties payable, but rather simply to provide prescribed information. For example, the late filing of the Partnership Information Return (TP-600-V) or the Déclaration de revenus et de renseignements des sociétés sans but lucratif (form CO-17.SP) is not eligible for the program. Situations involving late, amended or revoked elections. Situations where it is reasonable to conclude that the disclosure is being made essentially for retroactive tax planning purposes.

3 Situations that consist solely in a request for relief under Revenu Québec s tax fairness measures, pursuant to the following interpretation bulletins: Waiver or Cancellation of Interest, Penalties or Charges (LAF ), Tax Fairness: Refunds Applied For After December 31, 2004 (IMP ) and Late, Amended or Revoked Election (IMP ). Situations that Revenu Québec considers to be contrary to public interest. Making another voluntary disclosure 5. As a rule, a person cannot benefit more than once from the relief measures granted under the voluntary disclosure program. That said, Revenu Québec may allow a person to do so if it judges that the circumstances of the new disclosure are not attributable to a misrepresentation of the facts through negligence or wilful default and cannot be considered a repeat of the situation reported in a previous disclosure. 6. Likewise, Revenu Québec may accept a named disclosure (a disclosure in which the person s identity is divulged) from a person that previously made an anonymous disclosure concerning the same circumstances if Revenu Québec did not act on the previous disclosure because the person failed to respect the applicable deadlines or withdrew the disclosure. Wash transactions 7. With regard to the QST, the voluntary disclosure program applies to wash transactions where a registrant supplier did not remit an amount of net tax because the supplier did not duly charge and collect the tax on a taxable supply in respect of which the recipient would have been entitled to a full input tax refund (ITR) had the recipient paid the tax. Wash transactions can also occur when the wrong member of a closely related group or of a group of associated persons (all of which only carry on commercial activities) collects and reports the tax or claims an input tax refund. 8. In such cases, if the disclosure meets the conditions for the program, Revenu Québec will assess the tax not collected by the supplier or the ITR unduly claimed by the member and will waive the penalties and interest that would otherwise have been imposed under fiscal legislation. However, in order for such measures to be granted, the amounts due must be paid in full before the notices of assessment are issued. PROCEDURE FOR MAKING A VOLUNTARY DISCLOSURE General 9. In general, Revenu Québec cannot determine whether or not a disclosure meets the conditions for the program and, as a result, whether or not the person can benefit from the relief measures it offers, until the disclosure application has been fully processed. The onus is therefore on the person (and, where applicable, the person s representative) to make sure that the disclosure meets all the terms and conditions of the program. What is more, all the documents and facts submitted in support of the disclosure are subject to audit and investigation by Revenu Québec.

4 10. That is why, should an audit or investigation reveal that a disclosure does not meet the conditions for the program (see point 27), the relief measures granted to the person further to the disclosure will be revoked, even if one or more notices of assessment resulting from the disclosure have been issued. Making a disclosure 11. To be considered under the voluntary disclosure program, a disclosure must be made by filing form LM-15-V. The form must be duly completed and sent by mail, courier or fax (not by ) to the Direction principale des divulgations volontaires (DPDV), whose contact information is given at the end of the form. Form LM-15-V can be printed from the Revenu Québec website at The disclosure form must be accompanied by the person s returns for each taxation year or reporting period establishing the additional duties payable as a result of the disclosure, as well as by the relevant schedules, forms, work sheets and any other pertinent documents, as applicable, except in the case of a factual situation in which it is especially difficult to identify the relevant legal provisions, periods at issue or duties payable, or in which there are impediments to the availability of the documentary evidence. For example, a disclosure that concerns amounts invested or accumulated in a foreign country is generally considered such a situation. All supporting documents submitted must make it possible to rectify the person s tax situation and determine that the four conditions set forth in point 27 are met. Payment 12. As a rule, payment of the estimated duties and interest must accompany form LM-15-V. That said, where it is particularly difficult to estimate the amount of the duties or interest, the person must indicate on the form that that is the case. The payment must then be made no later than the deadline set by the DPDV employee. For more information about payment, see point 27(d). Anonymous disclosure 13. In general, the identity of the person making a disclosure must be divulged. Revenu Québec may, however, allow a disclosure to be made anonymously if it is the person s first disclosure and if it concerns a situation in which it is especially difficult to identify the relevant legal provisions, periods at issue or duties payable, or in which there are impediments to the availability of the documentary evidence. 14. That said, Revenu Québec reserves the right to not allow a disclosure to be made anonymously if it has reasonable grounds to believe that the disclosure is not spontaneous (see point 27(a)). In such a case, Revenu Québec will disallow the disclosure if the person s representative fails to divulge the person s identity by the deadline granted. Information to be provided 15. In order for a disclosure to be considered under the voluntary disclosure program, it is essential that the disclosure form contain the information needed in order for Revenu Québec to

5 determine whether or not the program applies to the situation and to identify the tax situation to be rectified. Accordingly, form LM-15-V will not be considered duly complete unless it contains the following information: (a) a summary of the facts behind the tax situation to be rectified; (b) the type of person involved (individual, corporation, partnership, succession, trust, etc.); (c) in the case of an individual, his or her sex and the year of his or her birth as well as, if applicable, his or her commercial or professional field and the year in which his ou her commercial or professional activities began; (d) in the case of a corporation or partnership, its commercial or professional field and the year in which its activities began; (e) in the case of a trust, the type of trust in question and the year in which it was constituted; (f) the relevant fiscal laws; (g) the type of default (such as business income, foreign investment income, pension income or capital gains that were not reported, source deductions that were not remitted, GST/HST and QST that was collected but not remitted, or GST/HST and QST that was not collected); (h) all the taxation years or periods in which there was a default or an inaccurate return; (i) (j) a statement of the tax consequences resulting from the disclosed defaults and the estimated amount of the duties and interest payable. In the case of a situation in which it is especially difficult to identify the relevant legal provisions, periods at issue or duties payable, or to obtain the requisite supporting documents, a detailed explanation of those difficulties and the magnitude of the amounts in question must be provided; in the case of foreign investments, the year in which the investment account was opened, the year the first investment or transfer was made to the account, the account balance as at the date form LM-15-V was filed, and the name of the foreign financial institution and the country in which it is located; (k) the person s postal code; (l) the person s name and primary address, as well as the identifiers (social insurance number, identification number, Québec enterprise number (NEQ)) assigned to the person; (m) in the case of a named disclosure, either the person or the person s representative must sign form LM-15-V in the appropriate space. 16. In the case of an anonymous disclosure, only the first three characters of the person s postal code (point 15(k)) are required, and the deadline for providing the information mentioned in point 15(l) is that given in points 23 and 24 below. In addition, form LM-15-V must be signed by the person s representative.

6 17. Where a person that has already made a disclosure is making another disclosure (see points 5 and 6 above), that fact must be stated in form LM-15-V. Furthermore, since the disclosure is not the person s first (see point 13), it cannot be made anonymously. The details of all previous disclosures, as well as the circumstances that justify the current disclosure, must also be provided. FILE-OPENING DATE AND PROCESSING 18. Upon receiving form LM-15-V, Revenu Québec issues a reference number. The number is for administrative purposes only; it does not mean that Revenu Québec has confirmed the disclosure s eligibility or that the disclosure meets the terms and conditions of the program. 19. The date a voluntary disclosure file is opened is considered to be the date on which form LM-15-V is received, but only once an employee from the DPDV has found that the form is duly completed (in accordance with the terms set out in points 11 through 17 of this bulletin). As of that date, the person will be protected against the imposition of penalties and any potential legal proceedings related to the facts disclosed. However, if the disclosure is later found not to meet one or more of the four conditions listed in point 27, the protection will be deemed never to have been granted. Accordingly, where a disclosure form received by Revenu Québec is considered incomplete, the voluntary disclosure file is considered to have been opened on the date on which the missing information is subsequently received. 20. Where a person that has already made a disclosure is making another disclosure (see points 5 and 6), the date on which protection is granted under the program is determined solely on the basis of the most recent copy of form LM-15-V, duly completed in accordance with point 17 above, that Revenu Québec receives. Processing 21. Voluntary disclosures are subject to the powers of audit and investigation conferred by the Tax Administration Act (CQLR, c. A-6.002). As a result, the full cooperation of the person and the person s representative is key both must be diligent in providing the information and documents necessary for the disclosure to be processed. 22. To that end, even in the case of an anonymous disclosure, Revenu Québec may request additional information or documents in order to rule on the eligibility of the disclosure or to continue processing the file. In the event of such a request, Revenu Québec will set a reasonable deadline for producing the information or documents. The person must either comply with the request by the deadline or obtain an extension before the deadline expires; otherwise, the person s disclosure may be disallowed and the protection conferred by the program withdrawn. Where a disclosure is made anonymously, Revenu Québec will rule on whether or not to accept the disclosure only once the person s identity has been divulged and once Revenu Québec has confirmed the accuracy and validity of the information and supporting documents provided with the person s identity, containing any particulars that may have been masked or otherwise omitted from the disclosure.

7 Divulging the person s identity (anonymous disclosure) 23. Subject to point 14 of this bulletin, where a disclosure is made anonymously by a person s representative, the person s identity must be divulged to Revenu Québec within 90 days following the date on which the DPDV employee notifies the person s representative that he or she has taken up the person s file. 24. However, an extension for divulging the person s identity can be granted if it is requested in writing before the 90-day deadline and if the DPDV employee considers it to be justified in light of the circumstances. If the request is granted, the DPDV employee will set a new deadline based on the situation. 25. Where a representative files an anonymous disclosure, he or she must, when subsequently divulging the person s identity, provide a power of attorney by filing a duly completed copy of form MR-69-V, Power of Attorney, Authorization to Communicate Information, or Revocation, signed by the person he or she is representing. Signature of a transaction 26. The parties may enter into a transaction (within the meaning of articles 2631 et seq. of the Civil Code of Québec) where, for example, the disclosure concerns one or more taxation years or one or more periods that exceed the normal assessment period, where it is especially difficult to identify the relevant legal provisions, periods at issue or duties payable, or where there are impediments to the availability of the documentary evidence. As part of the transaction, the person will waive all rights to opposition or appeal in respect of the elements covered by the transaction. CONDITIONS FOR BENEFITTING FROM THE PROGRAM 27. In order for a person to benefit from the relief measures offered under the voluntary disclosure program, the four conditions listed below must be met. Otherwise, the disclosure will be disallowed. (a) The disclosure must be spontaneous A disclosure is not spontaneous where, further to an examination of the facts, the DPDV finds that on the date the duly completed disclosure form is received, it is reasonable to believe, in light of an objectively demonstrable fact, that the person was aware that Revenu Québec or a body of another government that administers fiscal laws was about to undertake an examination, audit or investigation (or other control measures) regarding the person, or that such actions had already been taken. The same applies where, on that date, the person is being investigated for tax fraud by another body or authority (such as a police force). However, where it is reasonable to believe that, given the object of the control measure, the disclosed facts and omissions would not have been brought to light, the disclosure can, as a rule, be considered spontaneous;

8 the person made, during ongoing or recently ended control measures, misrepresentations concerning, in whole or in part, the facts and omissions covered by the disclosure; ongoing control measures regarding a third party with which the person making the disclosure is not dealing at arm s length, is affiliated or has a business relationship have already revealed the disclosed facts or omissions to Revenu Québec and allowed Revenu Québec to take steps to rectify the situation before receiving the duly completed disclosure form. (b) The disclosure must be complete A disclosure is complete where the person discloses, for all the fiscal laws, taxation years and periods in which the person s tax situation does not comply with the fiscal laws administered by Revenu Québec, all the instances where the person failed to meet the person s fiscal obligations. For example, in a case involving amounts invested or accrued in a foreign country, the disclosure must result in the taxation of all unreported amounts for all the years in question. Likewise, foreign investments may be subject to income tax unless their tax-exempt status can be proven. A disclosure is not complete, however, where the person has failed to fulfill other obligations with Revenu Québec under the fiscal laws that apply to the person; a person controlled by the person making the disclosure has failed to fulfill its obligations with Revenu Québec regarding one or more fiscal laws that apply to the person; the person making the disclosure is controlled by a person that has failed to fulfill its obligations with Revenu Québec regarding one or more applicable fiscal laws; the person making the disclosure and a person that has failed to fulfill its obligations with Revenu Québec regarding one or more applicable fiscal laws are both controlled by the same person. In order for a person to be considered to have fulfilled all its obligations with Revenu Québec, both the following conditions must be met before processing of the person s voluntary disclosure is completed: The person has filed all the returns and reports required under the fiscal laws administered by Revenu Québec. The person has no outstanding debt or, if the person does have an outstanding debt, the recovery of that debt has been legally suspended or a payment agreement has been reached and the person is not in default in that regard. If, at any point during the processing of the disclosure, the person fails or refuses to disclose facts, amounts or other details concerning the person s situation, or willfully discloses inaccurate information, the disclosure will not be considered complete but rather an attempt by the person to avoid fulfilling the person s tax obligations.

9 (c) The disclosure must be verifiable A disclosure is verifiable where the person provides Revenu Québec with all the information, records and documents required to determine the accuracy of the facts submitted and the estimated duties. Based on the facts and evidence collected, Revenu Québec will issue a notice of assessment for each year or period in which the person failed to meet the person s fiscal obligations. Where the person is unable to identify the exact taxation years or periods in which fiscal obligations were not met or the exact amount of the adjustments to be made because, for example, certain documents have been lost or cannot be obtained, other methods may be used to determine the amount of the adjustments. The same is true where it is impossible to prove the origin or prior taxation of invested or accumulated amounts. If Revenu Québec does not receive the necessary information or documents by the set deadlines, or if the parties are unable to reach an agreement with respect to the adjustments to be made, the disclosure will be disallowed. (d) The fiscal debt must be paid A person making a voluntary disclosure cannot benefit from the relief measures granted under the program unless the related tax debt is paid. In other words, in order for Revenu Québec to process the file and apply the relief measures granted under the program, the estimated duties and interest must be paid before the notice or notices of assessment are issued. The payment must generally be submitted along with form LM-15-V. However, where it is particularly difficult to estimate the amount of the duties and interest, the person must indicate on the form that that is the case and subsequently make the payment by the deadlines set by the DPDV employee. Likewise, if Revenu Québec determines while processing the disclosure that other amounts are due, it can require them to be paid by the deadline given to the person. Furthermore, any balance due shown on the notice of assessment issued further to the voluntary disclosure must be paid by the deadline mentioned on the notice of assessment. That said, where the situation so requires, Revenu Québec and the person may enter into a payment agreement taking into account all the amounts due to Revenu Québec as at the date of the agreement, not only the fiscal debt resulting from the voluntary disclosure. Failure to respect the payment agreement or a fiscal obligation that becomes payable during the term of the agreement may result in the relief measures granted by the program being revoked. Lastly, the relief measures granted by the program remain in effect only inasmuch as the amounts due are paid by the deadlines set forth in this bulletin.

10 DISALLOWANCE 28. If any of the terms set forth herein concerning the filing of a disclosure, the eligibility of a disclosure and the deadlines for producing the required information and documents, for divulging the identity of the person making the disclosure and for paying the amounts due are not met, Revenu Québec may, at any point in the processing of a disclosure, notify the person (or the person s representative) in writing that the disclosure has been disallowed. 29. Likewise, if, while reviewing the file of a person that has benefitted from the relief measures granted under the program, Revenu Québec finds that one or more of the conditions set forth in point 27 of this bulletin are not met or that inaccurate information was willfully submitted, it will notify the person (or the person s representative) in writing that the person is no longer entitled to benefit from the measures. Where applicable, any agreements entered into by the parties will be rendered null and void. 30. In the event that a voluntary disclosure is disallowed, Revenu Québec may determine or redetermine the amount of the duties, interest and penalties payable by the person for the taxation years and periods in question and issue the person a notice of assessment in that regard. Revenu Québec may also institute legal proceedings.