Income Tax INTERPRETATION AND ADMINISTRATIVE BULLETIN CONCERNING THE LAWS AND REGULATIONS

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1 INTERPRETATION AND ADMINISTRATIVE BULLETIN CONCERNING THE LAWS AND REGULATIONS Income Tax IMP /R3 Obligation to Provide Information About a Labour Expenditure Date of publication: March 31, 2015 Reference(s): Taxation Act (CQLR, c. I-3), section 1086 Tax Administration Act (CQLR, c. A-6.002), sections and Regulation respecting the Taxation Act (CQLR, c. I-3, r. 1), sections 1086R88 and 1086R89 This version of interpretation bulletin IMP supersedes the version of August 31, The bulletin was revised to take into account legislative amendments made in respect of persons exempt from tax. In addition, some changes in respect of style and conformity were made to ensure technical accuracy. The purpose of this bulletin is to describe the obligation of a person or partnership to file an information return in respect of a labour expenditure. APPLICATION OF THE ACT 1. Pursuant to section 1086R88 of the Regulation respecting the Taxation Act (RTA), where, in a taxation year or a fiscal period, as the case may be, a particular person other than a corporation referred to in section 1086R89 of the RTA or a person exempt from tax for the year under Book VIII of Part I of the Taxation Act (TA) or a partnership incurs expenditures for renovation, improvement, maintenance or repair work in respect of a building, structure or land that is property situated in Québec and used in the course of carrying on a business or for the purpose of earning income therefrom, that particular person or a member of that partnership designated by the members of the partnership must enclose with the tax return that the person or member files for that year or for the person's or the member's taxation year in which the partnership's fiscal period ends, under Part I of the TA, an information return in prescribed form in respect of every person that carried out the work, other than a person that is an employee of either the particular person or the partnership; the operator of a gas, telecommunications or electricity distribution network; or a government body.

2 Persons subject to the obligation 2. The obligation to provide information applies to every person, other than a corporation referred to in section 1086R89 of the RTA or a person exempt from tax under Book VIII of Part I of the TA, and every partnership that, as an owner, tenant or administrator or in any other capacity, uses a building, structure or land in the course of carrying on a business or for the purpose of earning income therefrom. Therefore, individuals, corporations, partnerships, trusts and cooperatives may be subject to that obligation. 3. Section 1086R89 of the RTA provides that the obligation to provide information does not apply to a corporation whose assets (and those of all the corporations with which it may be associated) that are shown in the financial statements submitted to the shareholders or, where such financial statements either have not been prepared or have not been prepared in accordance with generally accepted accounted principles, that would have been shown in the financial statements had they been prepared in accordance with generally accepted accounting principles for its preceding taxation year or, where the corporation is in its first fiscal period, at the beginning of its first fiscal period, are $25 million or more. Property in respect of which the obligation applies 4. The obligation to provide information applies in respect of property situated in Québec and used in the course of carrying on a business or for the purpose of earning income therefrom. Such property includes buildings, edifices, land, structures and any works of a permanent nature that are immovables within the meaning of the Civil Code of Québec. Examples of property in respect of which the obligation applies include roads and highways; residential complexes (single-unit and multiple-unit); gardens; swimming pools (indoor and outdoor, in-ground and above-ground); bridges; parking areas (indoor and outdoor, and carports); irrigation systems; agricultural land; and fences. Work in respect of which the obligation applies 5. The obligation to provide information applies in respect of renovation, improvement, maintenance and repair work in respect of, in particular, any of the property referred to in point 4 above. Examples of work in respect of which the obligation applies include

3 landscaping (initial work and regular upkeep); construction; demolition; snow removal; electrical work; fence installation; swimming pool installation; painting; and plumbing. 6. With regard to construction, the obligation to provide information exists only where renovations, improvements, maintenance or repairs are involved. For example, construction of a new building is not, as a rule, covered by section 1086R89 of the RTA. Prescribed information 7. The name, the mailing address and, if applicable, the social insurance number and the Québec sales tax (QST) identification number of the person (the individual, corporation, partnership or trust) that carried out the work must be provided to the Minister of Revenue. 8. The total amount billed for the work must also be provided. That amount must include not only the labour expenditure but also the expenditure for the purchase of materials and installation. Filing the form 9. The particular person (see point 1) or the designated member of a partnership must enclose an information return in prescribed form (form TP-1086.R V) with the tax return for either the taxation year in which the labour expenditures are incurred or the taxation year in which the partnership's fiscal period ends, as the case may be. 10. A particular person (see point 1) or the member of a partnership designated to file an information return that is not required to file a tax return under Part I of the TA for either the year or the taxation year in which the partnership's fiscal period ends must file an information return on or before the filing-due date for the tax return that would have had to have been filed had any income tax been owing under Part I of the TA for that year. 11. Where no member of a partnership has been designated to file an information return, each member of the partnership is required to file one. Persons, bodies and organizations not subject to the obligation 12. A person that owns a building, structure or land used exclusively for personal purposes is not subject to the obligation to provide information about a labour expenditure. However, a taxpayer

4 that claims an expense deduction in respect of a portion of any such property used for commercial or rental purposes must provide the prescribed information to the Minister. 13. The following persons, bodies and organizations are not required to file an information return in respect of a labour expenditure incurred in a particular year if they are exempt from income tax for that entire year under Book VIII of Part I of the TA: a person exempt from tax under sections 982 and 983 of the TA; a municipality or municipal or public body performing a function of government in Canada (section 984 of the TA); a corporation, commission or association of which 90% is owned by the State, Her Majesty in right of Canada, Her Majesty in right of a province (other than Québec) or a municipality in Canada (sections 985 to of the TA); a registered charity (sections to of the TA); a registered amateur athletic association (sections to of the TA); a registered national arts service organization (sections to of the TA); a registered museum (sections to of the TA); a registered cultural or communications organization (sections to of the TA); a recognized political education organization (sections to of the TA); an R&D (scientific research and experimental development) corporation (section 991 of the TA); an agricultural organization (paragraph (a) of section 995 of the TA); a board of trade (paragraph (a) of section 995 of the TA); a corporation constituted exclusively for the purpose of providing low-cost housing accommodation for the aged (paragraph (b) of section 995 of the TA); a non-profit club, society or association referred to in section 996 of the TA; an association of employees described in paragraph (a) of section 998 of the TA; a benevolent or fraternal benefit society or order (paragraph (a) of section 998 of the TA); a mutual insurance corporation receiving its premiums wholly from the insurance of churches, schools or charitable organizations (paragraph (b) of section 998 of the TA); a limited-dividend housing company, within the meaning of section 2 of the National Housing Act (R.S.C. 1985, c. N-11), all or substantially all of the business of which is the

5 construction, holding or management of low-rental housing projects (paragraph (c) of section 998 of the TA); one of certain corporations that are incorporated and operated for the administration of a registered pension plan and that are referred to in paragraph (c.1) of section 998 of the TA; a corporation referred to in paragraph (c.2) of section 998 of the TA; a small business investment corporation referred to in paragraph (c.3) of section 998 of the TA; a master trust described in paragraph (c.4) of section 998 of the TA; a trust established under a registered pension plan (paragraph (d) of section 998 of the TA); a trust established under a profit sharing plan, to the extent provided in Title I of Book VII of Part I of the TA (paragraph (e) of section 998 of the TA); a trust established under a deferred profit sharing plan, to the extent provided in Title II of Book VII of Part I of the TA (paragraph (f) of section 998 of the TA); an RCA trust, within the meaning of subparagraph (c) of the first paragraph of section of the TA (paragraph (f.1) of section 998 of the TA); a trust established under a registered education savings plan, to the extent provided in Title III of Book VII of Part I of the TA (paragraph (g) of section 998 of the TA); a trust established under a registered disability savings plan, to the extent provided in Title III.1 of Book VII of Part I of the TA (paragraph (g.1) of section 998 of the TA); a trust established under a registered retirement savings plan, to the extent provided in Title IV of Book VII of Part I of the TA (paragraph (h) of section 998 of the TA); a trust established under a tax-free savings account, to the extent provided in Title IV.3 of Book VII of Part I of the TA (paragraph (h.1) of section 998 of the TA); a trust established under a registered retirement income fund, to the extent provided in Title V.1 of Book VII of Part I of the TA (paragraph (i.1) of section 998 of the TA); a trust established under a registered supplementary unemployment benefit plan, to the extent provided by sections 962 to 965 of the TA (paragraph (j) of section 998 of the TA); a trust governed by an eligible funeral arrangement (paragraph (j.1) of section 998 of the TA); a cemetery care trust (paragraph (j.2) of section 998 of the TA); an insurer referred to in paragraph (k) of section 998 of the TA;

6 a trust that is established in order to provide compensation funds and that is referred to in paragraph (l) of section 998 of the TA; a trust that is established under a collective agreement and that is referred to in paragraph (m) of section 998 of the TA; an amateur athlete trust (paragraph (n) of section 998 of the TA); an environmental trust (paragraph (o) of section 998 of the TA); a trust that is created because of a requirement imposed by section 56 of the Environment Quality Act (CQLR, c. Q-2) and that is referred to in paragraph (p) of section 998 of the TA; and a trust that is created because of a requirement imposed by subsection 9(1) of the Nuclear Fuel Waste Act (S.C. 2002, c. 23) and that is referred to in paragraph (q) of section 998 of the TA. Penalities 14. Every person that fails to provide the required information on the prescribed form that must be filed in respect of work carried out on a building, structure or land used in the course of carrying on a business or for the purpose of earning income therefrom is liable to a penalty of $200 for each person in respect of which such information is not provided. 15. In addition, every person that fails to provide information to a person that is required to file a prescribed form in respect of work carried out on a building, structure or land used in the course of carrying on a business or for the purpose of earning income therefrom is liable to a penalty of $500.