RECENT CHANGES TO REVENU QUÉBEC’S VOLUNTARY DISCLOSURE POLICY
Over the past two years, the Agence du Revenu du Québec (“RQ”) has made changes to its voluntary disclosure (“VD”) policy. Here’s a brief summary of the income tax and Quebec sales tax (“QST”) changes.
BACKGROUND
To encourage taxpayers and agents to regularize their tax situation, the tax authorities have created the DV program. This program avoids penalties and criminal prosecution as long as duties and interest are paid, provided the eligibility conditions are met (complete, verifiable, spontaneous and paid).
MODIFICATIONS
RQ issued a new bulletin (ADM. 4/R3) on June 29, 2012 changing certain rules in Quebec. Subsequently, this bulletin was updated on September 19, 2013, with the publication of bulletin ADM.4/R4 in order to provide certain clarifications and to make the use of form LM-15 (voluntary disclosure request) mandatory when submitting a file opening request.
This bulletin sets out clearer and more detailed rules for :
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situations where the DV policy is not applicable;
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second DV cases;
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anonymous disclosure;
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how to submit an application.
RQ will not accept a DV file for the sole purpose of avoiding a late filing penalty on the last return due. On the other hand, RQ will accept it if it is part of a set of declarations to be regularized.
The bulletin clarifies the conditions necessary for a second voluntary disclosure to be accepted. It mentions that RQ may accept to process a second disclosure for the same taxpayer when the circumstances related to this second disclosure are beyond the control of this person, and that the omissions, tax evasions or inaccurate or incomplete statements that he declares cannot be considered as a repetition of the omissions, tax evasions or inaccurate or incomplete statements that he declared in his first disclosure, or as gross negligence. A second disclosure can never be anonymous, and must contain information relating to the first disclosure. Please note that processing procedures differ depending on whether it is a new voluntary disclosure or a second request following the cancellation of a first request.
Anonymous disclosures can only be made if they relate to at least one taxation year, calendar year or prescriptible period, which was not the case previously. An individual who has failed to declare tax liabilities, for example, will not be able to make an anonymous disclosure if the disclosure concerns only the three most recent years for which a tax return must be filed.
In addition, if the voluntary disclosure is made on an anonymous basis, several pieces of information must be provided (see ADM.4/R4), including the first three characters of the postal code. It should be noted that certain requests, the spontaneous nature of which could be questioned when the file is opened (high-profile case, subject of the Charbonneau commission), cannot be made anonymously.
Another new feature of this version of the bulletin is the requirement to complete a prescribed form in order to take advantage of the voluntary disclosure program. A simple call and discussion with an agent is no longer enough to open a file. A formal application on the new prescribed form is now required with all the information requested. This form must be sent by fax or mail. In addition, the information required on this form to initiate the request is more complete and detailed. Please note that failure to complete the form correctly may result in rejection of your voluntary disclosure request. If your application is incomplete, a QR agent will contact you to request the missing information within a specified timeframe. If you fail to reply within this period, the request for voluntary disclosure will not be considered. You will then need to submit a new, completed application. It’s important to know that program protection begins on the date your application is received, if it is compliant or if you respond to the request for additional information within the allotted time. Therefore, if you fail to meet the final conditions, program protection will not begin until the date of receipt of your new, duly completed application.
TVQ FEATURE
An important new QST rule was introduced on June 29, 2012: the collection of QST. Previously, the program allowed an agent not to remit uncollected tax to RQ in a wash transaction: a seller who did not collect an amount of tax from a purchaser who, had he paid it, would have been entitled to a full input tax refund. Since June 2012, RQ’s policy has been harmonized with that of the Canada Revenue Agency. In other words, for files opened after this date, rights will be contributed without penalty or interest.
This means that an agent who has not invoiced the taxes to his client must now remit both taxes and recover them from his client, which can create a liquidity problem when the amounts involved are significant for the agent. Nevertheless, in situations where the amounts involved are very substantial, it may be possible to reach an agreement with RQ for a tax transfer to be made between the supplier and the purchaser.
CONCLUSION
The DV program is a very practical solution for regularizing a problematic situation where penalties and interest could be a burden for the taxpayer/agent. However, it is important to ensure that all conditions are met. If in doubt, you are advised to contact RQ at: (514) 287-3585 ext. 2878705, to obtain clarification on the eligibility of your request, the terms and conditions for opening an account, and the treatment that may be applicable to your client’s situation.
This article was originally published in: Bulletin CPA |
Recent changes to Revenu Québec’s voluntary disclosure policy
| April 30, 2014
Recent changes to Revenu Québec’s voluntary disclosure policy
| April 30, 2014
