Revenue Quebec can issue demand letters to third parties outside of the province

The Quebec Court of Appeal has ruled the province’s tax authority can issue demand letters and request the disclosure of financial information from third parties outside the province to determine whether a taxpayer is subject to the province’s tax laws.

The precedent-setting ruling will potentially have a substantial impact as it is widely expected to spur Revenue Quebec to issue more demand letters to third parties outside the province even though questions remain over the scope of the ruling, tax lawyers say.

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Ruling extends reach of taxman’s demand letters

Quebec’s tax authorities can issue demand letters and request the disclosure of financial information from third parties located outside of the province to determine whether the taxpayer is subject to the province’s tax laws, ruled Quebec Superior Court.

The ruling illustrates the daunting challenge taxpayers face when trying to quash formal demand letters and requests for information by tax authorities, particularly when they are trying to ascertain the residency of corporations or trusts in order to establish where it makes its management decisions, according to tax experts.

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