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.
Why it matters: It is widely expected that Revenue Quebec will now issue more demand letters to third parties outside the province even though questions remain over the scope of the ruling.
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.
“The courts have always been reluctant to cancel or quash demand letters or requests for information, and one of the reasons is that it is not a collection measure per se but rather it is part of an investigation conducted by tax authorities,” noted Étienne Gadbois, a Montreal tax lawyer.