Memo-CRAC – January 12, 2006

 

Joint filing of information return and tax return

 

 

Certain amendments to the Act Respecting the Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons came into effect on January 1st, 2006. These new provisions introduced the option for a business to file an information return together with its tax return.

 

The objective of joint filing is to alleviate some of the administrative burden imposed on businesses and thus reduce the paperwork to be filed by them each year with different government offices.

 

  • What is an information return?

 

The Information Return for the Quebec Enterprise Register is a form to be used to update each year the information about a registrant in the CIDREQ register by indicating any changes with respect to this registrant. The information return is also known as Schedule O for sole proprietors and Form LE-630 for legal persons.

 

If a client selects to file an information return with his tax return, he shall be exempted from filing an annual declaration with the Quebec Enterprise Registrar (REQ).

 

You may have heard about these changes but not had time yet to familiarize yourself with the specific rules. Let’s try to sort this out and find answers to some of the questions you may have.

 

  • Which registrants can exercise the joint filing option? 

Registrants allowed to exercise the joint filing option are individuals (sole proprietors) and legal persons (corporations) who must file a tax return with the Minister of Revenue of Quebec (MRQ).

 

The other registrants do not get to exercise the joint filing option, and they are partnerships, associations and other groups, etc.

 

  • Who files what and where? 

Registrants allowed to choose have the following two options:

 

1) Join to the tax return to be filed with MRQ:

 

  • Schedule O for individuals; or
  • Form LE-630 for legal persons.

 

If a client decides to exercise this option, the accountant will have to complete either the schedule or form by recording any changes to the information set out in the document called Information Statement. We will discuss what an information statement is below. Once the information return is duly completed by the accountant, either in the form of Schedule O or Form LE-630, it is filed along with the tax return to MRQ.

 

OR

 

2) File an annual declaration with REQ.

 

The other registrants have no choice but to file their annual declarations with REQ each year as they have done in the past except they will do so during a different filing period as appears in the table below.

 

  • What is an information statement? 

Your clients will receive from Revenue Quebec, about 6 weeks prior to their financial year end, a document called Information Statement. This document reproduces the information regarding the business that appears in the CIDREQ register on the date of delivery of such document.

 

Undoubtedly, you will get calls from clients soon asking what to do with this information statement they will have received. Your client is to keep this statement if he wants his accountant to file an information return. The information contained in this statement shall be relied upon by the accountant to record any changes to that information by filling out either Schedule O or Form LE-630.

 

In our opinion, you should warn your clients about the risk in opting for joint filing of the information return and tax return. Many months could elapse between the date of delivery of the information statement and the date on which the information return is ready to be filed, thus rendering the information statement out of date and unreliable. Moreover, the accountant often doesn’t know what changes occurred in the business making it difficult to fill out the information return accurately.

 

For these reasons, we believe that it would be sound for a business to opt for the filing of the annual declaration with REQ in order to ensure that the information declared in the register is accurate and up-to-date. Obviously, communication between the client, the accountant and the attorney becomes even more crucial.

 

  • To whom do you pay the annual registration fee? 

For registrants allowed to choose between the two options, they must pay the annual registration fee to Revenue Quebec at all times even if they opted to file their annual declaration with REQ. A new line will be added on in the tax return to cover the amount due. This amount shall be considered as a tax to be paid at the same time as any other tax due, and to which Revenue Quebec may charge interest and penalty, if necessary (see table below).

 

For the other registrants, they must continue to pay the annual fee to REQ along with the annual declaration filed at the same time.

 

  • Has the filing period changed?

 

Yes, in order to have it coincide with the filing period for tax returns. We refer you to the table below to find out what the new filing period is for each type of registrant.

 

Indeed, we thought that the table below would serve to recapitulate the most relevant points with respect to joint filing.

 

 

 

Type

of

registrant

 

 

Joint filing possible

 

 

Declaration filed at:

 

 

Filing

Period

 

 

Payment Period

 

 

Annual amount due

 

 

Amount payable

to:

 

Individuals

(Sole proprietors)

Yes

MRQ

or

REQ

January 1

to

June 15

January 1

to

April 30

(Taxes due)

$32

(included in taxes due)

MRQ

Legal

Persons

Yes

MRQ

or

REQ

6 months following financial

year end

 

2 months following financial

year end

(Taxes due)

$79

(included in taxes due)

MRQ

Partnerships (Civil Code)

No

REQ

January 1

to

June 15

January 1

to

June 15

$48

REQ

Associations and Other Groups

No

REQ

May 15

to

November 15

May 15

to

November 15

$32

REQ

Extra-Provincial Legal Persons (no establishment in Quebec)

No

REQ

May 15

to

November 15

May 15

to

November 15

$79

REQ

 

 

 

This memo is a brief summary. We will deal with this subject matter again in greater detail in our next issue of Info-CRAC of February 1, 2006. In the interim, if you have any questions, please call Ms. Franca Sucapane, ext. 328.