TP-1097-V - Notice of Disposition or Proposed Disposition

TP-1097-V - Notice of Disposition or Proposed Disposition

Information

If more than one non-resident vendor is involved in a disposition, a separate notice must be filed for each vendor. A separate notice must also be filed for each disposition of property. However, a single notice must be filed if more than one property was or will be disposed of at the same time by the same vendor in favour of the same purchaser.

Taxable Québec property referred to in section 1097 of the Taxation Act

Property is taxable Québec property referred to in section 1097 of the Taxation Act (TA) if:

it is not excluded property or property referred to in section 1102.1 of the TA (see Excluded property and Property referred to in section 1102.1 of the TA below); and
it is, for example:
- immovable property situated in Québec;
- property used in Québec by the non-resident vendor in carrying on a business (other than an insurance business);
- an interest in or option in respect of property referred to in one of the two previous points;
- a share that is not listed on a designated stock exchange, if the non-resident vendor is a corporation and, at any time during the 60-month period prior to the disposition, the value of the share is derived primarily from immovable property situated in Québec, Québec resource property or Québec timber resource property;
- an interest in a partnership, if the non-resident vendor is a corporation and, at any time during the 60-month period prior to the disposition, the value of the interest is derived primarily from immovable property situated in Québec, Québec resource property or Québec timber resource property;
- an interest in a trust,¹⁰ if the non-resident vendor is a corporation and, at any time during the 60-month period prior to the disposition, the value of the interest is derived primarily from immovable property situated in Québec, Québec resource property or Québec timber resource property; or
- an interest in or option in respect of property referred to in one of the three previous points, if the non-resident vendor is a corporation.

Excluded property

Excluded property refers to, for example:

property that is tax exempt under a tax agreement;¹¹
movable property used in Québec by the non-resident vendor and included in the inventory of a business (including an interest in or option in respect of such property);
a share listed on a recognized stock exchange (including an interest in or option in respect of such a share); and
a unit of a mutual fund trust (including an interest in or option in respect of such a unit).

Property referred to in section 1102.1 of the TA

Property referred to in section 1102.1 of the TA is:

depreciable taxable Québec property (including such property that was considered incorporeal capital property before 2017 and is used in Québec for a business, other than an insurance business);¹²
immovable property situated in Québec and included in the inventory of a business;
Québec resource property;
Québec timber resource property;
a life insurance policy; and
an interest in or option in respect of any of the aforementioned property.

A person who wishes to notify us of the disposition or proposed disposition of property referred to in section 1102.1 of the TA must use form TP-1102.1-V, Notice of Disposition or Proposed Disposition of Property Covered by Section 1102.1 of the Taxation Act by an Individual or Corporation Not Resident in Canada. If the property is a life insurance policy, the insurer must send us form TP-1102.3-V, Payment of Income Tax by an Insurer on Behalf of an Individual Not Resident in Canada Further to the Disposition of a Life Insurance Policy. For more information, refer to those forms.

Obligation to file a notice of disposition

A notice of disposition must be filed further to the disposition of taxable Québec property referred to in section 1097 of the TA, unless all the following conditions have been met:

a notice of proposed disposition has already been filed in respect of the property;
the purchaser mentioned in the notice of proposed disposition and the actual purchaser are the same;
the proceeds of disposition are not more than the proceeds of disposition indicated in the notice of proposed disposition; and
the adjusted cost base (ACB) immediately prior to the disposition is not less than the ACB indicated in the notice of proposed disposition.

If one or more of the aforementioned conditions are not met, you must send a notice of disposition by registered mail to the address below within 10 days of the disposition:

Revenu Québec
3800, rue de Marly
Québec (Québec) G1X 4A5

Any notice of proposed disposition should also be sent to us at the same address.

If you fail to send us a notice of disposition by the deadline, you will be liable to a penalty of $25 for every day you are late, up to a maximum of $2,500.

Obligations of the purchaser

If the non-resident vendor has not met its obligation to notify us of the disposition of a property covered by section 1097 of the TA, has not paid to the Minister the amount on account of tax payable calculated in Part 5 or has not provided the Minister with acceptable security, the purchaser must pay the Minister, on behalf of the non-resident vendor, an amount corresponding to the difference between the acquisition cost of the property and the amount shown on the certificate issued under section 1098 of the TA respecting the disposition of that property, within 30 days following the end of the month in which the property was acquired.

Issuance of a certificate of compliance

If the disposition of property results in a taxable capital gain and the non-resident vendor encloses with the notice the amount on account of tax payable calculated in Part 5 (or provides acceptable security), we will issue the non-resident vendor and the purchaser a Certificate in Respect of the Disposition or Proposed Disposition of Taxable Québec Property by a Person Not Resident in Canada (TPF-1098-V).

The certificate relieves the purchaser of any liability for income tax arising from the transaction.

However, in the case of a proposed disposition, the certificate does not relieve the purchaser of such liability where the actual proceeds of disposition are greater than the proceeds of disposition indicated in the notice of proposed disposition. In such a situation, the non-resident vendor must file a notice of disposition and, in order for a new certificate to be issued, the vendor must remit an amount on account of tax payable in respect of the additional capital gain realized on the disposition. The new certificate relieves the purchaser of any liability for income tax arising from the transaction.

Supporting documents

You must enclose a cheque or money order (or proof of security) and a copy of any document substantiating the proceeds of disposition and ACB that you have entered, such as:

the purchase offer or any similar written agreement that has the same effect (for a proposed disposition);
the sales contract or any instrument for the transfer of property that is not listed below (for a disposition);
the deed of gift (for a disposition by way of an inter vivos gift);
a report or letter from an appraiser showing the fair market value of the property on the date of disposition (for a non-arm's-length disposition);
a list of the partners, including each partner's name, address, percentage interest in the property, and their portion of the payment (for the disposition of property by a partnership);
the documents substantiating the balance of the partnership's capital account (for the disposition of property that is an interest in a partnership);
the contract of acquisition of the property by the non-resident vendor and, if applicable, any document substantiating the calculation of the adjusted cost base (notary fees, real estate commissions, brokerage fees, invoices for improvements to the property, etc.);
a copy of form TP-518-V, Transfer of Property by a Taxpayer to a Taxable Canadian Corporation (for a disposition covered by an election under section 518 of the TA).

For the disposition of a principal residence (see notes 3 and 7, as well as the first point in note 8), also enclose the following, as applicable:

form TP-274-V, Designation of Property as a Principal Residence, and, if applicable, form TP-274.S-V, Reduction of the Capital Gain Deemed to Have Been Realized on a Principal Residence (for a non-resident vendor that is an individual other than a trust);
form TP-274.F-V, Designation of Property as a Principal Residence of a Personal Trust (for a non-resident vendor that is a personal trust covered by this form).

In addition, in the case of a disposition by a trust or succession, enclose, if applicable:

the will and, if the will is not notarized, proof of the will's validity (the probate of the will or the notarial minutes of the probate, or any similar document obtained in the non-resident vendor's country of residence);
the deed of trust;
proof of residence for the trustee (or the liquidator or any representative of the trust or succession);
a list of the beneficiaries and their place of residence.

If the non-resident vendor is a foreign officer, a member of a diplomatic mission or consular post, a director of a prescribed international organization or a representative of a member state on a prescribed international organization, the vendor must send us, in addition to proof of residency, an official document confirming the vendor's position that has been issued by the Ministère des Relations internationales et de la Francophonie or by another competent authority.

Foreign officer and similar positions

If the non-resident vendor is a foreign officer, a member of a diplomatic mission or consular post, a director of a prescribed international organization or a representative of a member state on a prescribed international organization, check the box at the end of Part 1 so that the person can receive the exemption on capital gains realized on the disposition of Québec taxable property referred to in section of 1097 of the TA. Next, enter the amount of the exemption on line 5.1.

The same privilege can be granted to members of the non-resident vendor's family and to the vendor's employees if they meet the required conditions. The exemption applies mainly to the persons listed below, provided they meet the specified criteria.

Foreign officer

A foreign officer is an officer or servant of the government of a foreign country:

who is exempt from tax because his or her duties require him or her to reside in Canada;
who resided outside Canada immediately before assuming his or her duties; and
whose country grants a similar privilege to an officer or servant of Canada or Québec of the same class.

No exemption can be granted, however, if the officer or servant of the government of a foreign country:

is a Canadian citizen;
carries on a business in Canada; or
performs the duties of an office or employment other than the person's position with that government.

The tax exemption also applies to a member of the foreign officer's family who resides with that person or to an employee of that person if all the following conditions are met:

the government of the foreign country grants a similar privilege to members of the family residing with and persons employed by an officer or servant of Canada or Québec of the same class;
the family member, at a given time:
- was not lawfully admitted to Canada for permanent residence,
- did not carry on a business in Canada, or
- did not perform the duties of an office or employment in Canada;
the employee resided outside Canada before assuming his or her duties as an employee of the foreign officer or servant and, since first assuming those duties, has not at any time:
- carried on a business in Canada,
- been employed in Canada other than by the foreign officer or servant;
the family member or employee is not a Canadian citizen.

Member of a diplomatic mission

A member of a diplomatic mission of a country other than Canada is an individual who is a diplomatic agent or a member of the administrative or technical staff of a diplomatic mission.

Any member of a diplomatic mission is exempt from tax if he or she meets all the following conditions:

The member is registered with the Ministère des Relations internationales et de la Francophonie or another competent authority.
The member is not a permanent resident.
The member is not a Canadian citizen.
The member is not performing the duties of an office or employment in Québec other than his or her function with the government that he or she represents.

The exemption also applies to a family member of a member of a diplomatic mission if the family member resides with that person and meets the following conditions:

The family member is registered with the Ministère des Relations internationales et de la Francophonie or another competent authority.
The family member is not a Canadian citizen.
The family member does not carry on a business in Québec and is not performing the duties of an office or employment in Québec.
In the case of a family member of a member of the administrative or technical staff of a diplomatic mission, the family member is not a permanent resident.

Member of a consular post

A member of a consular post of a country other than Canada is an individual who is a consular officer (excluding an honorary consular officer) or a consular employee.

Any member of a consular post is exempt from tax if he or she does not carry on a business in Québec and he or she meets the same conditions as for a member of a diplomatic mission.

The exemption also applies to a family member of the member of a consular post if the family member resides with that person and meets the following conditions:

The family member is registered with the Ministère des Relations internationales et de la Francophonie or another competent authority.
The family member is not a Canadian citizen.
The family member is not a permanent resident, is not carrying on a business in Québec and is not performing the duties of an office or employment in Québec.

The exemption does not apply to a consular employee employed at a consular post headed by an honorary consular officer.

Prescribed international organization

A prescribed international organization can be a government organization such as the International Civil Aviation Organization (ICAO), or a non-government organization such as the United Nations Educational, Scientific and Cultural Organization (UNESCO).

The following persons employed by, or connected to a person employed by, a prescribed international organization (depending on the type of organization) can receive the exemption if certain conditions are met:

a director of a prescribed international organization as well as the director's employees and family members;
a representative of a member state on a prescribed international organization as well as the representative's employees and family members.

Notes

Before filing this form, the trust must obtain an identification number by filing an Application for a Trust Identification Number (form LM-58.1.2-V). Effective March 26, 2021, trusts must use this number in all returns, reports and other documents required under tax law. Failure to do so could result in a penalty.
The trust account number is shown on the federal Trust Income Tax and Information Return (form T3RET). Effective March 26, 2021, trusts must use this number in all returns, reports and other documents required under tax law. Failure to do so could result in a penalty.
You cannot deduct the expenses incurred by the non-resident vendor for the disposition of a principal residence, specifically real estate commissions, appraisal and surveying fees, and legal and notary fees. However, you can deduct those expenses using form TP-274-V, Designation of Property as a Principal Residence, or form TP-274.F-V, Designation of Property as a Principal Residence of a Personal Trust, depending on whether the non-resident vendor is an individual or a trust (including a succession). To do so, complete and enclose the appropriate form with the Québec income tax return that the non-resident vendor must file for the year of disposition of the principal residence.
If the disposition concerns an immovable (land or building), enter the address, the amount of the municipal assessment and the lot number.
In the case of a disposition in favour of a person not dealing at arm's length with the non-resident vendor and the proceeds of disposition are less than the property's fair market value (FMV), or in the case of a disposition by way of an inter vivos gift, enter the property's FMV as at the date entered in column 1. (In the case of a proposed disposition, enter your estimate of the property's FMV as at that date.) The amount must be expressed in Canadian dollars.
Enter the ACB as at the date entered in column 1 in the case of a disposition. Enter the ACB as at the date of this notice in the case of a proposed disposition. The ACB must be expressed in Canadian dollars.
See guide IN-120-V, Capital Gains and Losses.
Enter the amount of the exemption being claimed. This can be:
- the exemption on capital gains realized on the disposition of a principal residence, which can be claimed only for the years during which the non-resident vendor that is an individual or trust (including a succession) resided in Canada, provided the other eligibility requirements are met;
- the exemption for a foreign officer, a member of a diplomatic mission, a member of a consular post, a director of a prescribed international organization or a representative of a member state on a prescribed international organization.
If a notice of proposed disposition was sent to us in respect of the property described in Part 4, enter the amount on account of tax payable (or the amount of security) included with that notice.
An income interest in a trust resident in Canada is not taxable Québec property and, therefore, is not property referred to in section 1097 of the TA.
In the case of a disposition of such property between persons not dealing at arm's length, the property constitutes excluded property only if the purchaser sends us, within 30 days after the acquisition date, a notice setting out the acquisition date, the acquisition cost, the non-resident vendor's name and address, a description of the property sufficient to recognize it and the name of the country with which Canada has entered into the applicable tax agreement.
On January 1, 2017, capital property that was incorporeal capital property before that date became depreciable property included in the new class 14.1. This includes goodwill, trademarks, customer lists or quotas.