Vincent – Court of Quebec imputes use of the firm’s Quebec establishments to a “silent” partner having departed from KPMG Canada to France in ousting a Quebec-France Treaty exemption

In May 2012, a Quebec-resident lawyer, who theretofore had been a partner of KPMG Canada, became a resident of France and started working at KPMG France. Despite his departure, Vincent received payments from KPMG Canada of $84,721 for 2013 and $58,936 for 2014, which were described in the Quebec tax-reporting slips issued by KPMG Canada as having been paid to him as a “silent partner” (“associé passif”). He was unsuccessful in getting KPMG Canada to change this description on the slips.

Art. 14 of the Income Tax Convention between France and Quebec only exempted income derived by a resident of France from a “liberal profession” (such as law) where such income did not relate to a fixed base used by the French resident in Quebec in exercising such profession. After quoting a statement in Dunne, 2005 QCCA 739 that “when dealing with a firm, all the members, including a member not residing in Quebec, carry on the business of the firm and thereby exploit all of the firm’s establishments there,” Lareau JCQ indicated that the two amounts allocated to the taxpayer thus were taxable to the taxpayer if he was a member of KPMG Canada in 2013 and 2014. As the taxpayer did not provide any evidence on this point other than a copy of his letter of resignation, the taxpayer failed to make this case, and his appeal was dismissed. (Lareau JCQ also made the questionable statement that the taxpayer and the ARQ were bound by the “partner” label in the tax-reporting slips issued by KPMG Canada, given that the taxpayer had not secured its change.)

Neal Armstrong. Summary of Vincent v. Agence du revenu du Québec, 2020 QCCQ 3605 under Treaties – Income Tax Conventions – Art. 7 and s. 96(1)(f).