Galaxia – Court of Quebec finds that a company whose shareholder was named as a VP of its only client did not have a personal services business

For the three taxation years in issue, the ARQ assessed Galaxia on the basis that it was carrying on a personal services business. Galaxia’s shareholder was engaged, through Galaxia, by Galaxia’s sole client during those years (“SM”) to canvas her extensive network of overseas contracts to obtain contracts for SM’s business of providing security-related services. Before concluding that Galaxia was not engaged in a personal services business, Riverin JCQ found:

• The shareholder was not under the control of SM, so that, for instance, she had no marketing plans to meet, and she did not inform SM of her travels.
• The only revenues of Galaxia were commissions calculated and collected as a percentage of the billings received by SM from the contracts generated by Galaxia – so that its revenues were highly variable.
• Galaxia incurred significant expenses, and thus was significantly at risk of generating losses.
• Although the shareholder was named as a vice-president of SM with an SM email address, this was done only for marketing reasons and her title was honorific.

Neal Armstrong. Summary of Consultants Galaxia Inc. v. Agence du revenu du Québec, 2023 QCCQ 5871 under s. 125(7) - personal services business.