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, at para. 28 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 stated (at para. 20) that the “question of whether or not Vincent is a member of KPMG Canada in 2013 and 2014 therefore becomes determinative in resolving this dispute” (TaxInterpretations translations).
In going on to find that Vincent received the amounts allocated to him as a member of KPMG Canada, Lareau JCQ went on to state (at para. 21):
There is no doubt that for the 2013 and 2014 taxation years, Vincent participated in the profits of KPMG Canada. Vincent did not provide any explanation as to the nature of the interest that enables him to receive income from this firm. He only contested the status of passive partner accorded to him in the granted to him in the relevés 15 of KPMG Canada by invoking his letter of resignation. However, the relevés 15 issued by KPMG Canada are official statements provided to taxpayers in order to establish, among other things, the amount of their income earned in Quebec. Vincent is bound by the content of these statements, as is the ARQ, and if they contain errors, it is up to the taxpayer to obtain the correction, which Vincent tried in vain to do with KPMG Canada.