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Notification of Pubco's New Partial Eligible Dividend Designation - by Nancy Belo Gomes 

Canadian Tax Adviser

 

October 09, 2012

 

Nancy Belo Gomes
Toronto, National Tax Centre

 

In a recent technical interpretation, the CRA clarified that, where only a portion of a dividend is designated as an eligible dividend as introduced in the 2012 federal budget, an online notice, press release or a notice in an annual or quarterly report that an eligible dividend has been paid are still acceptable methods of notification that a public corporation paid an eligible dividend. The CRA said its position on acceptable methods of making a notification, originally published in a 2006 press release, would still apply when only a portion of a dividend is designated as an eligible dividend.

The 2012 federal budget announced that corporations would be allowed to designate any portion of a dividend to be an eligible dividend. This measure is now in subsection 89(14).

 

Legislative background
In a 2006 press release, the CRA stated that posting a notice on a public corporation's website is an acceptable method of making a notification that the corporation paid an eligible dividend, under subsection 89(14) of the Act. The CRA said it considers a notice posted on a corporate website to be notification that an eligible dividend is paid to shareholders until that notice is removed. Similarly, a notice in an annual or quarterly report that an eligible dividend has been paid is considered valid for that year or quarter, respectively. Alternatively, the CRA said that if a public corporation issues a press release announcing the declaration of a dividend, a statement in the press release indicating that the dividend is an eligible dividend is sufficient proof that notification was given to each shareholder.

 

Issue
At issue is whether the methods of notification described in the 2006 press release would be acceptable where only a portion of the dividend will be designated as an eligible dividend under amended subsection 89(14).

 

CRA comments
In the current TI, the CRA confirms that a press release, posting a notice on the corporation's website or in corporate quarterly or annual reports or shareholder publications, as described in the 2006 press release, would be acceptable where only a portion of the dividend will be designated as an eligible dividend, under amended subsection 89(14).

 

For more information, contact your KPMG adviser.

 

 

 

 

Information is current to October 9, 2012. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.

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