Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2014-06-12 and last amended on 2014-05-16. Previous Versions

 [Repealed, SOR/81-725, s. 6]

PART LIXFOREIGN AFFILIATES

[SOR/94-686, s. 79(F)]

Dividends out of Exempt, Taxable and Pre-Acquisition Surplus

  •  (1) Where at any time a corporation resident in Canada or a foreign affiliate of the corporation receives a dividend on a share of any class of the capital stock of a foreign affiliate of the corporation,

    • (a) for the purposes of this Part and paragraph 113(1)(a) of the Act, the portion of the dividend paid out of the exempt surplus of the affiliate is prescribed to be that proportion of the dividend received that

      • (i) such portion of the whole dividend paid by the affiliate on the shares of that class at that time as was deemed by section 5901 to have been paid out of the affiliate’s exempt surplus in respect of the corporation

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

    • (a.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the portion of the dividend paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that

      • (i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s hybrid surplus in respect of the corporation

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

    • (b) for the purposes of this Part and subsection 91(5) and paragraphs 113(1)(b) and (c) of the Act, the portion of the dividend paid out of the taxable surplus of the affiliate is prescribed to be that proportion of the dividend received that

      • (i) such portion of the whole dividend paid by the affiliate on the shares of that class at that time as was deemed by section 5901 to have been paid out of the affiliate’s taxable surplus in respect of the corporation

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

    • (c) for the purposes of this Part and paragraph 113(1)(d) of the Act, the portion of the dividend paid out of the pre-acquisition surplus of the affiliate is prescribed to be that proportion of the dividend received that

      • (i) such portion of the whole dividend paid by the affiliate on the shares of that class at that time as was deemed by section 5901 to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

    • (c.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that

      • (i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time; and

    • (d) for the purposes of this Part and paragraph 113(1)(b) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the taxable surplus of the affiliate is prescribed to be that proportion of the underlying foreign tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that

      • (i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time

      is of

      • (ii) the whole dividend paid by the affiliate on the shares of that class at that time.

  • (2) Notwithstanding paragraphs (1)(a) and (b), where at any time a foreign affiliate of a corporation resident in Canada pays a dividend on a share of a class of its capital stock (other than a share in respect of which an election is made under subsection 93(1) of the Act) to the corporation, the corporation may, in its return of income under Part I of the Act for its taxation year in which the dividend was received by it, designate an amount not exceeding the portion of the dividend received that would, but for this subsection, be prescribed to have been paid out of the affiliate’s exempt surplus in respect of the corporation and that amount

    • (a) is prescribed to have been paid out of the affiliate’s taxable surplus in respect of the corporation and not to have been paid out of that exempt surplus; and

    • (b) for the purposes of paragraph (1)(d) and the definitions “underlying foreign tax” and “underlying foreign tax applicable” in subsection 5907(1) is deemed to have been paid by the affiliate to the corporation as a separate whole dividend on the shares of that class of the capital stock immediately after that time, and that whole dividend is deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation.

  • (3) For the purposes of subsection 91(5) of the Act, if a person resident in Canada (other than a corporation) receives a dividend on a share of any class of the capital stock of a foreign affiliate of the person, the dividend is prescribed to have been paid out of the affiliate’s taxable surplus.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/94-686, s. 79(F);
  • SOR/97-505, s. 2;
  • 2013, c. 34, ss. 40, 78.