Background
Background
Theresa Lo, CPA Chartered Professional Accountant 陳盧韻詩注册會計師事務所
Theresa Lo, CPAChartered Professional Accountant陳盧韻詩注册會計師事務所

Part 2: Corporate Federal Taxes Changes

5.  Changes to tax avoidance rules re: subsection 55(2)

 

When subsection 55(2) applies, the inter-corporate dividend is converted to proceeds of disposition, resulting in a taxable capital gain.  Under the old rule, certain way of inter-corporate transactions can create a tax free inter-corporate dividend even though the capital gain should be recognized if the transaction is done in a more direct way.

 

In Budget 2015, federal government proposed an amendment subsection 55(2) so such inter-corporate transactions cannot be converted into tax-free dividends.  Such amendment is carried forward to Budget 2016 and confirmed its implementation.

 

There are five main changes to the rules:

  • New purpose tests for dividends
  • Conversion of capital gains into dividends from the disposition of capital property
  • Restriction on the exception of related party dividends
  • Changes to the inter-corporate stock dividends if the value of the share becomes nominal
  • Allocation of safe income

 

For more information, please contact us @ 604-639-3229 or info@theresalocpa.ca

 

Note:  All information relating to s.55(2) above is available from Government of Canada website.

 

By Theresa Lo, CPA, CGA

October 11, 2017

Get in Touch With Us

Call us at +1 604 639-3229+1 604 639-3229 with any questions or to schedule an appointment.

 

Or you may use our contact form.

In order to visit us

Theresa Lo, CPA

Suite 206​, 5050 Kingsway

Burnaby, British Columbia

V5H 4H2

Get Connected!

Print Print | Sitemap
© Theresa Lo, CPA.
All data and information provided on this site is for informational purposes only. theresalocpa.ca makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.