ARCHIVED – Budget 2012 - Split dividend designation and late designations

Notice to the reader

This measure has received Royal Assent.

  1. What are the current requirements related to a designation of eligible dividends?
  2. What changes does the budget propose related to designations?
  3. When do these new rules apply?
  4. Where a late designation has been accepted under the new rules, will amended information slips be issued?
  5. Where can I get more information on the rules for the proposed split dividend designation and late filed designation?

To simplify the manner in which a corporation pays and designates eligible dividends, the budget proposes to allow the corporation to designate, at the time it pays a taxable dividend, any portion of the dividend to be an eligible dividend for the purpose of the enhanced dividend tax credit (DTC). As well, the Minister of National Revenue will be able to accept a corporation's late designation of a taxable dividend to be an eligible dividend under certain circumstances.

Q1. What are the current requirements related to a designation of eligible dividends?

A1. At the time a dividend is paid, the corporation is required to notify each shareholder, in writing, of the amount that is eligible for the enhanced DTC. The designation may only be made at the time of payment of the dividend; the designation cannot be made after the dividend is paid. The entire amount of a particular dividend that has been paid must either be an eligible dividend or a dividend that is not eligible. It is not presently permitted to designate a portion of a dividend to be an eligible dividend.

For more information concerning the current notification requirements please go to Designation of Eligible Dividends.

Q2. What changes does the budget propose related to designations?

A2. The budget proposes that a late designation of an eligible dividend may be accepted if, in the opinion of the Minister, it would be just and equitable to do so. A late designation may be considered if it is made within the three-year period following the day on which the designation was first required to be made. The designation will be deemed to have been made on the day the designation was required to be made.

The budget also proposes to allow a corporation to designate, at the time it pays a taxable dividend, that a portion of the dividend is an eligible dividend. The portion of a taxable dividend that is designated to be an eligible dividend will qualify for the enhanced DTC, and the remaining portion will qualify for the regular DTC.

Q3. When do these new rules apply?

A3. This measure applies to dividends paid after March 28, 2012. A late designation related to a dividend or a portion of a dividend paid before this time cannot be considered under the new rules.

Q4. Where a late designation has been accepted under the new rules, will amended information slips be issued?

A4. Where, the Minister of National Revenue accepts a late designation for dividends paid during a particular calendar year, and information slips in respect of the dividends that have already been issued, amended slips should be prepared.

Q5. Where can I get more information on the rules for the proposed split dividend designation and late filed designation?

A5. The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada's Budget 2012 documents for details.

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