What Has Changed With Inter-Corporate Dividends

The amendments to the anti-avoidance provisions in subsection 55(2) of the Income Tax Act (Canada) that were enacted a few years ago have created some uncertainly and even confusion to private companies and their tax advisors.  Dividends paid by one corporation to another corporation now require extra scrutiny to ensure that the adverse tax consequences of subsection 55(2) are avoided.

This article will focus on practical applications of the subsection 55(2) anti-avoidance rules and provide a brief overview of recent developments in the area. Click  here for a detailed discussion of the changes that were made to the rules (i.e. the "new rules"), in our article " Inter-corporate Dividends: Are They Still Tax-Free?".