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Question:

Hi

I own a small consulting company that has excess earnings I’d like to pay out as dividends this year. I see that I have 2 choices, eligible and non-eligible dividends. I also see that eligible dividends will attract less tax than non-eligible dividends.

Can you please tell me if I’m eligible to pay eligible dividends (pun intended) and if so, how would I go about doing so?

The amount of the dividend I’m thinking of paying is around $60,000.

Thanks

XXXXX

Answer:

XXXXXX

You’ll only be able to pay “eligible dividends” from your corporation to the extent that you have a current GRIP (general rate income pool) balance in the corporation. Generally speaking you’ll have GRIP if you’ve paid corporate tax on income not eligible for the small business deduction. This would generally include business income over the small business limit and investment income. You would receive a preferable rate on these dividends because you’ve already paid a higher tax in the corporation.

If you do have GRIP you’ll need to ensure you complete corporate resolutions for the payment of these dividends before actually making the payments.

Please give me a call at 250-381-2400 and we can discuss further.

Cheers

Phil

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

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Philip Hogan

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The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.

Phil Hogan

Phil Hogan is a Canadian and US CPA working with clients throughout Canada and the US. Phil advises on cross border tax and financial planning matters. Phil can be reached at phil@hutcheson.ca or via telephone at 250-661-9417. You can also read more about Phil at Hutcheson.ca/phil.
Phil Hogan

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