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Canada: Tax paid-up capital, dividend tax credit (Quebec)

Canada: Tax paid-up capital, dividend tax credit

Guidance (an information bulletin 2019-11) addresses the notion of tax paid-up capital and eligibility for the dividend tax credit in Quebec.


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Financial statement “paid-up capital”

Current law in Quebec does not allow an amount recorded in a separate component of a corporation's equity to be deducted in the calculation of tax paid-up capital—and thus cannot offset an increase in the tax paid-up capital resulting from the accounting change.

The information bulletin announces that any provision recorded in connection with the redemption of retractable or mandatory redeemable shares will be—regardless of the accounting approach used in the presentation of a corporation's financial statements—included in the calculation of tax paid-up capital, effective for fiscal years beginning as of 1 January 2020.

Dividend tax credit

Quebec is restricting the eligibility for the dividend tax credit for dividends received or deemed received after 31 December 2019. The Quebec tax legislation would be updated so that only an individual, including a trust, who is resident in Quebec on the last day of a tax year could benefit from the dividend tax credit for that year.

Additional items addressed by the information bulletin include:

  • Federal stock option regime changes
  • Refundable tax credits
  • Lodging tax

Read a December 2019 report prepared by the KPMG member firm in Canada

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