Under the new refundable tax rules, carefully paying dividends can maximize the use of both safe income and Part IV to protect dividends from 55(2). “This tax-planning opportunity requires very specific tax attributes for the payer: a GRIP corresponding to the SIOH, an existing NERDTOH, and no ERDTOH.” Compare the foregoing with the position under the old refundable tax rules as illustrated in 943963 Ontario Inc. v R, 1999 CanLII 306 (TCC), in which the first dollar of a dividend was subject to both Part IV tax and was considered paid from safe income.
Éric Hamelin “Subsection 55(2) and the Part IV Tax Exception: New Possibilities” 22:2 Tax for the Owner-Manager (April 2022)
