Part IV and 55(2) protection

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)

Print Friendly, PDF & Email