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Capital Dividends Are Tax Free

Capital Dividends

Capital dividends received by Canadian resident taxpayers are tax-free. However, the amount of the capital dividend paid to a non-resident shareholder is subject to Part XIII tax.-S.212(2)(b). This important tax attribute is lost if not used to make distributions only to those persons who can benefit from it.

The CRA takes the position is that a capital dividend cannot be paid by a way of journal entry. The dividend has to be validly declared and a promissory note can be issued if it is accepted as an absolute, unconditional payment by the recipient.

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ACCESSING THE SMALL BUSINESS DEDUCTION IN YOUR BUSINESS

The Small Business Deduction gives businesses a tax deduction on the first $500,000 of income. This saves an eligible corporation around up to $50,000 in income taxes. There are a number of conditions that have to be met to be eligible for this deduction.

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Response from the owner:Thank you Donald for your five stars review. We will remain at your disposal if you need our services in the future.
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Response from the owner:Many thanks and much appreciated for the kind and positive review.
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Response from the owner:It has been pleasure working with you and feel free to contact us in the future for any further help needed.
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Response from the owner:Thank you for the positive review.