I-3 - Taxation Act

Section 498.1 Disposition versions

2009-05-15

498.1. If a corporation makes a valid election, for the purposes of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), under subsection 2 of section 185.1 of that Act in relation to an eligible dividend (in this section referred to as the “original dividend for federal purposes”) that it paid at a particular time after 23 March 2006, the following rules apply:

(a)  despite the definition of “eligible dividend” in section 1, the amount of the dividend corresponding to the original dividend for federal purposes, that is an eligible dividend (in this section referred to as the “original dividend for Québec purposes”) that the corporation paid at the particular time is deemed to be equal to the lesser of the amount of the original dividend for Québec purposes, determined without reference to this section, and the amount of the original dividend for federal purposes, determined under paragraph a of subsection 2 of section 185.1 of the Income Tax Act;

(b)  an amount equal to the amount by which the amount of the original dividend for Québec purposes, determined without reference to this section, exceeds the amount of the original dividend for Québec purposes, determined under subparagraph a, is deemed to be a separate taxable dividend, other than an eligible dividend, that was paid by the corporation immediately before the particular time;

(c)  each shareholder of the corporation who at the particular time held any of the issued shares of the class of shares in respect of which the original dividend for Québec purposes was paid is deemed

i.  not to have received the original dividend for Québec purposes, and

ii.  to have received at the particular time

(1)  as an eligible dividend, the shareholder’s proportional share of the amount of any dividend determined under subparagraph a, and

(2)  as a taxable dividend, other than an eligible dividend, the shareholder’s proportional share of the amount of any dividend determined under subparagraph b;

(d)  a shareholder’s proportional share of the amount of a dividend paid at any time on a class of shares of the capital stock of a corporation is the proportion of that amount that the number of shares of that class held by the shareholder at that time is of the number of shares of that class outstanding at that time; and

(e)  not later than 30 days after the day on which the election is made, the corporation shall notify the Minister in writing of the election and attach to the notice a copy of every document sent to the Minister of National Revenue in connection with the election.

In the event of non-compliance with a requirement of subparagraph e of the first paragraph, the corporation incurs a penalty of $25 a day for every day the omission continues, up to $2,500.

Under this Part and despite sections 1010 to 1011, the Minister may make such assessments of the tax, interest and penalties payable as are necessary for any taxation year to give effect to the rules set out in this section in relation to the original dividend for Québec purposes, if the corporation fails to comply with a requirement of subparagraph e of the first paragraph in relation to the valid election referred to in that paragraph in respect of the original dividend for federal purposes or if the corporation makes the election after the day that is 30 months after the day on which the original dividend for federal purposes was paid.

2009, c. 5, s. 173.