CRA effectively rules that a preordained succession of monthly dividends was not a series for SIDT purposes

A Canadian corporation (Partner B) made monthly payments of interest on a note owing by its wholly-owning parent (Partner A), with such interest payments funded by monthly distributions received by Partner A on its limited partnership interest in a partnership. Partner B has been monthly paying such interest receipts to Partner A as PUC distributions (net of reserves); and Partner A, in turn, has been making matching monthly distributions of PUC to its non-resident shareholder.

It was proposed that, rather than continuing to distribute PUC, Partner B will adopt a policy of paying monthly dividends to Partner A of the amounts received. Partner A (presumably a ULC - see 2014-0534751R3), in turn, will make corresponding monthly increases in the stated capital of its shares (generating s. 84(1) deemed dividends) and then distribute such paid-up capital increases in cash to the non-resident shareholder, net of Part XIII withholding attributable to such s. 84(1) dividend.

The definition in s. 55(1) of the “safe-income determination time” (SIDT), in respect of a transaction or a series of transactions, relevantly refers to the earlier of:

(a) the time immediately after the earliest disposition or increase in interest described in any of ss. 55(3)(a)(i) to (v) that resulted from the transaction or series; and

(b) the time that is immediately before the earliest time that a dividend is paid as part of the transaction or series.

CRA relevantly ruled that the SIDT applicable to each monthly dividend (within the following 12 months covered by the scope of the ruling letter) will be the time immediately before the payment of that dividend, rather than immediately before the payment of the first such dividend pursuant to the revised policy.

Neal Armstrong. Summary of 2025 Ruling 2023-0990951R3 under s. 55(1) – SIDT.