Planning for intercorporate dividends can now be more fraught

There is increased complexity associated with the payment of dividends by private corporations.

Where a subsidiary corporation has non-eligible refundable dividend tax on hand (NERDTOH), ERDTOH, or GRIP balances, attention is needed to ensure that dividends from the subsidiary result in additions to the same pools in the parent company. Eligible dividends may add to the parent company's GRIP and ERDTOH, but will not recover NERDTOH in the subsidiary. Non-eligible dividends can increase the parent company's ERDTOH, but not its GRIP.

In addition, the usual Pt IV tax considerations should be addressed including that shares held by a trust will not qualify for the votes and value test in s. 186(4)(b). Staggered year-ends create planning challenges.

Neal Armstrong. Summary of A.G. (Sandy) Stedman, “Intercorporate Dividend Planning: More Complexity,” Tax for the Owner-Manager, Vol. 20, No. 1, January 2020, p. 7 under s. 129(1).