11 December 2013 External T.I. 2013-0474161E5 - T-slips and dividend and interest

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: What is the meaning of the terms "paid" and "received" in the context of a corporation that is paying dividends and/or interest to its shareholders?

Position: "Paid" is not defined in the Act, therefore, the plain and ordinary meaning of each should be used. Generally, they would be the same date. "Received" is defined in the Act for the purposes of items mailed. Jurisprudence has also considered the meaning of this word.

Reasons: Jurisprudence states that ordinary meaning should be used in relation to "paid". "Received" is defined in the Act for the purposes of things mailed. Otherwise, recent case law has considered this term.

XXXXXXXXXX
2013-047416
Katharine Skulski

Attention: XXXXXXXXXX

December 11, 2013

Dear XXXXXXXXXX:

Re: T-Slips for Dividend and Interest Payments

We are writing in response to your email dated December 27, 2012. We also acknowledge a telephone conversation on January 7, 2013. We apologize for the delay in responding.

Your original enquiry asked that we confirm when a T5 slip had to be prepared in connection with dividends and/or interest being paid to a shareholder. At that time, we referred you to T4015, T5 Guide – Return of Investment Income 2012, and in particular, to chapters 4 and 9. You subsequently asked that we clarify the meaning of the terms "paid" and "received" in the context of the Act where a corporation declares dividends in favour of its shareholders but only pays them at a later date.

This technical interpretation provides general comments about the provisions of the Income Tax Act (the "Act") and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

The Courts have held that where a term is not defined in the Act, then unless the context of the term otherwise requires, it must be given its common ordinary meaning. As such, the Concise Oxford dictionary states that "paid" means "to give (person) what is due in discharge of a debt or for services done or goods received".

The term "received", on the other hand, has been given meaning in the Act and in jurisprudence. Subsection 248(7) provides that for the purposes of the Act, anything (except a remittance or payment described later in that provision) sent by first class mail or its equivalent shall be deemed to have been received by the person to whom it was sent on the day it was mailed. In Innovative Installation Inc. v The Queen, 2009 TCC 580, the Tax Court of Canada explained that "received" does not require "proceeds to pass directly to the taxpayer. The taxpayer can notionally or constructively receive it."

Therefore, it is our view that, generally, the date on which the dividend is paid, whether by cheque, electronic payment, offset or credit to the shareholder's account, would also be the date on which the amount is received.

We trust that these comments will be of assistance.

Yours truly,

Terry Young, CPA, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch