Principal Questions: How to notify the shareholders and when to have a designation qualifying under subsection 89(14).
Position: See below.
XXXXXXXXXX 2017-072073 M. Séguin
December 18, 2017
Dear Sir,
Subject: Procedure respecting the subsection 89(14) conditions
This is in response to your e-mail of August 29, 2017 in which you asked the Canada Revenue Agency (the "CRA") to confirm whether the procedure you submitted meets the conditions in subsection 89(14) of the Income Tax Act (the "Act") in the context of a private corporation.
Unless otherwise indicated, any reference to any statutory provision constitutes a reference to a provision of the Act.
This technical interpretation provides general comments on the provisions of the Act and related legislation. 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 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Submitted Procedure
You would like to know if sending an e-mail, with acknowledgment of receipt and containing the required written notification in an attached document (in PDF), meets the condition for the designation of a dividend as an eligible dividend under subsection 89(14). In addition, you would like to know if the sending of an email at the time the dividend is declared meets the condition of notifying in writing at that time, even if the payment of the dividend is made later. Finally, you asked if the written notice can be dated between the time the dividend is declared and the date the dividend is paid.
Our Comments
The CRA's general position regarding the designation of an eligible dividend is set out in Income Tax Technical News No. 41 dated December 23, 2009, which incorporates the comments in our December 20, 2006 guidelines as well as in other documents subsequently issued by the CRA.
The CRA is of the view that the sending of an e-mail, with an acknowledgment of receipt, would meet the conditions for the designation of a dividend as an eligible dividend pursuant to subsection 89(14).
As to when the written notice must be sent and dated, the CRA accepts that notification in writing should be given to shareholders between the time the dividend is declared and the date the dividend is paid.
Best regards,
Urszula Chalupa, LL.B, M. Fisc.
for the Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy
and Regulatory Affairs Branch