December 15, 2015, No. 2015-39.You should review your year-end dividend planning now to ensure you have considered the full impact of the recently announced increase in the highest federal personal income tax rate to 33% (from 29%) effective January 1, 2016. As a result of this increase, the government made consequential changes relevant to the taxation of income flowed through your Canadian-controlled private corporations (CCPC). By revisiting your year-end dividend planning, you can properly address issues and opportunities that may have arisen following these changes.
Specifically, paying a dividend in 2015 versus 2016 to shareholders can result in absolute personal tax savings in certain situations. The savings range from 2.6% to 10.7% depending on the type of dividend (eligible or non-eligible) and province of residence. The decision as to whether it is better to pay a dividend in 2015 or 2016 to shareholders out of a corporation that has both active business income and investment income, as well as refundable dividend tax on hand (RDTOH), may vary by province.
This issue of TaxNewsFlash-Canada summarizes the impact of the new tax rates on year-end dividend planning that you should revisit before the end of 2015. In most cases it will be necessary to crunch some numbers and to obtain advice and assistance from your tax adviser to help evaluate all the implications before December 31, 2015.
Information is current to December 14, 2015. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.