Tax wiki
s. 185.2
PART III.1 — Additional Tax on Excessive Eligible Dividend Designations
Return
Not yet annotated · Text current to 2026-06-21 · section last amended 2007-02-21
Current text
Every corporation resident in Canada that pays a taxable dividend (other than a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1)) in a taxation year shall file with the Minister, not later than the corporation’s filing-due date for the taxation year, a return for the year under this Part in prescribed form containing an estimate of the taxes payable by it under this Part for the taxation year.
Provisions applicable to Part
(2)Subsections 150(2) and (3), sections 151, 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Joint and several liability from excessive eligible dividend designations
(3)Without limiting the liability of any person under any other provision of this Act, if a Canadian-controlled private corporation or a deposit insurance corporation pays an eligible dividend in respect of which it has made an excessive eligible dividend designation to a shareholder with whom it does not deal at arm’s length, the shareholder is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the designation that the amount of the eligible dividend received by the shareholder is of the total of all amounts each of which is a dividend in respect of which the designation was made.
Assessment
(4)The Minister may, at any time after the last day on which a corporation may make an election under subsection 185.1(2) in respect of an excessive eligible dividend designation, assess a person in respect of any amount payable under subsection (3) in respect of the designation, and the provisions of Division I of Part I (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it were made under section 152.
Rules applicable
(5)If under subsection (3) a corporation and a shareholder have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of an excessive eligible dividend designation described in subsection (3),
a payment at any time by the shareholder on account of the liability shall, to the extent of the payment, discharge their liability after that time; and
a payment at any time by the corporation on account of its liability shall discharge the shareholder’s liability only to the extent of the amount determined by the formula
(A - B) × C/D
where
is the total of
the amount of the corporation’s liability, immediately before that time, under this Part in respect of the designation, and
the amount of the payment,
is the amount of the corporation’s liability, immediately before that time, under this Act,
is the amount of the eligible dividend received by the shareholder, and
the total of all amounts each of which is a dividend in respect of which the designation was made.
Source: Justice Laws Website. Not an official version.
Historic text
This section has not been amended since it was enacted (2007, c. 2, s. 51), so there is no earlier version.
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 185.2 links to the one before it.
Enacting and amending legislation
- 2007, c. 2, s. 51
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 185.2.