The capital dividend account (“CDA”) tracks certain balances accumulated by a private corporation which may be paid out to its Canadian resident shareholders as tax free capital dividends¹. As with all good things – in order to pay out the tax free dividends, a corporation must comply with certain tax requirements. The corporation must file an election form with supporting calculations and a certified legal resolution in advance of making the payment.
Getting the CDA balance incorrect is costly; tax² is levied at a rate of 60% on the excess of the dividend paid over the CDA balance. This tax is paid by the corporation although the taxing authority has made recipients and issuer jointly responsible for the tax.
The CPL advantage comes in streamlining the documentation and providing guidance
as to how to complete the election form accurately.
¹ Subsection 83(2) of the Income Tax Act.
² Part III tax
- Tracks the balances attributable to individual components of the CDA on an individual basis and summarizes the corporate group.
- Provides an election calculation template to be submitted along with the official election form. Our template has already been tested with the taxing authorities.
- Provides a handy checklist of required filing information.
- Keeps the flexibility of a spreadsheet – information can be copied from the tracker for further work or distribution.
- We provide a user manual with the tracker which walks you through where to find the pertinent information and calculate the correct input values for the tracker.
- The Summary tab is your dashboard providing a snapshot of the each corporation’s capital dividend account balance and how much can be currently paid out as a capital dividend.
- Add Button permit you to insert a corporation from the tracker and summary. This maintains the functionality and formatting of the tracker.
- Print Button for the entire report or print just the Summary.
- The Description tab provides tax technical background on the mechanics of the capital dividend account and required election.
- The individual corporation tab keeps track of all the various components of the capital dividend account and calculates what is currently available for distribution on a tax free basis.
- Applies the technical limitation to the components to ensure overpayments do not erroneously occur,
- Delete Button permit you to delete the corporation from the tracker and summary. This maintains the functionality and formatting of the tracker.
- Print Button for a corporation’s individual report only.
- The “Checklist” is exactly what it sounds like – list of all information you need to file the election form correctly. The checklist can also act as a reviewer sign off sheet.
- The election template once completed is one of the items on the checklist that must be included with the election form.
- Prompts for a description of your share capital in order permit customization of the election template.
Each tracker including user manual is $550.00 plus applicable taxes.