Designation of eligible dividends

Corporations have to designate each eligible dividend that they pay, before or at the time the dividends are paid, and notify shareholders in writing that the dividend is eligible, as required by subsection 89(14) of the Income Tax Act.

Notification of shareholders

A corporation must make every effort to notify shareholders of an eligible dividend. Examples of notification could include:

• identifying eligible dividends through letters to shareholders
• dividend cheque stubs
• where all shareholders are directors of a corporation, a notation in the minutes

Public corporations

For public corporations, the Canada Revenue Agency (CRA) will also accept that notification has been made if a designation is made stating that all dividends are eligible dividends unless indicated otherwise. Acceptable methods of making such a designation include posting a notice:

• on the corporation's website
• in corporate quarterly or annual reports
• in shareholder publications

The CRA will consider that a notice posted on a corporate website is notification that an eligible dividend is paid to shareholders until the notice is removed. Similarly, a notice in an annual or quarterly report that an eligible dividend has been paid is considered valid for that year or quarter, respectively.

Alternatively, if a public corporation issues a press release announcing the declaration of a dividend, the CRA will consider a statement in the press release indicating that the dividend is an eligible dividend as sufficient proof that notification was given to each shareholder.