Tax wiki
s. 183.1
PART II.1 — Tax on Corporate Distributions
Application of Part
Not yet annotated · Text current to 2026-06-21 · section last amended 2026-03-26
Current text
This Part applies to a corporation (other than a mutual fund corporation) for a taxation year in which the corporation, at any time in the year,
was a public corporation; or
was resident in Canada and had a class of shares outstanding that were purchased and sold in the manner in which such shares normally are purchased and sold by any member of the public in the open market.
Tax payable
(2)Where, as a part of a transaction or series of transactions or events,
a corporation, or any person with whom the corporation was not dealing at arm’s length, has, at any time, paid an amount, directly or indirectly, to any person as proceeds of disposition of any property, and
all or any portion of the amount may reasonably be considered, having regard to all the circumstances, to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation,
the corporation shall, on or before its balance-due day for its taxation year that includes that time, pay tax of 45% of that amount or portion of it, as the case may be.
Stock dividend
(3)Where, as a part of a transaction or series of transactions or events,
a share was issued by a corporation as a stock dividend and the amount of the stock dividend was less than the fair market value of the share at the time that it was issued, and
the share or any other share of the capital stock of the corporation was purchased, directly or indirectly, by the corporation, or by a person with whom the corporation was not dealing at arm’s length, for an amount in excess of its paid-up capital,
that excess shall, for the purposes of subsection 183.1(2), be deemed to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation.
Purchase of shares
(4)Where, as a part of a transaction or series of transactions or events,
a share of the capital stock of a corporation was purchased, directly or indirectly, by the corporation, or by any person with whom the corporation was not dealing at arm’s length, and
any portion of the amount paid for the share may reasonably be considered, having regard to all the circumstances, as consideration for a dividend that had been declared, but not yet paid, on the share,
that portion of the amount shall, for the purposes of subsection 183.1(2), be deemed to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation notwithstanding that the dividend was actually paid thereafter.
Indirect payment
(5)Where, as a part of a transaction or series of transactions or events, a person received a payment from a corporation, or from any person with whom the corporation was not dealing at arm’s length, in consideration, in whole or in part, for paying an amount to any other person as proceeds of disposition of any property, the corporation shall, for the purposes of subsection 183.1(2), be deemed to have paid the amount indirectly to the other person.
Where s. (2) does not apply
(6)Subsection 183.1(2) does not apply if none of the purposes of the transaction or series of transactions or events referred to therein may reasonably be considered, having regard to all the circumstances, to have been to enable shareholders of a corporation who are individuals or non-resident persons to receive an amount, directly or indirectly, as proceeds of disposition of property rather than as a dividend on a share that was of a class that was listed on a stock exchange or that was purchased and sold in the manner in which shares are normally purchased and sold by any member of the public in the open market.
Non-application — subsections 110.6(8), 110.61(8) and 110.62(8)
(7)If this section has been applied in respect of an amount, subsections 110.6(8), 110.61(8) and 110.62(8) do not apply to the capital gain in respect of which the amount formed all or a part of the proceeds of disposition.
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2004-08-31 to 2026-03-25:
Show the text in force 2004-08-31 to 2026-03-25
Application of Part
183.1 (1) This Part applies to a corporation (other than a mutual fund corporation) for a taxation year in which the corporation, at any time in the year,
(a) was a public corporation; or
(b) was resident in Canada and had a class of shares outstanding that were purchased and sold in the manner in which such shares normally are purchased and sold by any member of the public in the open market.
Tax payable
(2) Where, as a part of a transaction or series of transactions or events,
(a) a corporation, or any person with whom the corporation was not dealing at arm’s length, has, at any time, paid an amount, directly or indirectly, to any person as proceeds of disposition of any property, and
(b) all or any portion of the amount may reasonably be considered, having regard to all the circumstances, to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation,
the corporation shall, on or before its balance-due day for its taxation year that includes that time, pay tax of 45% of that amount or portion of it, as the case may be.
Stock dividend
(3) Where, as a part of a transaction or series of transactions or events,
(a) a share was issued by a corporation as a stock dividend and the amount of the stock dividend was less than the fair market value of the share at the time that it was issued, and
(b) the share or any other share of the capital stock of the corporation was purchased, directly or indirectly, by the corporation, or by a person with whom the corporation was not dealing at arm’s length, for an amount in excess of its paid-up capital,
that excess shall, for the purposes of subsection 183.1(2), be deemed to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation.
Purchase of shares
(4) Where, as a part of a transaction or series of transactions or events,
(a) a share of the capital stock of a corporation was purchased, directly or indirectly, by the corporation, or by any person with whom the corporation was not dealing at arm’s length, and
(b) any portion of the amount paid for the share may reasonably be considered, having regard to all the circumstances, as consideration for a dividend that had been declared, but not yet paid, on the share,
that portion of the amount shall, for the purposes of subsection 183.1(2), be deemed to have been paid as a substitute for dividends that would otherwise have been paid in the normal course by the corporation notwithstanding that the dividend was actually paid thereafter.
Indirect payment
(5) Where, as a part of a transaction or series of transactions or events, a person received a payment from a corporation, or from any person with whom the corporation was not dealing at arm’s length, in consideration, in whole or in part, for paying an amount to any other person as proceeds of disposition of any property, the corporation shall, for the purposes of subsection 183.1(2), be deemed to have paid the amount indirectly to the other person.
Where s. (2) does not apply
(6) Subsection 183.1(2) does not apply if none of the purposes of the transaction or series of transactions or events referred to therein may reasonably be considered, having regard to all the circumstances, to have been to enable shareholders of a corporation who are individuals or non-resident persons to receive an amount, directly or indirectly, as proceeds of disposition of property rather than as a dividend on a share that was of a class that was listed on a stock exchange or that was purchased and sold in the manner in which shares are normally purchased and sold by any member of the public in the open market.
Where s. 110.6(8) does not apply
(7) Where this section has been applied in respect of an amount, subsection 110.6(8) does not apply to the capital gain in respect of which the amount formed all or a part of the proceeds of disposition.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 183.1
- 2003, c. 15, s. 119
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 183.1 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 183.1; 2003, c. 15, s. 119
- 2026, c. 3, s. 80
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
This section refers to
References are generated from the statutory text and list other sections of the Act only.
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 183.1.