Line 724 - Part VI.1 tax payable

Line 724 - Part VI.1 tax payable

Complete the following schedules if required:

• Schedule 43, Calculation of Parts IV.1 and VI.1 Taxes

• Schedule 45, Agreement Respecting Liability for Part VI.1 Tax

See the following headings for more details.

Part 1 of Schedule 43 - Calculation of dividend allowance

Calculate the dividend allowance on Part 1 of Schedule 43.

Generally, the first $500,000 of dividends paid in the year on taxable preferred shares is exempt from Part VI.1 tax liability. This basic annual exemption is called the dividend allowance.

However, the $500,000 dividend allowance is reduced if you paid more than $1 million of dividends on taxable preferred shares in the previous year.

Part 2 of Schedule 43 - Agreement among associated corporations to allocate the dividend allowance

If you are a member of an associated group, you have to allocate the dividend allowance between the members. Part 2 provides an area for this allocation.

Part 3 of Schedule 43 - Calculation of Part VI.1 tax payable

Complete Part 3 of Schedule 43 to calculate Part VI.1 tax. Part VI.1 tax is levied on dividends (other than certain excluded dividends) you paid on short-term preferred shares and taxable preferred shares.

You are subject to a 40% tax on dividends you paid on short-term preferred shares that are more than the annual dividend allowance.

You are subject to a tax of 25% or 40% on dividends you paid on taxable preferred shares (other than short-term preferred shares) that are more than any remaining dividend allowance. Choosing the 40% rate will exempt the holder of these shares from the 10% tax under Part IV.1. This rate would apply to all future dividends paid on that class or series of shares.

See subsection 248(1) for definitions of the terms short-term preferred shares and taxable preferred shares.

Schedule 45, Agreement Respecting Liability for Part VI.1 Tax

Complete Schedule 45 to certify the transfer of Part VI.1 tax liability and send it to the CRA with Schedule 43.

A corporation (the transferor) can transfer all or part of its Part VI.1 tax liability to another corporation (the transferee), if the corporations were related throughout the following tax years:

• the transferor's tax year for which it owes Part VI.1 tax

• the transferee's tax year that ends on or before the end of the above-mentioned transferor's tax year

You can deduct Part VI.1 tax payable from income. See page 73 for more information. Any Part VI.1 tax that is left over after the taxable income is reduced to zero is part of the non-capital loss for the year. See page 66 for details.

On line 724, enter the amount of Part VI.1 tax payable you calculated on line 270 of Schedule 43.

References
Sections 191, and 191.1 to 191.4

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