Corporate actions withholding taxes for canadian residents

[scorpioncapital]

If a Canadian company does a tender (like encana) is there a withholding tax by the broker on the cash received if held in rrsp, tfsa, regular account? Has anyone done these tenders before and notice any deductions from the cash offer ?

[bizaro86]

Tenders in Canada are deemed dividends if and only if the tender price exceeds the paid up capital of the business. Then they are deemed dividends to the extent the price exceeds the paid up capital.

 

Example: tender price $10, paid up capital $6. Proceeds of sale are $6, deemed dividend is $4.

 

In RRSP/TFSA both dividends and sale are not taxable. In non-reg you would pay tax on the dividend portion and claim either cap gain or cap loss.

 

Withholding tax is generally for non-Canadian investors.

 

 

[scorpioncapital]

Thanks. Sounds like it's one of those sort it out yourself on the tax return cases.

[bizaro86]

Your broker should send you a T5 for anything that is deemed a dividend in a non-reg account. In my experience they are pretty good a out reporting the cost basis correctly for sales as well. Probably worth checking though.

 

For rrsp/Tfsa there is nothing for you to do.