Do you need to report tax-free Capital Dividends (Income Tax Folio S3-F2-C1) and if so, where/how?

I was advised that the Capital Dividend payment was tax-free to shareholders who are residents of Canada.

Answer

You are correct these dividends are tax-free. 

Quoting directly from the CRA website link below: "This Chapter discusses capital dividends and the capital dividend account (CDA). The CDA keeps track of various tax-free surpluses accumulated by a private corporation. These surpluses may be distributed tax-free in the form of capital dividends to the corporation’s Canadian-resident shareholders.  A corporation paying a capital dividend must file an election in respect of the dividend when the dividend is paid or becomes payable (capital dividend election). In certain circumstances, a late-filed election is acceptable (late-filed capital dividend election).  If the corporation pays a capital dividend which exceeds the balance in its CDA, there will be additional tax consequences."

From my quote above - Income Tax Folio S3-F2-C1, Capital Dividends: https://bit.ly/2Aacdh3

Here is a link from TurboTax to guide you with your foreign sources:  How do I report foreign income, pension, and other foreign amounts? - https://bit.ly/2BuCFAf

Also from TaxTips - Capital Dividend: https://www.taxtips.ca/glossary/capital-dividend.htm



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