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  • Deemed dividend cannot exceed distributable surplus

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    The private company's distributable surplus is the maximum amount that can be treated as a deemed dividend. The company that made the payment or loan or forgave the debt will have to determine how much of the payment or forgiven debt is to be treated as having come from their distributable surplus. The distributable surplus is worked out at the end of the company's year of income using the following formula:

    Net assets

    non-commercial loans

    paid up share value

    repayments of non-commercial loans

    Non-commercial loans are loans which have previously been treated as deemed dividends.

    Last modified: 27 Jul 2004QC 27473