Canada: Focus On Tax: Federal Budget 2012 - Tax Analysis And Budget Documents - March 2012 Overview Budget Steps Up the Pace of Reform

This annual publication is produced by the National Tax Group of Fraser Milner Casgrain LLP (FMC), together with CCH.

Overview

Budget Steps Up the Pace of Reform

Prime Minister Stephen Harper's administration, secure for at least three more years in a parliamentary majority, uses its latest budget to implement an array of expected reforms that Finance Minister Jim Flaherty says are designed to sustain confidence at home and abroad while addressing the deficit. The reforms include tax adjustments, reductions in spending and the public service, streamlined regulation of resource development, and changes to social programs. ''Other western countries face the risk of long-term economic decline'', Mr. Flaherty said in his seventh budget speech to the House of Commons on March 29, 2012. ''We have a rare opportunity to position our country for sustainable, long-term growth. Others now have little room to manoeuvre; we are free to choose our future.''

Mr. Flaherty also pointed out that the Organization for Economic Cooperation & Development and the International Monetary Fund expect the Canadian economy to be a world leader over the next two years. However, the government was not interested in simply maintaining that edge. ''We must also position Canada to compete successfully with the world's large and dynamic emerging economies'', Mr. Flaherty stated. ''In a changing global economy we must . . . avoid falling behind.''

Reviewing personal income tax measures that the Conservatives succeeded in getting through Parliament while in a minority, Mr. Flaherty said they had reduced the taxes paid by the average family of four by more than $3,100. At the same time, lower corporate taxes had given Canada a ''significant advantage'' with ''the lowest overall tax rate on new business investment among major advanced economies.'' Coupled with an infrastructure- based economic stimulus agenda in response to the latest global economic downturn, Mr. Flaherty said these measures had sustained Canada through several difficult years. ''Canada is one of only two G-7 countries to have recouped all the jobs lost during the global recession. In fact, since July 2009, our economy has created more than 610,000 net new jobs.''

Mixed Bag of Tax Initiatives

No substantial new personal tax measures are set out in the budget, and the government indicated in its 498-page Budget Plan that since the federal personal tax burden is the lowest in 50 years, its focus for now is ''keeping taxes low for families and individuals.'' For corporations, the focus is on what the government describes as ''enhancing the neutrality of the tax system'', including further rationalization of fossil fuel subsidies by phasing out tax preferences for resource industries while promoting ''responsible'' resource development, expanding trade, and further reducing bureaucratic red tape.

''There are some who would raise taxes, increase government spending, and shun new trading opportunities'', Mr. Flaherty said, clearly taking aim at the New Democratic Part y and the election of its new leader just a few days earlier. In contrast, Mr. Flaherty said, the Conservatives would ''maintain our consistent, pragmatic, and responsible approach to the economy'' to bolster Canadians' confidence in the country's prospects. ''To provide this confidence, we must ensure that Canada's finances are sustainable over the long term. To that end, we will fulfill the commitment we made in the Economic Action Plan budget of 2009, to return to balanced budgets in the medium term. We are on track. In less than two years, we have already cut the deficit in half. We did it by ending our targeted and temporary stimulus measures, and by controlling the growth of new spending.''

Deficit Outlook Generally Positive

The deficit for the first 10 months of 2011-2012 was reported by the Finance Department on budget day as $15.98 billion, compared with $27.7 billion one year earlier. The cumulative gain reflected an increase in revenues, to $197.5 billion from $188.8 billion, and a slight drop in expenditures, to $187.4 billion from $190.6 billion.

The balance also reflected an increase in the cost of servicing the accumulated public debt—to $26.1 billion from $25.8 billion. The cumulative public debt, currently some $581 billion, is projected to continue rising slowly until it peaks at $613.9 billion in 2014-2015 before beginning to decline gradually as the government balances its annual books and potentially moves into a surplus position, declining to 28.5% of GDP by 2016-2017.

The Budget Plan indicates the push for balanced budgets in the medium term is ''on track'' — the 2011-2012 deficit should be approximately $8.5 billion lower than in 2010-2011, and is forecast to decrease by an additional $3.8 billion in 2012-2013 and continue to decline to $1.3 billion in 2014-2015. Expressed as a share of gross domestic product, program spending is projected to improve from 14.7% in 2010-2011 to 12.7% in 2016-2017, representing a return to pre-recession spending ratios.

''Canada expects to achieve, well ahead of schedule, its Group of 20 commitments to halve deficits by 2013 and stabilize or reduce total government debt-to-GDP ratios by 2016, as agreed to by G-20 leaders at their summit in Toronto in June 2010'', the Budget Plan adds. ''The International Monetary Fund projects that by 2016, Canada's total government net debt-to-GDP ratio will remain at about one-third of the G-7 average and more than 20 percentage points of GDP below that of Germany, the G-7 country with the next-lowest ratio.''

A small but symbolic sign of the Conservatives' determination to cut costs is its decision to start with the smallest unit of the economy: the lowly penny, which it plans to eliminate. ''Pennies take up too much space on our dressers at home'', the Finance Minister explained. ''They take up far too much time for small businesses trying to grow and create jobs.'' Mr. Flaherty pointed out that it costs the government 1.5 cents to produce each penny, and millions of them are not recirculated ever y year.

Restraint Reflected in Various Ways

As signalled by the Conservatives for months, the government plans to eliminate an initial 12,000 jobs over the next three years. The Budget Plan explains that this includes attrition through retirement or ''other voluntary departures''. The eventual overall reduction is about 19,200 positions, or 4.8%, including elimination of approximately 600, or 7.4% of executive positions, which the government says will bring the public service more in line with the private sector. ''The planned reduction in employment would reverse only about 20% of the increase in federal public sector employment that has occurred since the late 1990s'', the Budget Plan states, adding that ''a large proportion of full-time-equivalent reductions will occur in the National Capital Region.''

Other savings will be achieved by eliminating what Mr. Flaherty described as ''waste in the internal operations of government, making it leaner and more efficient.'' This includes a reduction in travel and more use of videoconferencing, which the Minister said makes it ''easier'' for public servants and ''cheaper for taxpayers.'' Additionally, the government plans to publish more major documents electronically for Internet-based retrieval rather than going to the expense of printing. Characterizing his plans as ''common-sense moderate restraint'', which will amount to less than 2% of overall federal spending, Mr. Flahert y said that ''we have no need to resort to the drastic cuts being forced upon some other developed countries'' or to ''the radical austerity measures imposed by the federal government in the 1990s.''

On a related matter, the Finance Minister says the government will ensure that public service pension plans are ''sustainable and financially responsible'' by adjusting them to be what the Budget Plan describes as ''broadly consistent'' with the private sector. The eventual goal, ''over time'' and subject to negotiation with unions, is a 50/50 contribution which also would be applied to members of the Canadian Forces and the RCMP, as well as to MPs and the Senate, effective in the next Parliament.

The major change to social programs is a phased increase, beginning in 2023, in the age when individuals are eligible for the Old Age Security benefit. Although the Canada Pension Plan is considered to be ''sound and fully funded'', the OAS—even though it can be ''clawed back'' incrementally from higher-income recipients—is considered to be unsustainable because it was designed ''for a much different demographic future.'' In the 1970s, there were seven workers for ever y person over 65; the expectation is that the ratio will be only 2:1 in 20 years. Coupled with increased life expectancy and declining birth rates, this has effectively left the government with no option but to reverse a trend it started several decades ago. ''These adjustments will not affect current recipients or those close to retirement'', Mr. Flaherty said. ''We will gradually increase the age of eligibility, from 65 to 67. . . . We will also make the program more f lexible for those approaching retirement.'' In addition, effective July 2013, Canadians who prefer to keep working past the usual retirement age will have the option of deferring benefits.

Mr. Flaherty also said that the government plans to modernize Employment Insurance in a bid to make it easier for unemployed persons ''to identify new opportunities'' and for employers to find workers. ''For EI recipients in areas of sporadic employment, we will initiate modest changes to the program to better focus our support for Canadians who are eager to work.'' He also outlined plans for First Nations reserves to ''participate fully in our economy and to gain greater self-sufficiency'' beginning with new investments in schools and support for early literacy.

Innovation Seen as a Key

Mr. Flaherty made it clear that while ''Canadians appreciate the fact that our country is outperforming our peers'', they also understand the fragility of the global economy and the fact Canada has its own challenges. ''We need to promote innovation more effectively, to keep creating good quality jobs.'' To that end, the Budget Plan outlined how the government plans to spend $400 million to increase private-sector investments in ''early-stage'' risk capital, to increase the Business Development Bank of Canada's budget by $100 million, and to add $110 million to the National Research Council's budget for its Industrial Research Assistance Program, while also giving the NRC an additional $67 million in 2012-13 as it refocuses on industry-led research.

Stressing the importance of natural resources to continued prosperity, Mr. Flaherty pointed out that the petroleum, mining, and forestry sectors directly employ more than 750,000 Canadians. ''They are driving economic growth across the country (and) offer huge potential to create even more jobs and growth, now and over the next generation . . . in ever y region'', he said, adding that it is critical to develop new export markets to reduce dependence on the United States. ''The booming economies of the Asia-Pacific region are a huge and increasing source of demand, but Canada is not the only country to which they can turn. If we fail to act now, this historic window of opportunity will close.''

That is why, Mr. Flaherty explained, the government will implement ''responsible resource development and smart regulation for major economic projects'' while ''respecting provincial jurisdiction and maintaining the highest standards of environmental protection.'' However, in a bid to streamline the review process, the emphasis will be on ''one project, one review . . . in a clearly-defined time period.'' Moreover, Mr. Flaherty said, in a clear challenge to opponents of major pipeline projects, ''we will ensure that Canada has the infrastructure we need to move our exports to new markets.''

Trade Diversification Critical for Growth

Mr. Flahert y reiterated that a key element of the government's plan for long-term prosperity is ''the most ambitious trade expansion plan in Canadian history.'' Experience has shown that opening new export markets provides an enormous long-term benefit and that given a level playing field, Canada can compete successfully. ''While acknowledging the economic realit y of the United States remaining Canada's most important trading partner, Mr. Flaherty said recent events and long-term trends warrant diversification. ''We need to open new export markets in the world's emerging major economies while strengthening and expanding our existing trade relationships.'' Mr. Flahert y promised to ''strengthen and deepen'' economic and securit y links with the U.S., and said Canada would harmonize its duty and tax exemptions for trips to the U.S. Effective June 1, the 24-hour exemption increases to $200 from $50 and the 48-hour exemption to $800 from $400. The amount for absences of more than seven days rises to $800 from $750.

Editorial Comment on Notice of Ways and Means Motion Resolutions and Supplementary Budget Information

[The editorial comments following the Resolutions have been written by CCH, Joseph Frankovic and tax practitioners at Fraser Milner Casgrain LLP.]

That it is expedient to amend the Income Tax Act to provide among other things:

Resolution 1: Registered Disability Savings Plans

(1) That the provisions of the Act relating to registered disability savings plans be modified in accordance with the proposals described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Editorial Comment: Budget 2012 proposes a number of changes to the rules governing Registered Disability Savings Plans (RDSPs) in section 146.4 of the Act.

These include changes to who may qualify as a plan holder in an RDSP, the introduction of a proportional repayment rule, changes to maximum and minimum withdrawals from an RDSP, the introduction of the rollover of RESP investment income to an RDSP, a new election to extend the duration of an RDSP where the beneficiary ceases to be eligible for the Disability Tax Credit (DTC), and administrative changes.

Plan Holders

Under the current RDSP rules, the plan holder of an RDSP must be either the beneficiary or a legal representative (where the beneficiary lacks the legal capacity to enter into a contract). However, there may be difficulties in establishing an RDSP where the potential beneficiary's capacity to enter into a contract is in doubt. Matters of capacity and legal representation are subject to provincial and territorial laws, and determining capacity and appointing a legal guardian can potentially be a lengthy process.

Budget 2012 proposes a temporary measure to allow certain family members to become the plan holder of an RDSP for adult individuals unable to enter into a contract.

Where an RDSP issuer has doubts regarding an individual's ability to enter into a contract, the spouse, common-law partner, or parent of the individual will be considered a qualifying family member. This person will be able to establish the RDSP for the individual. Budget 2012 further proposes that no action will taken against RDSP issuers, who are of the opinion that an individual's legal capacity is in doubt and allow a qualifying family member to establish and become the plan holder of an RDSP for the individual.

If an RDSP issuer subsequently no longer doubts the individual's legal capacity, or the individual is determined to be legally capable to enter into a contract by an authorized public agency or tribunal, the individual may replace the qualifying family member as the plan holder.

If the RDSP has been established by a qualif ying family member and a legal representative (i.e., a guardian or other person legally authorized to act on the individual's behalf ) is appointed, the legal representative will replace the qualif ying family member as the plan holder. This measure will not apply where the RDSP has already been established by the individual or where the individual already has a legal representative.

This measure will apply from the date of Royal Assent until the end of 2016.

Proportional Repayment Rule

Under the current RDSP rules, any Canada Disability Savings Grants (CDSGs) or Canada Disability Savings Bonds (CDSBs) paid into an RDSP in the preceding 10 years must be repaid to the Federal Government where: (i) any amount is withdrawn from the RDSP; (ii) the RDSP is terminated or deregistered; or (iii) the RDSP beneficiary dies or ceases to be eligible for the disability tax credit (DTC) under section 118.3. This is known as the ''10-year repayment rule''.

RDSP issuers must set aside an ''assistance holdback amount'' to guarantee that potential obligations under this rule will be met. The assistance holdback amount will equal the total CDSGs and CDSBs paid into the RDSP for the last 10 years less any CDSGs and CDSBs already repaid for the same period. Where one of the above events occurs, the required repayment is the amount of the assistance holdback amount immediately before the event occurs.

Budget 2012 proposes the introduction of a proportional repayment rule to replace the 10-year repayment rule where a withdrawal is made from an RDSP. (The 10-year repayment rule will remain for all other events such as RDSP termination or deregistration or where the beneficiary dies or ceases to be DTC-eligible.)

The proportional repayment rule will require that, for each $1 withdrawn from the RDSP, $3 of any CDSGs or CDSBs paid into the plan in the 10-year period preceding the withdrawal be repaid, up to a maximum of the assistance holdback amount. Repayments will be attributed to CDSGs and CDSBs that make up the assistance holdback amount in the order in which they were paid into the RDSP, starting with the oldest amounts.

This measure will apply to withdrawals made from an RDSP after 2013.

Maximum and Minimum Withdrawals

Specific rules limit the maximum amount that may be withdrawn annually from an RDSP where CDSGs and CDSBs paid into the RDSP exceed private contributions. Where this occurs, the RDSP is known as a ''primarily government-assisted plan'' (PGAP). The total number of withdrawals from a PGAP in a calendar year may not exceed the formula for lifetime disability assistance payments (LDAPs) for the year. The LDAP formula is based on the beneficiary's age and the fair market value of the RDSP's assets.

Budget 2012 proposes to increase the maximum annual limit for withdrawals from a PGAP to be the greater of the amount determined by the LDAP formula and 10% of the fair market value of the plan's assets at the beginning of the calendar year. A PGAP beneficiary will continue to be eligible for the maximum annual limit exemption where a medical doctor certifies in writing that the beneficiary has a life expectancy of five years or less.

Additionally, PGAPs are subject to a minimum annual withdrawal requirement beginning in the calendar year in which the beneficiary turns 60 years of age. For that calendar year and subsequent years, the total withdrawals are determined by the LDAP formula for the year. Currently, for other RDSPs, there is no specified minimum amount.

Budget 2012 proposes to extend the minimum annual withdrawal requirement for PGAPs to all RDSPs. Therefore, any RDSP that has a beneficiary reach 60 years of age will be subject to a minimum withdrawal determined by the LDAP formula for the year. The maximum and minimum withdrawal measures will apply after 2013.

Rollover of RESP Investment Income

Budget 2012 proposes a tax-free transfer (''rollover'') of investment income earned in a Registered Education Savings Plan (RESP) to an RDSP if both plans have a common beneficiary.

To qualify for the rollover, the beneficiary must meet the existing age and residency requirements with respect to RDSP contributions.

In addition, one of the following conditions must be fulfilled:

• the beneficiary has a severe and prolonged mental impairment that can reasonably be expected to prevent the beneficiary from pursuing a post-secondary education;
• the RESP has existed for at least 10 years and the beneficiary is at least 21 years of age and is not pursuing a post-secondary education; or
• the RESP has existed for at least 35 years.

Currently, the above conditions would allow for the beneficiary to receive an ''accumulated income payment'' from an RESP. Accumulated income payments are essentially the investment income earned in the RESP that are not educational assistance payments (as the beneficiary is not attending a post-secondary institution). An accumulated income payment will generally be included in the RESP subscriber's income and is further subject to a Part X.5 penalty tax of 20%. An RESP subscriber can reduce the accumulated income payment by contributing a portion of it to a Registered Retirement Savings Plan (RRSP) subject to certain conditions. This allows the rollover amount not to be subject to income tax or the 20% penalty tax.

Under the Budget 2012 proposal, the RESP investment income will be allowed to be rolled over to an RDSP on a tax-free basis, similar to a contribution to an RRSP of an accumulated income payment. Canada Education Savings Grants and Canada Learning Bonds in the RESP will have a requirement to be repaid by the end of February of the year following the year in which the rollover is made.

The amount of RESP investment income rolled over to an RDSP may not exceed the beneficiary's available RDSP contribution room, and the amount rolled over will reduce the available RDSP contribution room. The rollover amount will be considered a private contribution for the purposes of determining whether an RDSP is a PGAP but will not attract CDSGs. The rollover amount is to be included in the taxable portion of any RDSP withdrawals.

This measure applies to rollovers made after 2013.

Termination of an RDSP following Cessation of Eligibility for the DTC

An RDSP is only available to an individual that qualifies for the DTC in section 118.3. Where a beneficiary's condition improves to the point that the beneficiary does not qualify for the DTC for the full taxation year, the RDSP must be terminated by the end of the following year. A beneficiary who becomes DTC-ineligible may become DTC-eligible again at a later point and may establish a new RDSP. However, the contribution room and repaid CDSGs and CDSBs are not restored to the new RDSP.

Budget 2012 proposes to extend the period for which an RDSP remains open when a beneficiary becomes DTC-ineligible.

An RDSP plan holder will be able to make an election in prescribed form and submit it to the RDSP issuer along with written certification from a medical doctor that the beneficiary will be eligible for the DTC again in the near future. The RDSP issuer will then be required to notify Human Resources and Skills Development Canada (HRSDC) that the election has been made. The election must be made on or before December 31 of the year following the first full calendar year that the beneficiary is DTC-ineligible.

Where an election has been made, the following conditions apply:

• No contributions to the RDSP will be permitted, including the proposed RESP rollover. However, a rollover of proceeds from a deceased individual's RRSP or Register Retirement Income Fund to the RDSP of a financially dependent infirm child or grandchild will be permitted.
• No new CDSGs or CDSBs will be paid into the RDSP. If the beneficiary dies, the 10-year repayment rule will apply.
• No new entitlements will be generated for the purpose of the carry forward of CDSGs or CDSBs for years that the beneficiary is DTC-ineligible.
• Withdrawals from the RDSP will be permitted, subject to the proposed proportional payment rule and the proposed maximum and minimum rules. The assistance holdback amount for the period of DTC-ineligibility will be equal to the amount of the assistance holdback amount immediately preceding this period less any repayments made during or after the first calendar year of DTC-ineligibility.

The election will generally be valid for four years following the first full calendar year of DTC-ineligibilit y. The RDSP must be terminated by the end of the first year following the end of the election.

If a beneficiary regains DTC-eligibility during the time of the election, the standard RDSP rules will apply beginning with the year in which the beneficiary becomes eligible for the DTC. For example, contributions will be allowable and CDSGs or CDSBs may be paid into the RDSP. If the beneficiary becomes DTC-ineligible for a second time, a new election may be made.

This measure applies to elections made after 2013. RDSPs that would have to be terminated under the current rules before 2014 because the beneficiar y becomes DTC-ineligible and that have not been terminated, will not be required to be terminated until the end of 2014. Plan holders of these RDSPs may use this measure if they obtain the required medical certification and make an election on or before December 31, 2014.

Administrative Changes

Under the current RDSP rules, when an RDSP is established, the plan issuer must notify HRSDC within 60 days. When an RDSP is transferred from one RDSP issuer to another, the transfer must be completed within 120 days of the new plan's establishment. Budget 2012 proposes the replacement of these deadlines with the requirement that the RDSP issuer act ''without delay'' in notifying HRSDC or the establishment of transfer of a RDSP. This elimination of deadlines is to give issuers more flexibility in satisfying their obligations.

Further, upon the transfer of an RDSP to a new issuer, the original plan issuer is required to provide a large amount of information to the new issuer. This information also must be filed on a regular basis with HRSDC. Budget 2012 proposes that HRSDC, rather than the issuer of the original plan, will now be responsible for providing the information to the new plan issuer when an RDSP transfer occurs.

These measures will apply on Royal Assent.

Additionally, Budget 2012 proposes that the Canada Disability Savings Regulations be amended to eliminate the 180-day deadline for a RDSP issuer to submit an application for a CDSG or a CDSB. This measure will apply on and after the day the regulation amending the Canada Disability Savings Regulations is registered.

Resolution 2: Mineral Exploration Tax Credit for Flow-Through Share Investors

(2) That, for expenses renounced under a flow-through share agreement entered into after March 2012,

(a) paragraph

and

(b) paragraphs (c) and (d) of the definition ''flow-through mining expenditure'' in subsection 127(9) of the Act be replaced with the following:

Editorial Comment: The f low-through share regime permits an investor to enter into an agreement to subscribe for shares of a corporation and the corporation uses the subscription funds to incur certain qualifying resource expenses which it renounces or f lows through to the investor. Certain individuals who invest in flow-through shares are also entitled to an additional benefit equal to 15% of certain qualifying expenses incurred in Canada as described in the definition of ''f low-through mining expenditure'' in subsection 127(9). This mineral exploration tax credit was introduced as part of the October 18, 2000 Budget and is currently scheduled to expire at the end of March 2012.

As has been the case for several consecutive budgets, Budget 2012 proposes to extend the eligibility for the 15% investment tax credit for an extra year, to f low-through share agreements entered into on or before March 31, 2013. Furthermore, f low-through share funds raised in one calendar year with the benefit of the credit can be spent on eligible exploration up to the end of the next calendar year under the existing ''look-back'' rule. Accordingly, flow-through share funds raised during the first three months of 2013 can support qualifying expenses until the end of 2014.

Resolution 3: Eligible Dividends—Split-Dividend Designation and Late Designation

(3) That, for dividends paid on or after Budget Day, the Act be amended by

(a) replacing paragraph (a) of the definition ''eligible dividend'' in subsection 89(1) with the following:

(b) replacing subsection 89(14) with the following:

Dividend designation

and

(c) adding the following after subsection 89(14):

Late designation

(14.1) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable to permit a designation under subsection (14) to be made before the day that is three years after the day on which the designation was required to be made under that subsection, the designation is deemed to have been made on the day the designation was required to be made.

Editorial Comment: Since the taxation of dividends was significantly changed by the introduction of the ''eligible dividend'' concept, effective for dividends paid after 2005, it has been clear that these rules required modification to deal with practical problems. Specifically, pursuant to subsection 89(14), which provides that a corporation designates a dividend to be an eligible dividend by notifying the dividend recipient in writing at the time the dividend is paid, there is no ability to (i) designate a dividend as being an ''eligible dividend'' after it is paid, or (ii) designate only part of a dividend as an ''eligible dividend''. Allowing for late designations seemed to be a reasonable request on the part of taxpayers, due to timing issues that often arise in the calculation of ''general rate income pool'' (''GR IP'') under subsection 89(1) (for example, with respect to changes in the GR IP balance arising from a reassessment). Furthermore, requiring a second set of corporate resolutions to declare and pay ''eligible dividends'', in addition to the documentation required for dividends not designated as eligible dividends, often resulted in little more than additional paper work for the dividend payer.

In spite of requests for administrative relief from the CRA with respect to the strict application of subsection 89(14) (see, for example, Income Tax Technical News No. 41, and CRA Document No. 2010-0387541E5 ''Designation of Eligible Dividends'', January 10, 2011), none was forthcoming. Accordingly, changes proposed to subsection 89(14) are contained in Budget 2012 to deal with these concerns.

Specifically, Budget 2012 amends the legislation to provide that a portion of a taxable dividend received by a person after 2005 can be designated as a ''eligible dividend''. However, the legislation is not retroactive. The Notice of Ways and Means Motion provides that the ability to designate partial eligible dividends is limited to dividends paid after March 29, 2012.

In addition, newly proposed subsection 89(14.1) will allow for a late designation of an ''eligible dividend'' where, in the opinion of the CRA, ''the circumstances of a case are such that it would be just and equitable to permit a designation''. The late designation must be made within three years after the day it should have been made, being the time that the dividend was paid. Again, the Budget 2012 measures apply only to dividends paid after March 29, 2012. It is expected that the CRA will release some guidance on what circumstances it will consider ''just and equitable'' for these purposes.

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