Amendments to the Income Tax Act repeal some transitional provisions with effect from 1 January 2015. Tax incentives set out in these transitional provisions will thus apply to dividend payments or reductions of owner’s equity until the end of this year. Therefore it is reasonable to pay out  any profits made before 2000 by the end of 2014 at the latest.

Under the pre-2000 system, income tax was applied to corporate profits as well as dividends. Tax paid on dividends could subsequently be deducted from corporate income tax.

From now on, Subsection 60 (2) of the ITA allows companies to reduce their dividend tax obligation on profits posted in 1994-1999 by the amount of corporate income tax paid during that period, but this possibility will be terminated by the amendments. This means, theoretically, that any dividend payments from next year on could be subject to income tax even though the profits in question have already been taxed. Therefore, any profits made before 2000 should be paid out by the end of 2014 at the latest.

According to the letter of explanation accompanying the amendments, the deduction in question has been applied only a few times during recent years. However, any such double taxation could raise issues of constitutionality as it ignores the uniform taxation requirement of Section 12 of the Constitution.