Plain meaning
A foreign-affiliate surplus account generally connected to active business income earned in certain treaty or tax-information-exchange jurisdictions.
Also called
foreign affiliate exempt surplus
Key points
- Exempt surplus is one of several surplus pools tracked for foreign affiliates.
- Dividends paid out of exempt surplus to a Canadian corporation may generally be deductible in Canada under the applicable rules.
- The calculation depends on affiliate earnings, country status, taxes, reorganizations, and surplus regulations.
- Surplus classification affects repatriation planning and Canadian tax results.
Why it comes up
Exempt surplus can affect whether dividends from a foreign affiliate are received tax-free by a Canadian corporation.