Plain meaning
A foreign-affiliate surplus account generally connected to income that does not qualify for exempt surplus treatment.
Also called
foreign affiliate taxable surplus
Key points
- Taxable surplus is a tracking account within the foreign affiliate rules.
- Dividends paid from taxable surplus may be taxable in Canada, with possible deductions or foreign tax recognition depending on the rules.
- The account interacts with underlying foreign tax, withholding tax, and other surplus pools.
- Accurate surplus tracking is important for multinational groups and Canadian corporations with foreign subsidiaries.
Why it comes up
Taxable surplus affects the Canadian tax result when foreign affiliate earnings are repatriated as dividends.