Low rate income pool (LRIP)

A corporation resident in Canada that is neither a Canadian-controlled private corporation (CCPC) nor a deposit insurance corporation will be able to pay eligible dividends in any amount unless it has a low rate income pool (LRIP). The LRIP is generally made up of taxable income that has benefited from certain preferential tax rates. The corporation will have to reduce its LRIP to zero by paying out ordinary dividends before it can pay an eligible dividend, or it will be subject to Part III.1 tax. The LRIP must be calculated at the time a dividend is paid, received, or any other event occurs affecting the LRIP balance in the year.

Use Schedule 54, Low Rate Income Pool (LRIP) Calculation, to determine the LRIP, throughout the year. File the completed schedule with your T2 return. All other calculations including the worksheets should be kept with your records in case we ask for them at a later date.

Forms and Publications

• Schedule 54, Low Rate Income Pool (LRIP) Calculation