Capital gains may still be preferred over dividends in spite of an equivalence in tax rates. A non-resident prefers capital gains if shares are not taxable Canadian property or if a treaty capital gains exemption applies. The section 116 withholding has now largely lost its pre-budget edge over the domestic effective rate of 37 percent of capital gains. If there is safe income, dividends continue to be preferable between connected companies. A holdco continues to offer tax deferral on dividends received from connected companies in Canada.
Stock dividends permit the conversion of a dividend into a capital gain.
The reduced capital gains rates may mean that existing life insurance coverage exceeds the anticipated taxes on death.