Paid-up capital (PUC) is a tax measure of the amount a corporation can return to its shareholders as a tax-free repayment of capital, without producing a deemed dividend under section 84. PUC is computed for each class of shares and generally starts from the stated capital recorded under corporate law, then is adjusted by specific tax provisions.
Several rules can reduce PUC below stated capital, including the surplus-stripping grind in section 84.1 and the reductions tied to certain rollovers. Returning more than a share's PUC to a shareholder, or increasing PUC without corresponding consideration, can trigger a deemed dividend under subsection 84(1) or subsection 84(3). Because PUC drives whether amounts come out as a return of capital or as a dividend, tracking it accurately by class is fundamental to corporate distribution planning.