Canada Tax Rate On Dividends

The Canadian Dividend Tax Rate: What You Need to Know

Eligible vs. Non-Eligible Dividends

In Canada, the tax rate for eligible dividends is 38%, while the rate for non-eligible dividends ranges from 6.87% to 39.55%. Eligible dividends are dividends paid by Canadian corporations, while non-eligible dividends can include dividends paid by foreign corporations, private corporations, and investment corporations.

Gross-Up and Taxable Amount

Eligible dividends are subject to a "gross-up," which increases the taxable amount of the dividend you received. The gross-up factor is 30% for provincial dividends and 38.33% for federal dividends. This means that for every $1 of eligible dividend income, you will be taxed on $1.30 or $1.38, respectively.

Impact on Your Tax Rate

Dividend income is taxed at a lower rate than interest income, which can help to reduce your overall tax bill. If you have a high-income, receiving dividend income can help to keep your personal tax rate low.

Corporate Withholding Taxes

Corporate withholding taxes are imposed on dividends paid to non-residents of Canada. The withholding tax rate is 25%. However, the rate may be reduced or eliminated under a tax treaty.