compare with interest and capital gains

Dividends are a share of the after-tax profits earned by a corporation



Dividends are earned from

  • stocks
  • mutual funds
  • segregated funds
  • corporations
    • a share of the profits earned by a corporation
    • paid from net after-tax income to its shareholders at the discretion of the Board of Directors
    • not a tax deductible expense to the corporation (unlike interest on bonds or debentures)

Taxation (to be updated)

Federal and provincial tax are calculated separately

Personally-received dividends

  • dividends are taxed at 31.34% in Ontario
  • dividend included in income of the recipient in the year paid
  • shareholders taxed on the dividend income they receive at their personal tax rates
  • to reduce double taxation
    • 25% gross of applied to dividend to reflect pretax corporate earnings
    • dividend tax credit given on federal tax owing for dividends received from Canadian taxable corporations

Tax credit is fixed amount of the dividend paid —> more valuable to a taxpayer in a lower tax bracket

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