compare with interest and capital gains

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

Sources

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

• unlike interest and capital gains, a combined marginal tax rate is not used

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