Budget 2013 - Dividend Tax Credit

For dividends paid after 2013, the budget proposes to adjust the gross-up factor for other than eligible dividends used in the determination of the taxable amount of dividends. The budget also proposes to adjust the rate used in the corresponding dividend tax credit.

What are the two types of dividends that can be received from taxable Canadian corporations?

There are two types of dividends, eligible and other than eligible dividends, that you may receive from taxable Canadian corporations. The gross-up factors for these dividends and the factors used in the calculation for the corresponding dividend tax credit are different:

  • Eligible dividends (generally those received from large corporations) are grossed-up by 38% and a federal dividend tax credit is calculated as 6/11 of the gross-up (or 15.0198% of the grossed-up dividends).
  • Dividends other than eligible dividends are grossed-up by 25% and a federal dividend tax credit is calculated as 2/3 of the gross-up (or 13.3333% of the grossed-up dividends).

Note: If you need more information about the type of dividends you received, contact the payer of your dividends.

What are the changes to the factors used for dividends other than eligible dividends?

For dividends paid after 2013, the budget proposes to adjust the gross-up factor for other than eligible dividends from 25% to 18% and the corresponding dividend tax credit from 2/3 of the gross-up amount to 13/18 (or 11.0169% of the grossed-up dividends).

The payer of the dividends you receive will apply the appropriate factors when preparing your income slips for dividends paid after 2013, such as the T5, Statement of Investment Income. Generally, these slips will be received early in 2015.

Where can I get more information about the change to these factors?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web pages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada's Budget 2013 documents for details.

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