CCPCs resident in Canada to the extent
that their income (other than investment
income, which is eligible for a special
refundable tax) is subject to tax at the
general corporate tax rate
A portion of dividends paid by public corporations will
sometimes be not eligible for the enhanced dividend tax credit.
With the enhanced dividend tax credit, a "gross-up"
is added to the actual dividend to determine the taxable dividend amount to
include in income. The tax
credit is calculated as a portion of the gross-up. See the tables below
for gross-up and Federal tax credit percentages. See the tables
of enhanced dividend tax credit rates for the provincial and territorial
rates.
Changes to the
enhanced dividend tax credit
In keeping with the previously announced reductions to
the federal corporate income tax rates, the 2008
Federal Budget reduced the
gross-up on dividends eligible for the enhanced dividend tax credit, and reduced the dividend tax credit rate, beginning in the 2010 tax year.
The factor of 11/18ths of the gross-up is
10/17 for 2010
13/23 for 2011
6/11 for 2012 and later years
Federal Dividend Tax Credit (DTC)
2008/09
2010
2011
2012+
Gross-up
45%
44%
41%
38%
DTC as % of grossed-up dividends
18.9655%
17.98%
16.44%
15.02%
DTC as % of actual dividends
27.5%
25.88%
23.17%
20.73%
What does this do to the marginal tax rates for
eligible dividends, if the personal income tax rates remain unchanged?
Federal Marginal Tax Rates on Dividends Eligible
for the Enhanced Dividend Tax Credit
Taxable Income
2010 Tax Brackets
Other
Income
Tax Rate
Eligible Dividends Marginal Tax Rates
2009
2010
2011
2012+
First $40,970
15%
-5.75%
-4.28%
-2.02%
-0.03%
over $40,970 up to $81,941
22%
4.40%
5.80%
7.85%
9.63%
over $81,941 up to $127,021
26%
10.20%
11.56%
13.49%
15.15%
over $127,021
29%
14.55%
15.88%
17.72%
19.29%
The tax bracket thresholds are indexed each year. For
all marginal tax
rates and thresholds for the current year, federally and for each province
and territory, see the Tables of
Marginal Tax Rates.
The information on this site is not intended to be a
substitute for professional advice. Each person's situation differs, and
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site to your best advantage.
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