Dividend Tax Credit

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Dictionary Says

Definition of 'Dividend Tax Credit'

The amount a Canadian resident applies against their tax owing on the grossed up portion of dividends received from Canadian corporations. 
Investopedia Says

Investopedia explains 'Dividend Tax Credit'

The dividends an individual receives from Canadian corporations are "grossed up" by 25%. This amount is then included on their income tax form as taxable income. Both Canadian federal and provincial governments then grants individuals a tax credit, equal to a percentage of the grossed up amount. This helps to reduce the actual tax payable.  

Let's run through an example. Susan Smith has a marginal income tax rate of 25% and is located in Alberta, where the provincial dividend tax credit is 6.4%. The federal dividend tax credit is 13.33%. Her total dividends for the year were $250. On the taxable income portion of her tax return she will include $312.50 (250*1.25). Her approximate taxes owing on this dividend would then be $78.13 (312.50*25%). She also receives dividend tax credits of $41.67 (312.50*13.33%) and $20 (312.50*6.4%). Therefore, in all her taxes payable on her dividend is $16.46 (78.13-41.67-20). This amounts to only 6.58% of her original dividend.

Dividend tax credits are implemented in an attempt to offset double taxing, since dividends are paid to shareholders with a corporation's after-tax profit and the dividends received by shareholders are also taxed.

There are both federal and provincial tax credits.

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'Dividend Tax Credit'

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    http://www.investopedia.com/articles/06/JGTRRADividends.asp
    ... dividends paid by the following: Credit unions, mutual ... is exempt from federal income
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  • Beginner's Guide To Tax Efficient Investing

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    ... are the primary market for preferred stocks, may largely offset their tax bill using
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    ... of dividends, non-resident aliens face a dividend tax rate of 30 ... information, see
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  • What New Tax And Regulatory Changes May Mean For You ...

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    ... generous payouts) debentures are usually at the low end of the credit totem pole ...
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    ... vote and want to avoid a potential dividend tax hassle, the ... out, which removes the
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  • How To Owe Nothing On Your Federal Tax Return

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    ... the answers to your questions, it will tell you how much federal tax it expects ...
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  • What is the double taxation of dividends?

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    ... For more on this subject, check out Dividend Tax Rates: What Investors Need To Know
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  • Dividend Facts You May Not Know

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    ... that all paid dividends qualify for the lower tax rate. ... If you reinvest your dividends
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  • Should Dividend Investors Be Afraid Of Obama's Budget Plans?

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    ... it to 39.5%. "If we factor in the surcharge included in the healthcare reform
    package, the top dividend tax rate jumps to 43.4%.". ...

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