Individual investors pay personal income tax on dividends, which are paid from corporate earnings that have already been taxed. To avoid this 'double taxation', federal and provincial dividend tax credits are intended to compensate individual shareholders for income tax paid by Canadian companies in which they have invested.
Dividends received from Canadian public corporations and other corporations resident in Canada that are subject to the general corporate tax rate may be eligible for the Ontario dividend tax credit at the Rate for Eligible Dividends (see the table below). These amounts are usually reported in boxes 24, 25 and 26 on your T5 slip.
Other Canadian dividends received from Canadian-controlled private corporations subject to the small business tax rate may be eligible for the Ontario dividend tax credit at the Rate for Other Canadian Dividends (see the table below). These types of dividends are usually reported in boxes 10, 11 and 12 of your T5 slip.
The tax credit rates have changed over time; see the table below.
|Taxation Year||Rate for Eligible Dividends (%)||Rate for Other Canadian Dividends (%)|
You need to claim the credit on your personal income tax and benefit return. To do this, you will first need to calculate your credit on line 6152 of the provincial worksheet to determine the amount to enter on form ON428.