Eligible Dividends

Plain meaning

Certain Canadian corporate dividends that receive enhanced gross-up and dividend tax credit treatment.

Also called

Key points

• Eligible dividends are generally paid by Canadian corporations from income taxed at the general corporate rate.
• Individuals report a grossed-up dividend amount and claim the corresponding dividend tax credit.
• Eligible dividends usually receive more favourable personal tax treatment than non-eligible dividends.
• Corporations must designate dividends as eligible for shareholders to receive the eligible dividend treatment.

Why it comes up

Dividend classification affects owner-manager compensation, investor after-tax returns, and tax-integration policy.