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Ontario Dividend Tax Credit

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Ontario -> Dividend tax credit

Ontario Dividend Tax Credit

Ontario Taxation Act, 2007:
    -  s. 20.1 for taxation years ending 2014 or later
    - s. 13 for taxation years ending 2009 to 2013
    - s. 4(3.4) for taxation years ending 2008 or earlier

Ontario's Taxation Act, which is for taxation years ending in 2009 or later, specifies the dividend tax credits for both eligible and non-eligible dividends as a percentage of the federal dividend tax credit.

Ontario's November 7, 2013 Economic Outlook and Fiscal Review Chapter VI: Taxation announced revisions to both eligible and non-eligible dividend rates.  Another change is that the Ontario surtax, starting in 2014, will be calculated before deducting dividend tax credits.  By doing so, all taxpayers would get the same amount of dividend tax credit.  Previously, the surtax was applied after these tax credits were deducted, thus increasing the tax credits for high income earners by as much as 56%.  These measures were included with proposals in the 2014 Budget.

Ontario Enhanced Dividend Tax Credit for Eligible Dividends

The Federal 2008 Budget reduced the gross-up rate and the dividend tax credit rate for dividends eligible for the enhanced dividend tax credit.  See the Enhanced Dividend Tax Credit article for details.  The change in the gross-up rate automatically applies to the provincial treatment of these dividends.

Ontario's November 7, 2013 Economic Outlook announced that the rate for the enhanced dividend tax credit for eligible dividends would be increased to 10%, but the surtax will be calculated prior to the deduction of the dividend tax credit.  This was confirmed in the 2014 Budget.  The legislation was revised to define the tax credit as 36.3158% of the gross-up on the dividends, which equates to 10% of the taxable dividend.

Ontario Dividend Tax Credit Rate for Eligible Dividends

Year Gross-up % of Grossed-up
Dividend
% of Actual
Dividend
2014 & later 38% 10.0% 13.800%
2012/2013 38% 6.40% 8.832%
2011 41% 6.40% 9.024%
2010 44% 6.40% 9.216%
2009 45% 6.40% 10.730%
2008 45% 7.00% 10.150%
2007 45% 6.70% 9.715%

Ontario Dividend Tax Credit for Non-Eligible Dividends

Ontario Taxation Act, 2007 s. 20.1(b) for 2014 and later years

The Ontario Taxation Act, 2007 defines the non-eligible dividend tax credit as a percentage of the federal gross-up.

The Federal 2017 Fall Economic Statement announced that the gross-up rate for non-eligible dividends (also know as regular dividends, or small business dividends) would be reduced to 16% for 2018, and to 15% for 2019 and later years.

The Ontario 2017 Fall Economic Statement announced that the Ontario dividend tax credit rate for non-eligible dividends would be reduced to 3.2863% as of January 1, 2018.  However, Billl 177 tabled the same day as the Economic Statement sets the rate at 22.6175% of the gross-up, which would result in a tax credit of 3.1197%.  It would result in a rate of 3.2863% with a gross-up of 17%.  The Bill was prepared based on current federal legislation.  If and when the federal proposal becomes law, the Ontario Ministry of Finance will review its impact and decide whether to bring forth further legislative proposals.

The current and past Ontario rates for non-eligible dividends are shown in the following table.  This assumes no further legislative changes by Ontario.

     Ontario Dividend Tax Credit Rate for Non-Eligible Dividends

Year Gross-up
Rate
% of
Gross-up
% of Grossed-up
Dividend
% of Actual
Dividend
2019+ 15% 22.6175% 2.9501% 3.39%
2018 16% 22.6175% 3.1197% 3.62%
2016-2017 17% 29.50% 4.2863% 5.02%
2014-2015 18% 29.50% 4.50% 5.31%
2010-2013 25% 22.50% 4.50% 5.625%
2008/2009 25% 25.65% 5.13% 6.4125%

The combined federal/Ontario marginal tax rates for eligible and non-eligible dividends and other income are found in the table of Ontario marginal tax rates, which has been revised to reflect the 2018 rate of 3.2863% for non-eligible dividends..

See our tables of non-eligible dividend tax credit rates for all provinces and territories.

Revised: November 20, 2017

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