Dividend Tax Credit

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Dividend Tax Credit

In Canada, a tax credit that reduces one's tax liability if one receives dividends from a company. The credit is 13.33% of the value of a dividend for Canadian federal taxes, with additional credits at the provincial levels. The dividend tax credit treats a dividend as 125% of its actual value. For example, suppose one receives $1000 in dividends and would otherwise owe 22% (or $220) in taxes. The federal dividend tax credit would take 125% of the $1000 (or $1250) and reduces one's tax liability of 13.33% of that amount. 13.33% of $1250 is $166.63, which means that one would only owe $56.37 ($250 - $166.63) in taxes on the dividend at the federal level. One may owe less if the province applies its own dividend tax credit. This credit exists in order to avoid double taxation of dividends.
References in periodicals archive ?
On the reform of Dividend Tax he said: "The current system of dividend tax credits will be replaced with a new PS5,000 taxfree dividend allowance from April 2016.
Not so fortunate, however, are owner managed companies which will see dividend tax credits replaced by a new taxfree allowance of PS5,000 on dividend income.
Under this legislation, individuals resident in Canada may be entitled to enhanced dividend tax credits that reduce the income tax otherwise payable on these dividends.
Pensions have already been severely hit by the removal of dividend tax credits by Gordon Brown back in 1997 - costing savers an estimated pounds 5 billion per annum - reducing tax relief would be the penultimate nail in their coffin.
Pensions have already been severely hit by the removal of dividend tax credits by Gordon Brown back in 1997, costing savers an estimated pounds 5 billion per annum - reducing tax relief would be the penultimate nail in their coffin.
Mr Brown yesterday told a press conference in Glasgow the decision to axe dividend tax credits had been right for the country and the economy.
In response to the newspaper's claims, a Treasury spokesman said: "The Government policy on dividend tax credits was set out in Budget 1997, including the impact on revenues.
A Treasury spokesman said the papers showed Mr Brown "recognised that dividend tax credits were an anomaly in the tax system which distorted business decisions and discouraged long-term investment".
Under this proposed legislation individuals resident in Canada may be entitled to enhanced dividend tax credits that significantly reduce the income tax otherwise payable.
2001, "Cross-Border Investing with Tax Arbitrage: The Case of German Dividend Tax Credits," Review of Financial Studies 14, 617-657.
For instance, anyone investing pounds 6,000 in the Jupiter Income Trust within a PEP wrapper ten years ago would have lost pounds 1,289 had we been unable to reclaim the dividend tax credits.
Are there circumstances under which dividend tax credits could be carried forward?