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.
Tax boost buoys Midlands firms
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.
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"Over recent years we have seen a constant nibbling away at the incentives to save; reducing lifetime allowances; a fear of means testing for the state pension; investments in pension funds no longer receiving dividend tax credits - which were a huge incentive in the past; and now more and more pension savers are paying higher rate tax in retirement.
Pensions likely to be key focus of Budget
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.
Canada : Capital Power declares quarterly dividend on its cumulative rate reset preference shares (series 1)
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.
Getting into the mind of curious George; Anthony Platts, Divisional Director of Brewin Dolphin, Teesside, looks ahead a few hours to George Osborne's Budget
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.
Osborne has little room for Budget manoeuvres; Will George Osborne defy the odds and make us happy in his Budget speech next week? GEORGE SLACK takes a look
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.
Pensions row; BRITAIN Brown under fire over pensions tax raid
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".
BROWN GOAL; 'He defied the pounds 75b pension hole warnings'
Lemma 1: Assuming that more wealth belongs to investors who have higher tax rates (negative net dividend tax credits), the expected return on the ex date is positive.
Who wants to trade around ex-dividend days?
'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.'
Personal Finance: Where was pensions news?
Are there circumstances under which dividend tax credits could be carried forward?
Taxes, Dividends, and Distortions
The consultative document, "Large business taxation: the government's strategy and corporate tax reforms", outlines a proposed capital gains tax exemption for companies' substantial shareholdings, affirms a preference for retaining dividend tax credits (rather than exemption) and announces a review of administrative matters.
Big Five call for faster tax reform
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