Eligible and Non-eligible Dividends

tax planning

Eligible and Non-eligible Dividends

Eligible dividends

An eligible dividend is any taxable dividend paid to a resident of Canada by a Canadian corporation that is designated by that corporation to be an eligible dividend. A corporation’s capacity to pay eligible dividends depends mostly on its status. In simple terms, eligible portion of dividend paid to shareholder from a profit in excess $500,000 as corporation pays higher taxes on that amount. You also received eligible dividend from public corporations resident in Canada.

Non-eligible dividends

Non-eligible dividends are the type of dividends that a Canadian corporations paid to their shareholders/owner. They represent the dividends that are paid out of the retained earnings of corporate profits; profits of which are taxed at the very favorable 13.5% on the first $500,000.

Eligible dividends has better tax treatment than non-eligible dividends.

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