Taxable Amount of Dividends from Corporations for Quebec

Dividends received from taxable Canadian corporations are treated differently from other types of investment income for Canadian tax purposes. Due to Canada's tax integration system, these dividends are adjusted through a process called dividend gross-up and dividend tax credit.

The dividend gross-up increases the dividend amount reported as taxable income to reflect the pre-tax corporate income. A dividend tax credit is then provided to recognize the corporate tax already paid and reduce the taxpayer's overall tax payable.

What Is Dividend Gross-Up and Tax Credit?

Canada's dividend tax system is designed to prevent double taxation. Corporations pay income tax before distributing profits to shareholders as dividends. The gross-up and dividend tax credit mechanism ensures that shareholders receive credit for the tax already paid at the corporate level.

When reporting dividends:

• The dividend amount is increased by a specific gross-up percentage.
• The grossed-up amount is included in taxable income.
• A dividend tax credit is claimed to reduce federal and provincial tax payable.

Dividend Gross-Up Rates for Federal and Quebec Tax Purposes

Type of Dividend	Description	Gross-Up Rate
Eligible Dividends	Usually paid by larger public corporations and corporations that pay tax at the general corporate tax rate.	38%
Other Than Eligible Dividends	Usually paid by Canadian-controlled private corporations (CCPCs) that qualify for the small business tax deduction.	15%

Taxable Amount of Dividends from Taxable Canadian Corporations

For Quebec tax purposes, the taxable amount of dividends from taxable Canadian corporations includes the following amounts reported on Revenu Québec information slips:

• Amount from box B of the RL-3 slip.
• Amount from box I of the RL-16 slip.
• Amount from box F of the RL-25 slip.
• Amounts from boxes 6-1 to 6-3 of the RL-15 slip.

If the taxpayer does not receive one or more of these Relevé slips, the required information may be available on other slips such as:

• T3 – Statement of Trust Income Allocations and Designations.
• T4PS – Statement of Employee Profit-Sharing Plan Allocations and Payments.
• T5 – Statement of Investment Income.
• T5013 – Statement of Partnership Income.

Calculating Taxable Dividends When Slips Are Not Available

If the taxpayer does not receive the required information slips, the taxable amount can be calculated by multiplying the actual dividend received by the applicable gross-up percentage.

Dividend Type	Calculation
Eligible Dividends	Actual dividend amount × 138%
Other Than Eligible Dividends	Actual dividend amount × 115%

Dividend Tax Credit (DTC)

The Dividend Tax Credit (DTC) is a non-refundable tax credit available to taxpayers who receive dividends from taxable Canadian corporations.

The credit helps reduce the impact of double taxation by recognizing that the corporation has already paid tax on the income before distributing dividends.

Quebec Dividend Tax Credit Eligibility

A taxpayer can claim the Quebec dividend tax credit if they received dividends from taxable Canadian corporations and were a resident of Quebec on December 31 of the tax year.

To calculate the Quebec dividend tax credit, add the following amounts:

• Box C from all RL-3 slips.
• Box 44 from all RL-15 slips.
• Box J from all RL-16 slips.
• Box G from all RL-25 slips.

The total amount is reported on Quebec TP-1 Line 415.

Example 1: Eligible Dividend Calculation

Scenario: Andrea received $1,000 in eligible dividends.

Federal Tax Return (T1)

• Line 12000 – Taxable amount of dividends: $1,380
• Calculation: $1,000 × 138% = $1,380
• Line 40425 – Federal Dividend Tax Credit: $207.27

Quebec Tax Return (TP-1)

• Line 120 – Taxable amount of dividends: $1,380
• Line 405 – Quebec Dividend Tax Credit: $151.49

The grossed-up dividend amount is included in taxable income, while the dividend tax credits reduce the final tax payable.

Example 2: Eligible and Other Than Eligible Dividends

Louise received the following dividend amounts:

Dividend Type	Gross-Up Rate	Federal Dividend Tax Credit	Quebec Dividend Tax Credit
Eligible Dividends	38%	15.0198% of grossed-up amount	10.97% of grossed-up amount
Other Than Eligible Dividends	15%	9.0301% of grossed-up amount	7.04% of grossed-up amount

Description	Actual Dividend	Gross-Up Calculation	Taxable Amount
Eligible Dividends	$1,000	$1,000 × 1.38	$1,380
Other Than Eligible Dividends	$500	$500 × 1.15	$575
Total Taxable Dividends			$1,955

Dividend Reporting Lines

Tax Return	Line	Description
Federal T1	Line 12000	Eligible dividends
Federal T1	Line 12010	Other than eligible dividends
Federal T1	Line 40425	Federal dividend tax credit
Quebec TP-1	Line 120	Taxable amount of dividends
Quebec TP-1	Line 405	Quebec dividend tax credit

Important Dividend Tax Slips

Slip	Important Boxes
T5 – Statement of Investment Income	Box 10 – Actual amount of other than eligible dividends Box 11 – Taxable amount of other than eligible dividends Box 12 – Dividend tax credit for other than eligible dividends Box 24 – Actual amount of eligible dividends Box 25 – Taxable amount of eligible dividends Box 26 – Dividend tax credit for eligible dividends
RL-3 – Relevé 3	Box A1 – Actual amount of eligible dividends Box A2 – Actual amount of other than eligible dividends Box B – Total grossed-up taxable dividends Box C – Dividend tax credit

Key Takeaways

• Dividends from taxable Canadian corporations are reported using the gross-up and dividend tax credit system.
• Eligible dividends are grossed up by 38%, while other than eligible dividends are grossed up by 15%.
• The dividend tax credit reduces the tax payable and prevents double taxation.
• Federal and Quebec dividend reporting requirements are different.
• Taxpayers should review all T5, T3, T5013, and Relevé slips before filing their tax return.

Understanding how dividend income is taxed helps taxpayers correctly report investment income and claim available dividend tax credits.