Why are Canadian dividends grossed-up for tax purposes?

Allan Madan, CA
 Nov 12, 2013


Dividends are paid out of corporations from after-tax profits. As the company has already paid tax on the amount, taxing the shareholder on the full dividend income would not be reasonable. Hence, in order to prevent this, the gross-up and tax credit system has been created.

Grossing up the dividend converts it to an amount that is pre-corporate tax. Then, the tax credit provided to the shareholder compensates for the tax paid by the corporation on its profits.



The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

Related Resources

Pin It on Pinterest

Share This