The federal government announced changes to the dividend gross-up factor and the dividend tax credit for eligible dividends in response to the reduction in federal corporate tax rates from 19% in 2008 to 15% in 2012. The budget proposes to adopt the gross-up factor reduction applicable to eligible dividends received by Ontario individuals. Ontario proposes to maintain its plan to increase the tax credit rate on grossed-up eligible dividends from 7.0 percent in 2008 to 7.4 percent in 2009, and 7.7 percent in 2010 and subsequent years. The proposed adjustments are summarized below:
2008 | 2009 | 2010 | 2011 | 2012 | |
Federal and Ontario dividend gross-up | 45% | 45% | 44% | 41% | 38% |
Federal dividend tax credit on grossed-up dividend | 18.97% | 18.97% | 17.97% | 16.44% | 15.02% |
Ontario dividend tax credit on grossed-up dividend | 7.0% | 7.4% | 7.7% | 7.7% | 7.7% |
Top federal rate | 14.6% | 14.6% | 15.9% | 17.7% | 19.3% |
To Ontario rate | 9.4% | 8.5% | 7.8% | 7.6% | 7.4% |
Combined proposed top rate: federal and Ontario | 23.96% | 23.06% | 23.65% | 25.33% | 26.74% |
(Other provincial rates may differ.) |
Source: Soberman LLP, Chartered Accountants, Toronto, ON, www.soberman.com