Eligible and non-eligible dividend tax rates in every province — plus dividend vs salary comparison
Dividends from Canadian corporations are taxed differently than employment income in every province. The dividend tax credit system is designed to prevent double taxation — since corporations already paid corporate tax before distributing dividends. Understanding how dividends are taxed provincially is essential for business owners deciding how to extract income, and for investors comparing after-tax returns on Canadian equities versus other income types.
When you receive a Canadian eligible dividend, you must gross it up by 38% for tax purposes (the "grossed-up" dividend is reported as income). You then receive a federal dividend tax credit of 15.0198% of the grossed-up amount, plus a provincial dividend tax credit that varies by province. For non-eligible dividends (typically from CCPCs), the gross-up is 15% and federal credit is 9.0301%.
| Province | Top Rate on Eligible Dividends | Top Combined Marginal (Employment) | Dividend Advantage |
|---|---|---|---|
| Alberta | 34.31% | 48.00% | 13.69% lower |
| Saskatchewan | 30.33% | 47.50% | 17.17% lower |
| Ontario | 39.34% | 53.53% | 14.19% lower |
| British Columbia | 36.54% | 53.50% | 16.96% lower |
| Manitoba | 37.78% | 50.40% | 12.62% lower |
| Quebec | 40.11% | 53.31% | 13.20% lower |
| New Brunswick | 37.33% | 52.50% | 15.17% lower |
| Nova Scotia | 41.58% | 54.00% | 12.42% lower |
| Province | Top Rate on Non-Eligible Dividends | Notes |
|---|---|---|
| Alberta | 42.31% | Higher than eligible — small biz income |
| BC | 48.89% | Close to employment rate |
| Ontario | 47.74% | Includes surtax effect |
| Saskatchewan | 42.34% | Moderate |
| Manitoba | 46.67% | Relatively high |
| Quebec | 47.14% | High — affects CCPC planning |
| Nova Scotia | 48.28% | Highest for non-eligible |
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Get KOHO Free — Code 45ET55JSYAFor a business owner in Ontario earning $150,000 from a CCPC, the choice between salary and dividends involves complex trade-offs. Salary: deductible to the corporation, creates RRSP room, subject to CPP, taxed at full marginal rates. Eligible dividends (if corporate income was taxed at general rate): taxed at ~39.34% top rate, no CPP, no RRSP room. A common strategy is a salary-dividend blend: pay enough salary to maximize RRSP contributions ($32,490 room requires ~$180,500 salary), then take the remainder as dividends for overall tax efficiency.
At lower income levels, eligible dividends from Canadian corporations can actually result in negative provincial tax — meaning the dividend tax credit exceeds your provincial tax otherwise owing. In Alberta, an individual earning only $50,000 in eligible dividends may have zero or near-zero provincial tax after the Alberta dividend tax credit of 10% of the grossed-up amount. This makes eligible dividend income particularly attractive for lower-income investors or retirees drawing from non-registered accounts.
Compare salary, dividends, and capital gains across provinces.
Canada Tax Calculator →Also see: Provincial Tax on Capital Gains | Alberta Income Tax 2026 | Ontario Income Tax 2026