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Question from a newbe.

How does one tell if a Canadian companies dividend is CRA "eligible"? Some seem to declare that they are eligible, others simply state that they will be treated as income. Does a company have to declare or are they eligible by being Canadian and listed on the TSX?

Don't want to pay those guy's any more then I have to.
 

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Thanks Stardancer.

Anyone know if there is a list available that shows the companies that have declared?
 

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Most Canadian corporations issue eligible dividends. Not all of every distribution will necessarily be an eligible dividend, as some could be return of capital, or ineligible dividends. You need to check the company website. That said, in most cases, the dividend a company issues is usually eligible. Note that Income Trusts are not corporations (but they will convert in the near future).
 

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Kind of late for me to input this, but I guess if it's helpful, it's better late than never,... I think the funds given out are called by very specific names by the issuing body, be it by a corporation or an income trust or a mutual fund. The issuing body may call the funds as dividends, or interests or return of capital, hence, if the give-outs are called dividends, then most likely they will enjoy the tax benefits, especially if it's coming from a public listed corporation listed in the TSX.

All public corporations will need to pay tax at the company level, and whatever earnings leftover (a portion of this would then be paid out as dividends) would have already gone through the above stage. Hence, most dividends would qualify for the tax benefit, if they are to be called dividends.
 

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Kind of late for me to input this, but I guess if it's helpful, it's better late than never,... I think the funds given out are called by very specific names by the issuing body, be it by a corporation or an income trust or a mutual fund. The issuing body may call the funds as dividends, or interests or return of capital, hence, if the give-outs are called dividends, then most likely they will enjoy the tax benefits, especially if it's coming from a public listed corporation listed in the TSX.

All public corporations will need to pay tax at the company level, and whatever earnings leftover (a portion of this would then be paid out as dividends) would have already gone through the above stage. Hence, most dividends would qualify for the tax benefit, if they are to be called dividends.
My experience is the brokerage puts them in the account, without any notifications. If I visit the web site, in the short term - there's announcements of dividends, special dividends etc. In the long term,
when the institutions (i.e. company, trust or whatever) gets around to it for each tax year, they'll update their website with a breakdown of how much is dividend, how much is interest, ROC etc. etc. The brokerage then sums it up across all of the investments into one or more tax forms (ex a T5).
Due to the timing, sometimes I've had four T5's.

As for all public corporations are eligible - I'm not so sure. I believe it's where the head office is incorporated. I recall back in the "doc-com" phase, complaints about a company in Vancouver, that was listed on both the TSE (now TSX) and the US exchanges. As the corporation was registered out of one of the US states, it wasn't eligible. A strange situation with less than five percent of the staff/buildings were in the US and the other ninety plus were in Vancouver and area.

I haven't checked but I think part of the "eligible" is to be incorporated in Canada, not elsewhere.

As a side note, this is probably why a lot of the trust units will have a Canada and US investor sections. The investments are cross-listed on Canada and US exchanges but the tax treatment seems to be driven by where the incorporation happened.

The bottom line is that if you want eligible dividends, do some research as a listing on an exchange does not seem to be a guarantee.
 

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My experience is the brokerage puts them in the account, without any notifications. If I visit the web site, in the short term - there's announcements of dividends, special dividends etc. In the long term,
when the institutions (i.e. company, trust or whatever) gets around to it for each tax year, they'll update their website with a breakdown of how much is dividend, how much is interest, ROC etc. etc. The brokerage then sums it up across all of the investments into one or more tax forms (ex a T5).
Due to the timing, sometimes I've had four T5's.

As for all public corporations are eligible - I'm not so sure. I believe it's where the head office is incorporated. I recall back in the "doc-com" phase, complaints about a company in Vancouver, that was listed on both the TSE (now TSX) and the US exchanges. As the corporation was registered out of one of the US states, it wasn't eligible. A strange situation with less than five percent of the staff/buildings were in the US and the other ninety plus were in Vancouver and area.

I haven't checked but I think part of the "eligible" is to be incorporated in Canada, not elsewhere.

As a side note, this is probably why a lot of the trust units will have a Canada and US investor sections. The investments are cross-listed on Canada and US exchanges but the tax treatment seems to be driven by where the incorporation happened.

The bottom line is that if you want eligible dividends, do some research as a listing on an exchange does not seem to be a guarantee.
Eclectic,... I appreciated your replies and your help for me,... you have replied in other threads where I have asked questions on too,....

Looks like it's not so simple to be able to earn dividends which qualify for the Dividend Tax Benefits (DTCs),... but for a start, what we can do is to select dividend-payers who :-

1) is called a Public Corporation, ie not a TRust, or a Mutual Fund, etc,...

Hmm,... having said that, what about a Canadian REIT ? Does it qualify automatically since, without doubt, it is giving out dividends ?

2) is incorporated in Canada.

3) has her Head Office inside Canada and not in The USA.

With the above fulfilled,... check one more time with the CCRA about the status of the dividends. Thanks again,....
 

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No, all REIT distributions may not be dividends.
They often distribute RoC.
Harold, thank you,... just to understanding better, are you saying :-

1) All REIT distributions are NOT dividends, and they distribute Return-of-Capital(ROC); OR,

2) Not all REIT distributions are dividends, for they often distribute ROC, which means some REITs could also be distributing dividends which qualify for the DTCs ?

Need to check if they're dividends or not or can we say that none are dividends ?
 

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Wouldn't most companies websites show you the break down for the distribution and/or whether it is a distribution or dividend payment?

Personally I hold any REIT's in my TFSA, so it is a non issue for me.
 

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Harold, thank you,... just to understanding better, are you saying :-

1) All REIT distributions are NOT dividends, and they distribute Return-of-Capital(ROC); OR,

2) Not all REIT distributions are dividends, for they often distribute ROC, which means some REITs could also be distributing dividends which qualify for the DTCs ?

Need to check if they're dividends or not or can we say that none are dividends ?
Check the REIT website for the breakdown of the distribution.
Your statement from the brokerage will also show the breakdown.
For example, the breakdown of the distribution for XRE is as follows from their website:
http://ca.ishares.com/product_info/fund_history.do?ticker=XRE&year=2009

In this case, it is a mix of several types of distributions.

In general, it is better to hold these types of income trusts inside registered accounts (RRSP, TFSA, RESP) so that you don't have to worry about ACB.
In a non registered account, keep track of ACB.
It gets more complicated if you are writing off interest on an investment loan.
In that case, you'll make your life simpler by holding these inside registered accounts.
 

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Reading all these posts about what should be a simple tax question make me agin realize that our ENTIRE tax system is a mess.

Again I say that we need to go to some sort of "Flat Tax" system....where all income is income period.

To take into account different income sources.( eg..earned income, dividend income ,capital gain income, rental income, etc).....these different types of income could have different "inclusuion rates".

What this simply means is that only a portion of each type of income is added into taxeable income,,then ONE RATE of taxation would apply to all taxable income.
( just like as now, you pay tax on only half of your capital gains).

Also it drives me absolutely crazy that dividends are"groosed up" by 144% in 2010.( dropping a bit to 141% in 2011).

This means that $1000 of divedends = $1440 of "taxable income.
You have to figure out your taxes payable on $1440 even though you actually only received $1000 in dividends.
You will get the extra tax back with the dividend tax credit........BUT,

and this is a big BUT......many other entitlements , like the claw back on OAS, and tax payments, like the dreaded "health tax" here in Ontario, are based on your "taxable income" , which INCLUDES this grossed up amount of dividends!!
This means you are punished through having to include in taxable income MONEY YOU NEVER EAERNED OR RECEIVED!!!!

Its an absolute DISGRACE!!

By the way, our Premier McGinty, who got elected by promising not to raise taxes, and has done nothing but ever since, tried to say the new health tax was not a tax because it was a "health levy", not a tax!!
That funny because its right there on my TAX RETURNS every year!!
And of course we all have to apy it year in and year out , while his govt blows $billions!!

This is a rant...because Im sick and tired of the bullsh*t from our politicians
 

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Thank you,... warp and Harold,... for the great points,... for me, how I'd play it would be,.. just keep it simple,...

1) For the incomes which can "be planned", like approved and Eligible Dividends, ie by formulae which are approved by the CRA, say grossed-up, and then a certain percentage will be taxed, which could be quite low if an individual does not have any other income (this too is dependant upon the province one is in), I will put these into Non-registered plans, but there will be some work at our end to understand the methodology of taxation, then try to submit the proper paperwork and deliberations to CRA on the tax reduction.

2) For the incomes which are taxed "wholesome", and which "cannot be planned", say dividends from foreign companies, ROCs from Income Trusts and dividends from Mutual Funds, I'd just dump them into the TFSA, max it out and keep track of the available rooms if there are withdrawals, the rest go into the Registered plans.

And if 2) above is maxed out totally, then get a Tax Planner and see if he can propose any other proper and legal ways, otherwise, just pay to the CRA, after all, we can claim the benefits, eg CCTBs, healthcare, etc,....
 

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Its beyond me why a taxpayer should have to go through all this bullsh*it, as proposed in your post.


Filling out a tax form, which is a legal requirement, should be simple enough for any average taxpayer to understand and to do.

Its so onerous and complicated now, that many so called "tax prepayers" dont understand it themselves, and so do a poor job for the taxpayers using their services, and causing them to pay more in tax than they probably should.

Many studies have shown that if you call CRA and ask tax questions you will get WRONG answers, even from them, a good percentage of the time.

I have called CRA, and the person on the line was more confused than I was.

Anyway,.....to answer you, it is a goos idea to have candian eligible dividends in a taxable account, and have regular interest or foreign divs in a registered account......but NOT in a TFSA....foreign divs will have withholding taxes taaken out when paid into a TFSA, and they will be lost to you forever.

By the way ROC is ok in ataxable account as it is used to lower your cost base, which hopefully increases your capital gain, which is the best income to have tax wise.

Many high income investors have NO IDEA about the AMT.( alternative minimun tax)......this is a system dreamed up by the CRA to punish people if they have what they consider too much capital gains and dividend income.

What it basically means is that if you have these "tax preverance" types of income alone, or too much of them, and you use all the tax deductions you are allowed under the tax law to use......the CRA will "RE-WRITE", your tax return for you and charge you a minimum tax, that they have decided you should pay non the less.

They get you coming or going
 

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..warp,... many thanks for the geat information,...

I never knew that foreign dividends will have withholding taxes deducted from them when they are moved into the TFSA. I was always under the impression that any sort of investment income can be parked inside the TFSA, as long as there is enough room for it, and all this income will be subjected to the same treatment regardless,.. Where did you read this please ?

Yes, am aware that Canadian dividends and ROC can be kept inside a Taxable Account -> to help on the Canadian dividends, use the DTC method; and to help on the ROC, declare them together with the other income, eg capital gains from selling of shares. And yes, there will be calculations to learn-up here too.

Yes, aware of the AMT too,... can't do anything about that, goes back to the concept that the rich pay a bit more taxes,.. which, well,... it's acceptable to me,...
 

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ROX:

the reason taxes are withheld on your foreign dividends in a TFSA is that unlike a RRSP, LIRA RRIF etc,,,,a TFSA is NOT recognized as a "registered account" for foreign dividends.


You say you dont mind the AMT as its ok that the rich pay more taxes.
My friend the "rich" already pay huge taxes in Canada........if someone makes 10 times as much as you,,they pay 10 times, ( or more taxes than you)

When exactly do you think high earners have paid their fair share?

Do you think they are stealing the money?

Dont punish the "rich".....many are small business owners, and work like dogs, as well as having had to risk their capital to get ahead.

this whole idea of "screw the rich" is really, really getting out of hand.
 

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I never knew that foreign dividends will have withholding taxes deducted from them when they are moved into the TFSA. I was always under the impression that any sort of investment income can be parked inside the TFSA, as long as there is enough room for it, and all this income will be subjected to the same treatment regardless,.. Where did you read this please ?
The reason that US withholding taxes are not taken on US dividends within an RRSP is that the two countries have negotiated that in their tax treaty.

Until they re-negotiate the tax treaty and add a TFSA to the list, US taxes will be withheld on US dividends within a TFSA, just as within a non-registered account.

You can have foreign holdings within a TFSA and Canada will treat these holdings as tax-free upon withdrawal, but Canada has no jurisdiction over what other countries do until the procedure is negotiated within a tax treaty.
 

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The reason that US withholding taxes are not taken on US dividends within an RRSP is that the two countries have negotiated that in their tax treaty.

Until they re-negotiate the tax treaty and add a TFSA to the list, US taxes will be withheld on US dividends within a TFSA, just as within a non-registered account.

You can have foreign holdings within a TFSA and Canada will treat these holdings as tax-free upon withdrawal, but Canada has no jurisdiction over what other countries do until the procedure is negotiated within a tax treaty.
But even tax treaties impose taxes onto dividends earned. The percentage, as I can see, is usually 15% for many countries. What this means is the 15% is the maximum that a dividend-earner can be taxed; and there must not be any double-taxation with another taxation actvity from another country.

I am learning that the TFSA must be added into the tax treaty too, yes, I supposed so, since the TFSA is quite new, many countries would not have recognized it yet.
 

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..warp,... okay, I hear your point-of-view,... I'm sure many around the world are also debating this very same thing - is it fair for all to pay the same amount of tax, or to tax based on an income scale or ladder ?
 
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