• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/22/2013

Canada - P.E.I. reduces 2014 non-eligible dividend tax rate 

November 22: Prince Edward Island legislation to reduce the tax rate on non-eligible dividends, by increasing the province's dividend tax credit applicable to non-eligible dividends received, is deemed substantively enacted for purposes of IFRS and ASPE, after the bill received its "first reading" on 13 November 2013.

The bill (Bill 7) also provides for the gradual phase-out of the additional deduction for credit unions, mirroring the federal changes announced in the 2013 federal budget.

Dividend tax credit, non-eligible dividends

The legislation increases the dividend tax credit on non-eligible dividends to 21% (from 14.5%) of the federal gross-up for non-eligible dividends, effective 1 January 2014.

As a result, the top federal-provincial marginal tax rate on non- eligible dividends paid in 2014 increases slightly to 38.74% (from 38.56% in 2013).

However, before the P.E.I. amendment, the top federal-provincial marginal tax rate on non-eligible dividends paid in 2014 would have been 40.03%, as a result of federal changes to the taxation of non-eligible dividends announced in the 2013 federal budget.

Read a November 2013 report prepared by the KPMG member firm in Canada: P.E.I. Decreases 2014 Non-Eligible Dividend Tax Rate

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