Ontario Non-Eligible Dividend Tax Credit 2027: Dec vs Jan
Reviewed by Bader A. Chowdry, CPA, CA, LPA on
If you own a Canadian-controlled private corporation (CCPC) in Mississauga or elsewhere in Ontario, the Ontario non-eligible dividend tax credit 2027 rate is lower than the 2026 rate, so a dividend paid before December 31 and one paid in January are credited differently. The rate falls from 2.9863% to 1.9863% for 2027. The 2026 Ontario Budget announced the cut, and Bill 97, the Plan to Protect Ontario Act (Budget Measures), 2026, enacted it: the bill has received Royal Assent as Statutes of Ontario 2026, chapter 2.
What changes for non-eligible dividends on January 1, 2027?
Ontario’s credit rate for non-eligible dividends, which the province calls the rate for other Canadian dividends, is 2.9863% for 2020 to 2026 and 1.9863% for 2027, according to Ontario’s dividend tax credit table. The rate for eligible dividends stays at 10.0% in both periods. The 2027 rate applies to dividends you receive in 2027.
The legal source is Schedule 15 of the enacted Bill 97, which amends section 19.1 of the Taxation Act, 2007. The enacted text expresses the new credit as 15.2283% of the federal gross-up for taxation years ending after December 31, 2026. With the 15% gross-up, that works out to the same 1.9863% of the taxable amount that Ontario’s table shows.
A non-eligible dividend is generally one paid from corporate income that benefited from a preferential rate, such as the small business deduction. Ontario’s general corporate income tax rate is 11.5%, and up to $500,000 of a small CCPC’s active business income qualifies for the small business rate. Since July 1, 2026, that small business rate has been 2.2%, because the enacted Bill 97 set the small business deduction rate at 9.3% for days after June 30, 2026, in force from July 1, 2026. The rate was 3.2% before July 1, 2026, and a taxation year that straddles that date is prorated by days. Insight Accounting CPA’s guide to that rate cut covers the corporate side; this article focuses on the timing decision.
Why does a personal credit move when a corporate rate moves? The budget annex explains that dividend tax credits give relief that approximates the corporate income tax rate the corporation paid, so a lower small business rate brings a lower credit. The CRA’s Income Tax Folio S3-F2-C2 calls this integration: when the credits roughly match the gross-up, the shareholder is credited for the corporate tax presumed to have been paid. Each side moves by one percentage point: the corporate rate was 3.2% before July 1, 2026 and is 2.2% now, and the shareholder’s credit goes from 2.9863% to 1.9863% in 2027.
This article is about taxable dividends. A capital dividend paid from the corporation’s capital dividend account (CDA) under subsection 83(2) is a different tool, because the CRA’s folio notes that such a dividend is not included in a shareholder’s income.
The credit is not applied to the cash you receive. The CRA has you multiply a non-eligible dividend by 115% to get the taxable amount for line 12010, which is the 15% gross-up shown in T5 box 11. The CRA’s 2025 Ontario worksheet applies the 2.9863% rate to that line 12010 amount, and the federal credit is 9/13 of the gross-up, or 9.0301% of the taxable amount.
When does a dividend count as income: December or January?
Generally, a taxable dividend is included in your income in the tax year you receive it, under paragraph 12(1)(j) and subsection 82(1) of the Income Tax Act (ITA). The date that matters is the date the corporation pays you or credits your account, not the date the directors sign the resolution. For 2026, that means the payment has to land by Thursday, December 31, 2026.
Two sources support that. Subsection 82(1) includes taxable dividend amounts received in the taxation year, and paragraph 12(1)(j) brings dividends on shares of Canadian-resident corporations into income. The folio adds that a taxable dividend is generally counted in the year the shareholder receives it, and that the credit rate depends on the year the dividend is included in income.
Bookkeeping can move the date. According to the CRA’s folio, crediting a shareholder’s account or cutting what the shareholder owes the corporation can count as paying a dividend, in the amount credited or forgiven. A year-end journal entry that clears an overdrawn shareholder loan may therefore put the dividend in 2026 even if you planned January. Settle the payment date first, then book the entry to match.
Reporting follows the same calendar. A dividend paid in December 2026 belongs on the T5 for 2026, and the T5 is due the last day of February after the calendar year. February 28, 2027 is a Sunday, so the next business day, March 1, 2027, applies. A January 2027 dividend goes on the 2027 T5, due Tuesday, February 29, 2028.
You are taxed on a calendar year, but the corporation has its own fiscal year, and its T2 return follows that year. Its dividend refund is built from dividends paid in its own tax year: for non-eligible dividends, up to 38 1/3% of those dividends, capped by its refundable dividend tax on hand (RDTOH) balances at year-end. If your corporation holds RDTOH from passive income such as investment income, which fiscal year the dividend falls in can matter as much as the calendar date.
How big is the credit change on a $100,000 dividend?
On an illustrative $100,000 non-eligible cash dividend, the taxable amount is $115,000. Ontario’s credit at 2.9863% is about $3,434 and at 1.9863% about $2,284, so the 2027 credit is $1,150 lower. That is 1.15% of the cash dividend, before your tax bracket and the other items on your return.
Here is the illustrative example in full. An owner-manager of a Mississauga CCPC wants $100,000 in cash and compares a payment in December 2026 with one in January 2027. The assumptions: the dividend is non-eligible, the corporation can lawfully pay it, and the owner’s bracket would be the same in both years.
| Feature | December 2026 | January 2027 |
|---|---|---|
| Taxable amount after the 15% gross-up | $115,000 | $115,000 |
| Ontario credit rate | 2.9863% | 1.9863% |
| Ontario credit | $3,434 | $2,284 |
| Difference | – | $1,150 lower |
The $1,150 is not the whole decision. Three things can outweigh it:
- Bracket. A December dividend adds $115,000 of taxable income to 2026. If that is taxed at higher rates than the same dividend would be in 2027, the bracket cost can exceed the credit gap, and the reverse can also be true.
- Deferral. Tax on a December dividend is reported on the 2026 return, while a January dividend moves it to the 2027 return, a year later. The CRA’s page for the 2025 return shows the usual pattern: for most people, filing and payment fall due on April 30 of the following year.
- Instalments. The CRA says you pay instalments for 2026 if net tax owing is more than $3,000 in 2026 and in either 2025 or 2024. The due dates are March 15, June 15, September 15 and December 15, so a large dividend can change your instalment position.
A workable decision rule: pay in December only if the credit gap, plus any bracket advantage in 2026, is worth more to you than a year of deferral on the tax. If 2026 is a high-income year and 2027 will be lower, January tends to look better; if 2026 is a low-income year, December may. Neither answer holds until you have modelled both years, including your salary and dividend mix: salary runs through payroll, with source deductions to remit to the CRA, and appears on a T4, while a dividend appears on a T5 and on your T1 return. Insight Accounting CPA’s short answer on salary or dividends from an Ontario corporation is a starting point.
What can go wrong with a year-end dividend?
Three things go wrong most often: paying a dividend the corporation cannot lawfully pay, booking the payment on a different date than you intended, and ignoring the personal side of the return. Under section 42 of the federal Canada Business Corporations Act, a corporation cannot declare or pay a dividend when there are reasonable grounds to believe it could not pay its liabilities as they become due.
The section turns on two questions: can the corporation pay its liabilities as they come due, and would the realizable value of its assets stay at or above its liabilities plus stated capital. A profitable year on paper does not answer either one. Confirm which statute governs your corporation, whether federal or Ontario, and what its dividend test says before the resolution is signed.
The most common mistake is the booking one: the journal entry described above. The personal risk is the combination of bracket, deferral and instalments. Between now and December 31, a sensible sequence is to estimate both years for each timing, check the corporation’s cash, liabilities and RDTOH, fix the payment date and the entry together, and calendar the T5 and instalment dates. Insight Accounting CPA can run that comparison for a Mississauga owner-manager before the resolution is drafted.
Frequently asked questions
Does Ontario’s 2027 change affect eligible dividends?
Not on the published table. Ontario’s credit table lists 10.0% for eligible dividends in both the 2020 to 2026 row and the 2027 row, and only the rate for other Canadian dividends moves, from 2.9863% to 1.9863%. Eligible dividends generally come from income taxed at the general corporate rate, so whether your corporation can pay one is a separate question to review.
How much taxable income does a $100,000 non-eligible dividend create?
The taxable amount is $115,000. The CRA applies a 15% gross-up to non-eligible dividends paid in 2019 or later, so a $100,000 dividend adds $15,000 and is reported at $115,000 on line 12010. The federal credit is 9/13 of the $15,000 gross-up, and Ontario’s credit rate applies to the same $115,000 taxable amount.
Does a dividend declared in December but paid in January count in 2026?
Generally not. Paragraph 12(1)(j) and subsection 82(1) of the Income Tax Act look to amounts received in the year, so a dividend paid in January is generally 2027 income. The CRA’s folio treats crediting a shareholder’s account, or reducing what the shareholder owes, as a possible payment, so the bookkeeping entry matters. Confirm the facts before relying on a date.
Do I need to pay instalments if I take a large dividend?
Possibly. For 2026, the CRA says you have to pay instalments if your net tax owing is more than $3,000 in 2026 and also more than $3,000 in either 2025 or 2024. Most individuals pay on March 15, June 15, September 15 and December 15. That page speaks to 2026, so have your advisor check how it applies to 2027 before you set a January date.
Book a 30-minute planning call with Bader A. Chowdry, CPA, CA, LPA.
Important — informational only, not advice. Do not use this article to make any decision.
This article is published by Insight Accounting CPA Professional Corporation for general educational purposes only. It is not tax, legal, accounting, financial, or investment advice, and nothing in this article should be relied upon — by anyone, for any purpose — to make a business, tax, financial, accounting, legal, or investment decision.
Tax law, CRA administrative positions, court interpretations, and Ontario provincial rules change frequently, sometimes retroactively, and the content of this article may be incomplete, simplified, out of date, or wrong by the time you read it. The right answer for your specific situation depends on facts this article does not know — your structure, history, jurisdiction, filings, contracts, and goals.
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Insight Accounting CPA Professional Corporation is led by Bader A. Chowdry, CPA, CA, LPA — licensed by CPA Ontario under the Public Accounting Act, 2004. To engage us for situation-specific advice, book a 30-minute planning call.
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