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how much taxes do corporations have to pay on dividends they receive from other companies?
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summary: the corporation pays 33.3% tax on dividends it receives and gets a tax refund at the same rate when it pays dividends out. according to http://www.kpmg.com/ca/en/issuesandinsights/articlespublications/taxrates/federal-and-provincial-territorial-tax-rates-for-income-earned-ccpc-2015-dec-31.pdf the corporate tax rates for 2015 are: according to page 3: the federal and provincial tax rates shown in the tables apply to investment income   earned by a ccpc, other than capital gains and dividends received from canadian   corporations. the rates that apply to capital gains are one-half of the rates shown in   the tables. dividends received from canadian corporations are deductible in computing   regular part i tax, but may be subject to part iv tax, calculated at a rate of 33 1/3%. if i understand that correctly, this means that a corporation in quebec pays 46.6% on investment income other than capital gains and dividends, 23.3% on capital gains and 33.33% on dividends. i'm marking this answer as community wiki so anyone can correct these numbers if they are incorrect. update: according to http://www.pwc.com/ca/en/tax/publications/pwc-facts-figures-2014-07-en.pdf page 22 the tax rate on taxable dividends received from certain canadian corporations is 33 1/3%. further, this is refunded to the corporation through the "refundable dividend tax on hand" (rdtoh) mechanism at a rate of $1 for every $3 of taxable dividends paid. my interpretation is as follows: if the corporation receives $100 of dividends from another company, it pays $33.33 tax. if that corporation then pays out $100 of dividends at a later time, it receives a tax refund of $33.33. meaning, the original tax gets refunded. note the first line is for the 2015 tax year while the second link is for the 2014 tax year. the numbers might be a little different but the tax/refund process remains the same.
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