A non-eligible dividend is a dividend paid from corporate income taxed at the small business rate, carrying a smaller gross-up and dividend tax credit than an eligible dividend.
Also called an "other than eligible" dividend, a non-eligible dividend comes from income taxed at the low small business rate. Because less corporate tax was paid, the shareholder receives a smaller dividend tax credit, so the effective personal rate is higher than on an eligible dividend, though still lower than on salary.
For most owner-managers of a CCPC drawing on active business income within the small business limit, the dividends they pay themselves are non-eligible. Integration is designed so the combined corporate-plus-personal tax on this income roughly matches taking it all as salary.
An owner draws $50,000 in dividends from her CCPC's small-business-rate income. These are non-eligible dividends, grossed up by a smaller factor and carrying a smaller credit than eligible dividends would.
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