How to Pay Dividends: Completing the T5 Slip and Summary
Table of Contents
Note that the T5 slips for calendar year ended December 31st 2024 are due by February 28, 2025. This post and the T5 calculator have been updated to reflect that.
If you are the owner of a Canadian corporation, you can choose to pay yourself (and other shareholders) dividends instead of a salary. Alternatively, some shareholders also take dividends in addition to a salary depending on their tax planning strategy.
If you do decide to pay yourself dividends, it is important to ensure that you prepare the proper documentation to submit to Revenue Canada (CRA) (and if you live in Quebec to Revenue Quebec (MRQ)) since this must be reported as investment income on your personal tax return in the calendar year in which the dividends are paid.
If you are paying dividends to a Canadian shareholder, you must issue a T5 slip while non resident shareholders receive an NR4 slip. The T5 dividend slips are generally due by February 28th of the calendar year following the year in which the dividend was paid Although no income taxes are due at the time of filing the T5 slips with the government, interest and penalties apply for late filing .
In this article I give you guidance on how to prepare and submit the dividend declarations (T5 Slips) and the documents that need to be filled out and returned to the CRA and MRQ.
how to Obtain the T5 Dividend Slip
The first step, when preparing to do your dividend declarations, is to obtain a blank T5 slip. There are three ways to access a blank T5 Slip :
Download a PDF at CRA’s website at the PDF link. Note that there is a fillable version which means the slip can be directly edited from your computer rather than having to write in the amounts by hand.
Use a forms tax software offered by various tax software providers including Taxcycle, DTMax, Profile etc.
Use WebForms which is provided at the CRA link for all forms that can be filed directly. In order to use WebForms you will need a Web Access Code which can be obtain at this link by following the steps. Webforms can also be accessed by going to your CRA business account
how to Prepare the T5 Dividend Slips
Note: The example and calculator below assumes that you are paying income taxes at the small business tax rate i.e. your net profits for tax purposes are less than $500,000 and non eligible dividends.
Dividends paid from a company which pays the small business tax rate are referred to as “non eligible (or ineligible) dividends” or “dividends other than eligible dividends” while dividends paid from a corporation who pays the full corporate tax rate are referred to eligible dividends.
There is a third type of dividend referred to as a capital dividend which does not require preparation of a T5 slip.
Using the T5 slip obtained in one of the methods above, you are required to fill out both a T5 slip and complete the following boxes:
Note that the rates for the dividend gross up of 1.15 and dividend tax credit of 9.0301% are the same for the years from 2019 to 2024.
the actual amount of dividends paid to the shareholder on Box 10 of the slip
the grossed up amount of dividends on Box 11 = amount of Box 10 X 1.15 (2018 = 1.16 Gross Up)
the dividend tax credit on Box 12 = 9.0301% X Box 11 (2018 = 10.0313%)
Example of T5 Slip Calculation:
For example if you pay yourself a dividend of $35,000 : (2018 comparative):
Enter $35,000 on Box 10
Enter $40,250 on Box 11 (2018 = $40,600.00)
Enter $3,634.52 on Box 12.(2018 = $4,072.71)
See link to our T5 dividend calculator that you can use to calculate the amounts on Box 11 and Box 12
You will also need to enter the following information on the slip:
Year for which the dividends are paid
Payer corporation name and address (this is the corporate entity that is paying the dividends.)
Dividend recipient name and address (name of individual or corporation that is receiving the dividends)
Report code – The code in this box indicates that this slip is the original ("O"), an amended ("A"), or a cancelled slip ("C").
If the information on an Original (O) slip is incorrect, you would file an Amended (A) slip.
If you have filed a slip and decide to not pay the dividends you would Cancel (C) the slip.
Recipient type – The code in this box indicates if the amount was paid to an
individual ("1"),
a joint account ("2"),
a corporation ("3"),
an association, trust, club, or partnership ("4"),
or a government ("5")
Recipient identification number – If the recipient of the dividends is an individual (other than a trust),the number in this box is their social insurance number. In all other cases, the number is the CRA issued Business Number of the entity which is nine characters followed by RZ0001.
The Quebec equivalent form for the dividend declaration is the RL-3. The information required is very similar to the T5. Further information can be found at the links below:
RL-3 Slips including a fillable slip where you can enter the amount of the dividend and the other fields are automatically calculated.
This RL-3 guide gives you information on how to complete the dividend declaration.
do you need a T5 Summary?
The T5 summary should only be completed when the T5 slips are being submitted in paper format.
A summary is not required when the T5 slips are being submitted electronically.
Please refer to instructions and the T5 summary form
how to submit the T5 and RL3 Slips
The T5 can be filed electronically to Revenue Canada either in XML format, when you are using tax software, or by using Web Forms (as discussed above) for which you will need your account number (this is usually your CRA business number followed by RZ0001) and a Web Access Code
The RL3 slip can be efiled to Revenue Quebec in XML file format (that has to be certified). In order to do this you must have a transmitter number which you can get by completing the Transmitter Registration Form ED‑430
When mailing the T5 slips to CRA use the address below:
T5 Program
Jonquière Tax Centre
PO Box 1300 LCD Jonquière
Jonquière QC G7S 0L5If you have more than 50 slips, you are required to file the slips electronically either using internet file transfer or by using Web Forms
Deadline to submit the forms for 2024 is February 28, 2025
Points to Note About Small Business Dividends:
Payment of a capital dividend does not required T5 dividend slip since the dividend is effectively tax free. Instead the corporation is required to complete election T2054.
Payment of dividends should be recorded in the corporation minutes.
A copy of the T5 and RL3 should be kept for your records.
A copy should be given to the recipient(s) of the dividends to reflect on their personal tax return.
The deadline for submission of the T5s and RL3s is usually February 28th in the year after the calendar year in which the dividend was paid. For 2024, this is actually February 29th since we are in a leap year.
No taxes are due along with the filing of the dividend slips for Canadians.
Interest and penalties apply for late filing. Returns filed late are charged a penalty of a $10 per day for a minimum of $100 and a maximum of $1,000.
Small business dividends are non eligible and should be reflected on box 10. Non eligible means that the corporation qualifies for the small business deduction i.e. since the corporation pays less corporate tax, the recipient of the dividend receives a lower tax credit on their personal tax return.
Preparing the T5 slips is fairly straightforward. If possible, it is better to file it online as you receive an instant confirmation of submission, don’t have to worry about T5 slips getting "lost in the mail and the T5 summary is automatically generated. Also, you can save the file for future returns that can help save time in the long run.
Need help filing your dividend slips? Check out my book on what every small business owner should know about dividends and step by step instructions on how to prepare and submit them to CRA (and Revenue Quebec) or contact me for a consultation.
