: How much taxes do corporations have to pay on dividends they receive from other companies? I am trying to figure out whether it would be beneficial for me to convert my sole-proprietorship to a corporation. In doing my research,

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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.

Details

According to 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:

+---------------------------+--------------------------------------+-----------------------------------------------------+------------------------+-------------------+
| | Small Business Income up to 5,000 | Small Business Income between 5,000 and 0,000 | Active Business Income | Investment Income |
+---------------------------+--------------------------------------+-----------------------------------------------------+------------------------+-------------------+
| British Columbia | 13.5% | 13.5% | 26.0% | 45.7% |
| Alberta | 14.0 | 14.0 | 25.0 | 44.7 |
| Saskatchewan | 13.0 | 13.0 | 27.0 | 46.7 |
| Manitoba | 11.0 | 23.0 | 27.0 | 46.7 |
| Ontario | 15.5 | 15.5 | 26.5 | 46.2 |
| Quebec | 19.0 | 19.0 | 26.9 | 46.6 |
| New Brunswick | 15.0 | 15.0 | 27.0 | 46.7 |
| Nova Scotia | 14.0/27.0 | 27.0 | 31.0 | 50.7 |
| Prince Edward Island | 15.5 | 15.5 | 31.0 | 50.7 |
| Newfoundland and Labrador | 14.0 | 14.0 | 29.0 | 48.7 |
| Yukon | 14.0 | 14.0 | 30.0 | 49.7 |
| Northwest Territories | 15.0 | 15.0 | 26.5 | 46.2 |
| Nunavut | 15.0 | 15.0 | 27.0 | 46.7 |
+---------------------------+--------------------------------------+-----------------------------------------------------+------------------------+-------------------+

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 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 for every of taxable dividends paid.

My interpretation is as follows: if the corporation receives 0 of dividends from another company, it pays .33 tax. If that corporation then pays out 0 of dividends at a later time, it receives a tax refund of .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.