Dividends received from securities are considered to be income, and therefore are subject to tax when received within a non-tax sheltered account (i.e. a non-registered account).
There are different tax treatments for dividends depending on whether they are Canadian or foreign dividends (foreign dividends are classified as 'other income'). At a federal and provincial level, marginal tax rates for each of these dividend types are decided on annually.
Canadian dividends are also eligible for the dividend tax credit (reduces the taxes payable).
Consider an example.
Let's say you receive $300 in Canadian dividends from an investment in your non-registered account.
$300 in actual dividends received gets 'grossed up' for tax purposes by 38%, so on your tax return $414 ($300 x 1.38) is included in your taxable income. Tax is then calculated based on your marginal tax rate.
The eligible dividend tax credit is 15.0198% of the grossed up dividend, so $62.18 ($414 x 0.150198) will be applied to reduce your taxes payable.
If your marginal rate is 40% for example, your net taxes payable will be $414 x 0.40 = $165.60 - $62.18 (dividend tax credit) = $103.42.
If you are looking for advice or help in completing your taxes, we recommend seeking out a tax professional as Wealthsimple does not currently offer services in this area.