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How to Prepare and File T5 Slips

If your corporation paid dividends during the calendar year, you're required to prepare T5 slips and file them with the CRA by the last day of February. Here's how.

A T5 slip (Statement of Investment Income) is the tax slip issued to shareholders who receive dividends from a corporation. If your corporation paid dividends during the calendar year, you're required to prepare T5 slips, give copies to the recipients, and file them with the Canada Revenue Agency (CRA) — by the last day of February.

What You'll Need

  • Access to QBO or your payroll/accounting software
  • The dividend amount paid during the calendar year
  • Shareholder information: name, address, and SIN
  • Access to CRA My Business Account or CRA Web Forms

How Dividends Work on a T5

Canada has two types of dividends for tax purposes:

Type

What it is

Gross-up rate

Dividend tax credit

Eligible dividends

Paid from income taxed at the general corporate rate (not the small business rate)

38%

15.02%

Non-eligible dividends

Paid from income taxed at the small business rate

15%

9.03%

Most small businesses pay non-eligible dividends because their income is taxed at the small business rate.

The gross-up and tax credit exist to account for the corporate tax already paid. The shareholder pays personal tax on the grossed-up amount, then claims the dividend tax credit — which reduces the personal tax to avoid double taxation.

Your Mesa CPA advisor determines which type of dividend to declare at year-end.

Normal Procedure

Step 1: Declare the Dividend

Dividends must be formally declared by the corporation's board of directors (which is you, in most owner-operated corporations). This should be documented with a simple board resolution stating:

  • The amount of the dividend
  • The record date (who was a shareholder on that date)
  • The payment date

Your Mesa CPA team can prepare this documentation.

Step 2: Record the Dividend in QBO

  1. Go to + New > Check or Journal Entry (depending on how your Mesa CPA bookkeeper handles this).
  2. The dividend is recorded as a reduction in Retained Earnings (the source) and a payment to the shareholder.
  3. Your bookkeeper will handle the specific journal entry — this isn't something to set up yourself without guidance.

Step 3: Prepare the T5 Slip

Option A: Using QBO or a T5 preparation service

Some payroll/accounting software can generate T5s. Check whether your version of QBO supports this, or use a service like Wagepoint or a CRA-certified tax slip software.

Option B: CRA Web Forms
  1. Log in to CRA My Business Account.
  2. Go to Prepare and file information returns.
  3. Select T5 and enter the dividend information: Box 10: Amount of actual dividends (non-eligible) | Box 11: Taxable amount of dividends (grossed up — non-eligible: multiply by 1.15) | Box 12: Dividend tax credit (non-eligible: 9.03% of the taxable amount) | Box 24/25/26: For eligible dividends, if applicable
  4. Add the shareholder's information.
  5. Review and file.

Step 4: Distribute T5s to Shareholders

Provide each shareholder with their T5 slip by the last day of February. They need it to file their personal income tax return.

Abnormal Procedures

You paid dividends to multiple shareholders in different proportions.

Each shareholder gets their own T5 reflecting their share. Dividend allocation must match the shareholder's ownership percentage unless you have different share classes with different dividend entitlements. Your Mesa CPA advisor will confirm the correct allocation.

You filed T5s and then realized the dividend amount was wrong.

File an amended T5 through CRA My Business Account. Provide the corrected slip to the shareholder so they can amend their personal return if it has already been filed.

You paid dividends during the year but didn't document them formally.

Work with your Mesa CPA team to prepare retroactive board resolutions for each dividend payment. The CRA expects dividends to be formally declared — undocumented dividends can be recharacterized.

FAQ

What's the difference between a T4 and a T5?

A T4 is for salary — employment income with source deductions withheld. A T5 is for dividends — investment income with no source deductions. If you pay yourself both salary and dividends, you'll issue both a T4 and a T5.

Do I need to withhold tax on dividends before paying them out?

No. Unlike salary, dividends are paid gross — no source deductions. The shareholder pays the tax themselves when they file their personal return.

What if the only shareholder is me — do I still need to file a T5?

Yes, if the dividend amount is $50 or more. The CRA requires T5 filing regardless of whether you're the only shareholder.

Are dividends subject to CPP?

No. CPP applies to employment income (salary and wages), not dividends. This is one of the reasons some owners prefer dividends — to avoid paying into CPP. The trade-off is no CPP benefit entitlement for that income.