DRIP Taxes
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A BASIC and SIMPLE overview of the tax implications for Canadian DRIPs.
Information here should taken informally and not as tax advice.
All references here at to Eligible-Dividend Corporations and not to Trust Distributions.
For your specific details, consult a certified tax professional.
Investing through a DRIP can lead to 2 tax situations:
Capital Gains as the result of you selling shares, a take-over / Merger, etc...
Receiving Eligible-Dividends
Capital Gains:
If you buy a stock then sell it at a Gain, or Profit, you are taxed on these gains. You are taxed on HALF (50%) of this Gain at your Marginal tax rate (tax bracket) Federally and Provincially. This is called the inclusion rate. Read more at the CRA page for Capital Gains.
There is also Capital Losses if you sell at a loss, but these losses can only be used for
Dividends:
When you receive eligible Dividends from a Canadian corporation, you are taxed on them regardless if you reinvest them or not. You pay tax both Federally and Provincially for this amount.