Final answer:
All interest and dividends received by an individual taxpayer outside of RRSP or TFSA are taxable, requiring reporting on a tax return and taxed at the individual's marginal rate, with dividends being subject to the dividend tax credit.
Step-by-step explanation:
The statement is generally true: all interest and dividends received by an individual taxpayer outside of a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) are indeed taxable. In Canada, interest earned from savings accounts, bonds, or GICs and dividends from owning shares in corporations must be reported on your income tax return. This income is taxed at your marginal tax rate, though in the case of dividends, there is a gross-up and tax credit system in place to take into account the tax the corporation has already paid on its profits (known as the dividend tax credit).However, within an RRSP or TFSA, these types of income are not taxed on an annual basis. For RRSPs, tax is deferred until funds are withdrawn, usually at retirement, at which point the withdrawals are treated as income and are then taxed. For TFSAs, both contributions and gains (including interest and dividends) are tax-free even when withdrawn.