The Competitive Edge for Small Business Owners
Salary, dividends or salary & dividends mix: where’s the tax advantage?
As the owner-manager of an incorporated business, you can choose how you wish to be compensated: a salary, dividends or appropriate salary/dividends mix?
Dividends are distribution of a company’s profits, which is not deductible at corporate’s level. They are not subject to normal payroll deductions such as CPP EI, etc. Salary payment is deductible at corporate’s level and subject to normal payroll deductions. Salary is taxable only at recipient’s hand as personal tax on T4 income, however dividends are taxed at 2 levels. First, dividends are taxable at corporate’s level. Second, they are taxed at recipient’s hands on T5 slips.
Benefits of Salary
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