Dividends vs Salary
Find your optimal compensation mix as a BC incorporated business owner.
Corporation Profit
| Personal Tax | — |
| CPP (both sides) | — |
| Total Tax Burden | — |
| Net Take-Home | — |
| Effective Rate | — |
| Corporate Tax | — |
| Personal Tax | — |
| Total Tax Burden | — |
| Net Take-Home | — |
| Effective Rate | — |
Frequently Asked Questions
Should I pay myself salary or dividends?
It depends on your income level. Salary generates RRSP room and CPP entitlement. Dividends avoid CPP and can have a lower combined tax rate at certain incomes. Most owner-managers use a blend. Consult an accountant for a personalized plan.
What are eligible vs non-eligible dividends?
Eligible dividends come from corporations paying the general corporate rate. Non-eligible dividends come from CCPCs benefiting from the small business deduction (SBD). Eligible dividends receive a more generous gross-up and dividend tax credit (DTC).
Salary route: salary plus employer CPP equals the corporate profit; EI is not charged to owner-managers who own over 40% of the shares. BC's small business rate is 2% and its general corporate rate is 12%. BC Employer Health Tax (for large payrolls), RRSP room and corporate retained earnings are not included.
Salary route: salary plus employer CPP equals the corporate profit; EI is not charged to owner-managers who own over 40% of the shares. BC's small business rate is 2% and its general corporate rate is 12%. BC Employer Health Tax (for large payrolls), RRSP room and corporate retained earnings are not included.