![]() ![]() The employer portion is considered a business expense deducted from your corporate revenue pre-tax. This takes money out of your pocket currently. There are considerations beyond the tax rate: Canada Pension Plan ContributionsĪ salary has the down side of having to make both employer and employee Canadian Pension Plan (CPP) contributions. Accountants can figure out and exploit those inefficiencies, but it generally works as intended. Except for Saskatchewan and Newfoundland. Generally, tax integration favors earning income directly rather than flowing it through a CCPC. There are some small inefficiencies where it does not line up perfectly depending on your marginal tax bracket and province. The Canadian tax system is designed to be integrated, meaning that from the time a dollar is earned in your business to passing into your hands, the tax paid will be the same whether salary or dividends. There has been much debate about whether it is best to give salary versus dividends from a CCPC. They have changed the game with their personal income tax increases and attack on CCPCs. Alas, the Sith Lords on the Dark Side of the Force have not been idle. ![]() You can also download the Jedi Mindtricks Calculator to help your human mind process some of the mathematics for you. This is not for the uninitiated. For the basics of RRSPs, take RRSP Anatomy 101 first. This is where we receive more advanced RRSP training from Master Yoda. ![]() However, it may not be the best approach. That approach has been and still is suggested by many accountants. You could just pay yourself with dividends rather than building an RRSP. Some of you may have been tempted to skip learning about RRSPs because you have a CCPC. ![]()
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