How To Pay Salary vs Dividends From Your Corporation (Video)

A corporation can be a great tool for high-income professionals to manage their cash flow. It can smooth out income as your business income and personal expenses fluctuate to avoid excessive losses to tax. However, you do have to move the money out of your corporation and pay personal taxes to use it. Learn more about how to optimally do that using a combination of salary and dividends. The optimal mix will also change as your corporate investments grow. Learn why. That way, you can make sure to ask the right questions and provide the right information to get the best out of your accountant.

Click the image below to go straight to the video. It is time-stamped with different sections. Or click a section of particular interest in the overview to jump straight there.

Video Episode Overview

0:00 – Intro

2:09 – Cashflow in a Corporation

5:05 – How to pay yourself Salary from your Corp

5:50 – Canada Pension Plan (CPP)

9:05 – Setting up Payroll with Revenue Canada

10:26 – Salary: Pros & Cons

18:21 – How to pay yourself Dividends from your Corp

20:12 – Dividends: Pros & Cons

22:47 – How to determine how much Salary or Dividend to pay?

25:35 – Capital Dividend Account (CDA)

25:57 – General Rate Income Pool (GRIP)

26:49 – Eligible vs Ineligible Dividends

29:15 – Optimal mix of Salary & Dividends

30:45 – Summary

Corporation Salary & Dividend Articles

Income Smoothing Using A Corporation To Reduce Taxes

small business tax

You are bound to have fluctuations in your income. Both over your long-term career and life cycle, but also year to year. Your consumption and the income required to support it will also fluctuate.

Learn how income smoothing using a corporation can minimize your taxes. That means more money for you to spend now or invest for the future.

Corporate Cashflow Tax Optimizer

salary vs dividend optimal mix

Not sure of the salary & dividend mix to get money out of your corp and into your hands?

Enter your desired after-tax cashflow, your personal investment plans (like RRSP/TFSA), and your corporate income. It runs an algorithm to tax-efficiently move money out. You can use that to plan with your accountant.

Is CPP A Pension Or A Tax For The Self-Employed?

cpp self-employed

One of the arguments used against paying salary from a corporation is that you have to pay into CPP. Both the employer and employee contribution.

Is that a tax and something to avoid, if possible? Or is it a defined benefit, inflation-indexed pension to be coveted?

Spoiler: It can be either.

Is CPP A Good Investment For The Self-Employed?

Enhanced CPP ROI

If CPP is a pension in your case, the next question is whether it is a good investment or not.

Those who argue against paying salary and into CPP base that on the fact that it leaves less money in the corporation to invest.

How does CPP compare to other ways for you to invest?

Strategies To Withdraw Big Chunks of Money From Your Corporation Tax Efficiently

corporation tax strategy

For large withdrawals from your corporation, plan in advance to minimize the tax hit.

That means more money for you to pay off debt, buy a house, max out your RRSP/TFSA, or whatever big splurge you have planned.

Learn about six different ways to access your cash without getting crushed by a big tax boulder trap.


    1. Hey BC Doc. Yes, I do enjoy the POF blog too. Even though POF and I went in different directions with our financial independence, I think we have a lot in common. Like a love of beer. Plus, I really like the discussion of different perspectives and experiences.

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