Salary vs. Dividend - Does it really matter?
Posted on June 01, 2021

Have you ever wondered what the difference between a salary and a dividend is?
The Canadian Tax System is designed so that an individual should be indifferent between earning a salary versus a dividend from a corporation.
Attached are examples of the after tax dollar for the individual when paying a Salary versus paying a Dividend.
Examples of comparative charts between Salary vs. Dividend
Some of the key points of Salary are as follows:
- Potential to reduce corporate taxable income of a corporation if they exceed the Small Business Deduction Limit thus not paying tax at higher corporate tax rates.
- Tax withholdings required in the corporation including potentially an employer portion of CPP and EI. The tax withholdings are required to be remitted regularly each month/quarter.
- Creates RRSP contribution room to plan for retirement.
Some key points for Dividends are as follows:
- May require quarterly personal tax installments depending on amount paid each year and the personal tax payable
- Dividends are simple and can be withdrawn at any time
- Dividends do not affect taxable income of the corporation
There are tax planning opportunities that may make dividends or salaries preferable in specific circumstances.