Corporations: salary or dividends

The money in your corporation's bank account belongs to the corporation, not to you. To take it out for yourself, you usually pay yourself a salary, dividends, or a mix.

Salary

• The corporation runs payroll: it holds back income tax and CPP from each pay, and pays the employer's share of CPP.
• An owner who controls more than 40% of the voting shares usually doesn't pay EI.
• The salary is an expense for the corporation, which lowers its tax.
• You get a T4 slip and pay personal tax on it. It builds RRSP room and CPP pension.
• It needs a CRA payroll account and remittances, usually by the 15th of the next month.

Dividends

• Paid from the corporation's profit, after the corporation has paid its own tax.
• Not an expense for the corporation.
• No CPP: less taken off now, but no CPP pension built either.
• You get a T5 slip, and the dividend tax credit lowers your personal tax. From a small business, they are usually non-eligible (other than eligible) dividends.
• Less paperwork during the year.

Which is better?

It depends on your income, your plans for RRSPs and CPP, and the corporation's profit. Many owners use a mix. This is a good question for an accountant, once.

Record it in CollabNorth

Open the year's T2 worksheet from Tax time and find Pay yourself, or record it under Money between you and the business on the balance sheet:

• Paid yourself a salary: the gross pay, what was held back for CPP, EI and income tax, and the employer's share. Work these out with CRA's payroll deductions online calculator (PDOC). CollabNorth doesn't estimate them or run payroll.
• Sent payroll deductions to CRA: each remittance. Until then, the deductions show as owed to CRA on the balance sheet.
• Paid yourself a dividend: paid from the business account.
• Declared a dividend to your shareholder loan: declared but not paid in cash. The corporation owes you more, or you owe it less. See Corporations: shareholder loans.

Pay yourself shows the year's totals: salary, deductions held back and sent, and dividends. It also reminds you of the slips: see Corporations: T4 and T5 slips.

This is general information to help you keep your own records. It is not tax or legal advice.

Based on: CRA: Payroll, CRA: Payroll Deductions Online Calculator and CRA guide T4015, T5 Guide

Last checked: 2026-10-13