Tax Guide/Corporate tax
Salary vs. dividends
Updated November 4, 2026
| Salary | Dividends | |
|---|---|---|
| Corporate tax | Deductible | Paid from after-tax profits |
| RRSP room | Created | Not created |
| CPP | Required | Not paid |
| Admin | Payroll and T4 | Resolution and T5 |
| Child care deduction | Earned income counts | Generally not earned income |
Dividends can look cheaper because no CPP is paid, but that also means less future CPP retirement income.
Many owners use a mix. The right answer changes with income, family, province and retirement plans. Have it reviewed before year-end, because the payroll and dividend steps need to happen on time.