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If you’ve recently incorporated or started turning a real profit, you’ve probably hit one of the most common and confusing questions for Canadian business owners: How do I pay myself from my corporation in Canada?

How do I pay myself from my corporation in Canada?

More specifically:

Should I take a salary, or should I pay myself dividends?

You’re not alone. This is one of the most asked questions I get from clients. And in most cases, people don’t totally understand the difference or how their decision will affect taxes, cash flow, or retirement planning.

Why This Matters

Choosing between salary vs. dividends in Canada isn’t just a formality. It changes:

How much tax you pay (personally and corporately)
Whether you’re building up retirement income through CPP
How flexible you can be with taking money out of your business
How much admin and CRA compliance you’re dealing with

If you are new to owning a business, this is likely one of your first big financial choices. Get it right early, and it’ll save you stress later.

Option 1: Paying Yourself a Salary

A salary is exactly what it sounds like. You pay yourself like an employee of your own corporation. That means setting a regular amount, running payroll, and submitting source deductions.

Why some owners go with salary:

CPP contributions: You’re building retirement income. If the business fails, that CPP stays with you.
Set-it-and-forget-it: You decide on a number and use it moving forward. No need to change it every month.
Lowers your corporate tax: Salary is an expense, so it brings down your business’s taxable income.

What to watch out for:

You pay more upfront. Compared to dividends, salary means higher immediate tax.
You’re on a tight schedule. Source deductions are due monthly or quarterly. CRA charges a 10% penalty if you’re late.
It’s not flexible. You can’t just grab money when you need it.

Option 2: Taking Dividends

Dividends are money you take out of your corporation as a shareholder, not as an employee. You’re not running payroll; you’re drawing from profits.

How do you pay dividends to yourself in Canada?

It’s simple, but you need to do it properly:

Make sure your corporation has after-tax profits (retained earnings)
Declare a dividend (usually with a simple shareholder resolution)
Issue a T5 slip at year-end
Report the dividend on your personal return

Pros of dividends:

Total flexibility: You can pull money when it makes sense.
Tax deferral: You don’t pay tax until you file your personal return.
Often taxed at a lower rate: Dividend credits reduce your effective rate.

Cons of dividends:

No CPP contributions—so plan retirement savings yourself.
No automatic tax withholding—so discipline is key.

Corporate Tax Implications

Salary: Your salary gets deducted as an expense. The company doesn’t pay further tax on that amount.

Dividends: Come from after-tax profit. Then you pay personal tax. It’s taxed twice—but often still efficient, especially for lower incomes or if leaving money in the business.

Personal Tax Differences

If you’re taking salary:
- You’ve already paid most of your personal tax
- You get CPP contributions
- You build RRSP room
If you’re taking dividends:
- You pay tax when you file
- No CPP or RRSP room
- Possibly lower effective rate

Long-Term Planning: CPP, RRSPs, and Cash Flow

The biggest long-term factor is CPP. With salary, you’re building it. With dividends, you’re not.

Salary also gives RRSP room for tax-deferral. Dividends don’t—but you can keep funds in your company and withdraw later.

Common Mistakes I See

Not filing a T5 when taking dividends
Not saving for tax on dividends
Messing up payroll deductions

FAQ: How to Pay Yourself from Your Corporation in Canada

How do I pay myself dividends?
Declare the dividend, issue a T5, and report it on your return.
How do I pay myself a salary?
Set up payroll, remit CPP and taxes, and issue a T4.
Which has a better tax rate?
It depends—salary has deductions and builds CPP. Dividends can be lower tax depending on income.
How do I avoid overpaying tax?
Use a strategic mix of salary and dividends tailored to your needs.

What I Usually Recommend

Want CPP? Take a $70,000 salary and top it up with dividends.
Want flexibility? Go with dividends, but manage your taxes carefully.
Income under $70K? Consider a 50/50 salary/dividend blend.

Why This Isn’t DIY Territory

Most people who try to do this alone overpay tax, miss forms, or mess up deadlines. That can lead to penalties or even audits.

At LedgerLine, we help business owners:

Choose the right salary/dividend mix
Stay CRA-compliant
Minimize tax and plan for retirement

Final Advice

If you’re asking how to pay yourself from your corporation, the best answer isn’t “salary” or “dividends.” It’s a strategy—based on what matters most to you long term.

Do you want CPP? Flexibility? Retirement savings? Let’s figure that out together.

How LedgerLine Can Help

We simplify this process. You don’t need to guess or risk costly mistakes.

Whether you’re wondering how to pay dividends, whether salary works better, or just want peace of mind at tax time—we’re here to help.

Let’s figure out the best way to pay yourself—and make it work for your goals.

About the Author

Stefan Armstrong, CPA, CMA

Stefan is the engagement leader at LedgerLine, bringing over 15 years of hands-on experience in accounting and finance. He specializes in supporting small and mid-sized businesses with full-cycle financial services, helping leaders gain clarity, confidence, and control over their financial operations. Stefan combines strategic insight with a deep understanding of day-to-day execution — making him a trusted partner for growing organizations across sectors.

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