Personal Finance

Tax efficient ways to transer money from corporate acc. to personal

  • Last Updated:
  • Apr 17th, 2014 9:17 pm
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Deal Addict
Jun 29, 2009
2307 posts
213 upvotes
Toronto
kaycee8877 wrote: Mark please stay out of any tax related threads. You have posted completely false and incorrect information multiple times in these tax threads, then argue about how you are right using the biggest longest words and tangents you can muster, then you disappear once its obviously proven you are wrong.
fwiw, he should also stay out of careers forums.
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Dec 26, 2010
1736 posts
776 upvotes
Calgary
CanuckGreg wrote: This. If you're a shareholder pay yourself dividends. The first $40k is basically exempt from personal taxes, and no CPP or EI contributions, so your net tax rate is 15.5% (small business corporate tax rate).
This simply isn't true. Dividend tax credits certainly don't apply to some guys small corporation. You have to make a lot of money, pay a higher corporate tax rate to get that tax credit. For this guy, dividend tax rate (not dividend credit eligible) plus corporate tax rate = personal income tax rate. The government isn't stupid.
Indexer, non-yield chasing, low cost, broad based, as simple as possible investor.
Deal Addict
Sep 10, 2008
1016 posts
260 upvotes
Ottawa
wm009 wrote: This simply isn't true. Dividend tax credits certainly don't apply to some guys small corporation. You have to make a lot of money, pay a higher corporate tax rate to get that tax credit. For this guy, dividend tax rate (not dividend credit eligible) plus corporate tax rate = personal income tax rate. The government isn't stupid.
I realize they've changed the rules for personal tax year 2014 to reduce this advantage somewhat, but can you give an example where it doesn't work?

/not being difficult, just curious.
Deal Addict
Mar 3, 2009
1913 posts
1221 upvotes
Ottawa, ON
wm009 wrote: This simply isn't true. Dividend tax credits certainly don't apply to some guys small corporation.
Actually, this is not true. You can claim up to around $40,000 on non-eligible dividends as long as you have no other income. The personal tax rate is 0% on this.

It does not matter on the size of the corporation.

Source: http://www.taxtips.ca/dtc/smallbusdtc.htm
Deal Addict
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Dec 26, 2010
1736 posts
776 upvotes
Calgary
CanuckGreg, I'm not sure where the rules were ever changed for that because it never worked that way. Like Alberta for example, non-eligible dividends have a higher tax rate then capital gains. Eligible dividend tax rate on first $43k = negative 0.03%. Non-eligible on first $43k = 12.84%
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Deal Guru
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Nov 18, 2005
11955 posts
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Kingston
True that the net tax paid via salary or dividends works out to being the same.

But paying via dividends does save the corporation and the employee from paying CPP or EI. Downside is that you aren't eligible for benefits. I've been told that it is a good idea to pay about $4600 of salary so that you hit the point where some CPP payments have to be made and that makes you eligible for CPP disability benefits.

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