Salary or Dividends?

July 20, 2020

If you are self-employed, and your business is incorporated, you can choose how to pay yourself: salary, dividends, or both.

There are pros and cons for both and you should choose one based on your business income level, cash flow, and other circumstances surrounding your business.


  • You contribute to CPP for the future
  • You earn RRSP maximum limit
  • There will be no surprise taxes because it is deducted from the source each time
  • Salary can be expense at the corporate level


  • You must set up a payroll account and remit source deduction
  • You need to pay both employer and employee portions of CPP


  • Dividends have a lower tax rate than salary
  • You do not need to set up a payroll account and calculate source deduction
  • You can declare dividends and pay yourself any time


  • You cannot contribute to CPP
  • You cannot earn RRSP maximum limit
  • Dividends cannot be expense at the corporate level