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TAX BULLETIN - ARCHIVES 2020

1  Extracts from CCH Tax Reference Booklet 2019-2020.

2 Qc's SBD included is conditional to a minimum payment of 5500 hours to employees of the corporation during the current or previous taxation year; it is cancelled gradually between 5000 and 5500 hours.

  • Comparison of salary vs dividend:
    Income Tax Bracket       $ 1 Salary vs Dividend Scenarios 2
    Salary Dividend Advant. Div.
    Company Employee Company Shareholder  
    Inc  Bef Sal Ben 3 Sal Inc Tx 1 Ben 3 Net Inc Bef Sal Inc Tx Div Inc Tx 1 Net  
    11 809 100.00 -8.592% -91.41 -12.53% -6.194% 74.29 100.00 -14.00% 86.00 -4.81% 81.86 7.57
    15 012 100.00 -8.592% -91.41 -27.53% -6.194% 60.58 100.00 -14.00% 86.00 -14.93% 73.16 12.58
    43 055 100.00 -8.592% -91.41 -32.53% -6.194% 56.01 100.00 -14.00% 86.00 -20.73% 68.17 12.16
    46 605 100.00 -8.592% -91.41 -37.12% -6.194% 51.82 100.00 -14.00% 86.00 -26.06% 63.59 11.77
    86 105 100.00 -1.500% -98.50 -41.12%   58.00 100.00 -14.00% 86.00 -30.70% 59.60 1.60
    93 208 100.00 -1.500% -98.50 -45.71%   53.48 100.00 -14.00% 86.00 -36.02% 55.02 1.54
    104 765 100.00 -1.500% -98.50 -47.46%   51.75 100.00 -14.00% 86.00 -38.05% 53.28 1.53
    144 489 100.00 -1.500% -98.50 -49.97%   49.28 100.00 -14.00% 86.00 -40.96% 50.77 1.49
    205 842 100.00 -1.500% -98.50 -53.31%   45.99 100.00 -14.00% 86.00 -44.83% 47.45 1.46

1  Extracts from CCH Tax Reference Booklet 2019-2020.

2 Taking into account the company income tax rate and the cost of salary benefits 3 , assuming also that the company meets the 5500 hours criterion and that $100 before tax is available for distribution to its shareholders owning 40% or more of shares ,  the advantage of a dividend  other than eligible over a salary is shown in the last column of the table. Note that the advantage of the dividend would be higher for a shareholder owning less than 40% of shares due to the fact that he would have to contribute to EI but that it would be negative in the following cases: -$4.64 on average if the 5500 hours criterion is not met or -$3.66 on average if the taxable income was > $500k (taking into account that the excess  generates eligible dividends). Note also that the higher advantage in the first 4 levels of income tax bracket does not take into account the return on investment of QPP contributions.

3 The cost of salary benefits of 6.194% for the employee and 8.592% for the employer  in 2019 details as follows: QPP 5.70% for the employee and 5.70% for the employer  up to $58700, QPIP 0.494% for the employee and 0.692% for the employer up to $78500, QHIP 1.5% for the employer & CNT 0.7% for the employer up to $78500 but not taking into account EI 1.58% for the employee and 2.212% for the employer up to $54200.