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Salary or Dividends, What Compensation Should an Entrepreneur Choose

Is it more advantageous, from a tax perspective, for a business manager to opt for dividends over a salary? The answer is not clear.

This is what Daniel Germain of Les Affaires found out in discussions with specialists, including Pascal Leclerc, Tax Partner at Raymond Chabot Grant Thornton.

At one time, based on the company’s financial results, the rule of thumb indicated that dividends were the right choice. Today, tax rules are complex. Dividends are certainly simpler, from an administrative point of view, but there are several types of dividends, and businesses must now meet new tax obligations and comply with payroll tax rules.

According to Pascal Leclerc, things used to be easier: “Business owners with profits in excess of $500,000 could be told to pay themselves a salary without having to perform the complex calculations we do today. Owners whose business earned less were advised to pay themselves dividends. Now, for the latter, it’s less obvious. The decision requires more calculations.”

Read the online article in French (for subscribers).

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