Utilizing Dividends

If you were a shareholder of your private Corporation then you may be able to receive Dividends from your Corporation. Canadian Dividends are a very tax advantageous type of income due to the large Dividend Tax Credit that comes with them. The Corporation can only issue dividends in the amount of positive retained earnings. Retained Earnings is simply the sum of profits and losses, less dividends, throughout the life of the Corporation. Dividends are paid out after the Corporation pays its Corporate Tax, which is currently 14% for Private Corporations making under $500,000 active net income in Alberta. If Dividends are your only source of income you may be able to make up to $35,000 without paying any personal tax. If you have other tax credits and tax deductions, then this number continues to get larger, paying no personal tax. You also pay no CPP or EI on dividends. Dividends are issued to Shareholders 18 or older, and may be issued to Holding Companies tax free, and to Trusts that are Shareholders.