If I'm the only owner and employee of corporation, and if I pay myself the entire corporation's revenue, do I have to pay federal/provincial corporation tax on my salary?

Hello,

so say I own a corporation and I am the only owner and employee of that corporation. if the corporation earned $40000, and if I pay myself the entire $40000 for my salary, (leaving the corporation $0... I can do this since I am the only employee of the corporation), is it true that I do not have to pay neither of federal and provincial corporate tax on the $40000 that the corporation made, but only pay T4 income tax on the $40000 (since it is my salary)? Thank you,

Answer

1 person found this helpful

Well, you have just made the biggest mistake in the Tax Act and thus shot yourself in the foot with your own weapon.

The corporation only suffers tax @ 13% on active income, which one assumes you have earned, leaving 87% after tax.

The human suffers tax at 25% minimum once he becomes a tax payee, leaving only 75% after tax.

The corporation can thus make more purchases with the difference.

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