Its a trade off, if she is paid salary she will DEFINITELY pay tax in canada and not in US.
If she takes dividend, she will not pay tax in canada and may pay a little tax in US, but probably not as high a rate as she would pay on wages in canada.
Btw, if they are dividends, is this considered passive income for FTC purposes, or general (since it is business income).
I also hope they have taken care of GST/HST considerations.
Take Canadian small business income as pay or as dividend?
Moderator: Mark T Serbinski CA CPA
The dividends are passive never business they retain their origin throughout to the shareholder for FTC. Another important factor yes they pay tax as salary but the corp gets the deduction and saves 16% from dollar one no graduated rates in corp so you see it all depends on their circumstances and $ amounts. I will not get into the exercise since it requires a good portion of work on the corp side to figure out the mix, I am sure their CND CA will be able to advise now that we have laid down the framework.
JG
Thank you both - this has been great.
We have paid some salary to my wife, as much as we could justify given her involvement in the corp. It's not quite the optimal mix, but it's close to optimal, though optimized considering only Canadian tax rules.
My main worry was about double taxation - that dividends would not count as foreign in the US, and we'd pay double tax if the FTC didn't apply. It sounds like we may end up paying some top-up, but not the double I'd feared, so I am happy. I can't imagine the top-up would be as high as if I took it at the top bracket, so we're still in the best possible position.
I have submitted the payment for the initial consultation with Serbinski. I'm not sure if you guys are affiliated or just rather active and helpful contributors, but I feel like he has earned the fee just for bringing us together on this forum. Many thanks to you both.
We have paid some salary to my wife, as much as we could justify given her involvement in the corp. It's not quite the optimal mix, but it's close to optimal, though optimized considering only Canadian tax rules.
My main worry was about double taxation - that dividends would not count as foreign in the US, and we'd pay double tax if the FTC didn't apply. It sounds like we may end up paying some top-up, but not the double I'd feared, so I am happy. I can't imagine the top-up would be as high as if I took it at the top bracket, so we're still in the best possible position.
I have submitted the payment for the initial consultation with Serbinski. I'm not sure if you guys are affiliated or just rather active and helpful contributors, but I feel like he has earned the fee just for bringing us together on this forum. Many thanks to you both.
Good idea, Mark is great he will certainly give you the right advise for the corporate and pers tax filing procedures to follow.
Anyway Im off on xmas break, salut to all see you all in the new year and Best wishes to Nelsona for all the great work he has done all year on this site for everyone, Merci Nelsona!
Anyway Im off on xmas break, salut to all see you all in the new year and Best wishes to Nelsona for all the great work he has done all year on this site for everyone, Merci Nelsona!
JG