First, regarding contributions , it is important to note that a salary allows the recipient to contribute to the Quebec Pension Plan (QPP) and the Quebec Parental Insurance Plan (QPIP). A dividend does not. A salary also allows the individual to accumulate RRSP contribution room, which is not the case with a dividend.

Furthermore, QPP, QPIP and RRSP contributions may not have any value for individuals who have accumulated real estate and other assets that will be sold upon retirement. This could make the dividend preferable. The funds and assets accumulated by the entrepreneur must therefore be taken into account when determining what type of remuneration should be paid to them.

Also, it is important to know that at the federal level, when the individual receiving the remuneration has young children and has the lowest net income of his or her couple, his or her remuneration must include active income, such as a salary, in order to benefit from the deduction of child care expenses. If he or she only receives a dividend, the tax advantage of child care expenses could be lost.

At the company level , it is important to take into account that salary is a deductible expense, while dividends are not . Dividends are normally taxed at a lower rate than salaries. The tax rates applicable to the company must therefore be taken into account.

However, the salary can be more demanding than the dividend in administrative terms, due to the fact that salary deductions must be remitted regularly (RRQ, RQAP, taxes, etc.). In terms of dividends, the individual who will receive them will have to plan for the taxes that will be payable.

These criteria should all be taken into account in the type of compensation to be paid to you and your CPA can certainly guide you in this very important decision!