Income Tax - Owner and Manager Compensation

Overview:

(Formerly – Income Tax – Salary vs. Dividends)

Do you understand the tax effects of a salary versus dividends as compensation? What are the different strategies? Is there a significant difference?

This course provides you with a working knowledge of the tax effects of the use of salary and dividends as compensation to owner-managed businesses from both the shareholder and corporate perspective. The course will look at inter-corporate transactions for small businesses including management fees, rent, and intercompany loans. Case study examples are used to illustrate a variety of situations from both perspectives so that practitioners can obtain a working knowledge to make appropriate calculations and understand the considerations that should be made in assisting clients with tax planning.

This course provides detailed information on the differences in the use of salary and dividends as compensation from both a shareholder and a corporate perspective, for tax purposes. It also explores inter-corporate transactions for small businesses including management fees, rent, and intercompany loans.  Working through case studies allows participants to understand and calculate the different tax effects of using one or the other, or both, types of compensation.  Examples will cover single shareholders, married shareholders, and unrelated shareholders examples to review the different tax effects of these situations from the recipient’s standpoint.  Examples will further cover a variety of corporate situations and tax rates to showcase the different dividend options available and tax effects in both situations.

Course Content:

In this course, you will gain knowledge about the following topics:

• Definitions, types and important facts about salary and dividends
• Taxation rates and payroll considerations from the shareholder perspective
• Taxation rates and payroll considerations from the corporate perspective
• Transactions involving shareholder loan accounts, rental income and expenses, management fees and intercompany transactions
• Case law - CRA rulings relevant to owner-managers
• Case studies looking at situations for single shareholder, married shareholders, unrelated shareholders and a variety of shareholder goals (tax goals such as RRSPs, childcare, etc. and personal goals such as obtaining lending)
• Case Studies looking at situations for both CCPC and non-CCPC corporations and the effect on dividend types / tax effects
• Take-away summary of concepts

Learning Objectives:

Upon completing this course, you should be able to:

• Understand the tax rates applied to and flow-through costs with respect to salary and dividends from both a corporate and a shareholder perspective
• Understand and apply relevant taxation principles to assist clients in understanding the best mix of salary and dividends for their individual situation 
• Understand and be able to calculate the tax effects of salary vs dividend distributions to both corporations and shareholders
• Understand the different types of dividends available to corporations and different timings available for payment/accrual of salary payments
• Look at additional transactions including profit sharing, rent and management fees
• Understand the use of shareholder loans and taxation impacts to the owner-manager
• Understand how to use intercompany transactions to effectively plan transactions among small business corporations

Who Will Benefit: 

Practitioners working with owner-managed business clients / small business clients, assisting them with corporate set-up and tax planning.