Quote:
Originally Posted by Enoch Root
Yes, but this doesn't avoid tax, it only defers it. Once you take the money out of the corp, in order to have it and spend it personally, you pay the remaining tax.
And for those that aren't familiar with this, corps pay a corporate tax rate, then, when rolled out to personal shareholders, they pay a dividend tax.
corp tax + dividend tax = personal income tax (approximately).
Also, as someone else mentioned, there is no estate tax, however, death is a deemed disposition and capital gains taxes become due (except for the spousal rollover of course, which also is a deferral , not an avoidance).
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Yes and no. The government felt it unfair recently and revised the rates. There's up to 3-11% "leakage" doing corp tax plus dividends. Plus passive income over a threshold is now at a higher rate than personal tax rate. In most situations, it's more tax effective to take it as wages than dividends now.
Good point on the tax deferral part. You'd be surprised how many people don't understand how this concept works for an RRSP and needlessly contribute to it and claim it in the lowest tax bracket.