Incorporation opens the door to advanced financial strategies for Canadian physicians — but one of the most critical decisions you’ll face is how to draw income from your professional corporation. Should you pay yourself a salary, take dividends, or adopt a blended strategy?
Each path carries distinct implications for taxes, retirement planning, and cash flow. At Imperial Lifestyle Management, we help medical professionals take control of this decision to support long-term financial clarity and security.
Paying Yourself a Salary: Stability with Long-Term Upside
Choosing to receive a salary means your corporation treats you as an employee. This creates contribution room for your RRSP and builds Canada Pension Plan (CPP) credits — key components for long-term retirement planning.
Advantages:
- Establishes RRSP contribution room
- Builds CPP retirement benefits
- Demonstrates consistent income — helpful for budgeting and loan approvals
Considerations:
- Requires payroll setup and ongoing remittance
- Salary is taxed at personal marginal rates — often higher than corporate tax rates
Drawing Dividends: Flexible and Potentially More Tax-Efficient
Dividends are paid out of your corporation’s after-tax earnings and offer a leaner administrative path. This strategy can be more tax-efficient, especially when you’re retaining earnings inside the corporation.
Advantages:
- Easier to administer — no payroll setup
- May lead to lower combined corporate and personal tax
- Offers flexibility to adjust income based on your lifestyle needs
Considerations:
- Does not create RRSP contribution room
- No CPP contributions
- Income variability may impact personal budgeting or loan applications
The Hybrid Approach: Structure Meets Efficiency
A combination of salary and dividends is often the optimal solution for physicians looking to balance tax efficiency with long-term benefits. It also supports advanced strategies like income splitting or using family trusts.
This blended approach gives you the benefit of retirement contributions while maintaining the flexibility and tax advantages of dividends.
Elevate Your Compensation Strategy with Expert Guidance
Choosing how to pay yourself as a physician isn’t just about maximizing income — it’s about integrating your compensation into your broader wealth strategy. Whether you’re in your early years of practice or optimizing your retirement runway, your pay structure should reflect your goals, tax planning, and future vision.
At Imperial Lifestyle Management, we specialize in guiding medical professionals through sophisticated compensation planning tailored to their stage of practice. Our team brings over 15 years of experience helping doctors align their corporate earnings with their financial ambitions.
Secure your financial future today — book a consultation with us today!
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