Does salary count in the year it is earned or the year it is paid?
The year it is paid. Employment income, including an owner's salary or bonus, is taxed in the year you receive it. A December pay run that lands in your account on 2 January counts as 2027 income, even if the work was done in 2026.
So if the plan is to take more income in 2026, the money has to reach you by 31 December. The payroll deductions on that pay are then due to the CRA by the 15th of the following month for most small employers, which means 15 January 2027 for a December pay. The CRA's When to remit page explains the due dates for each type of remitter.
What is the 180-day bonus rule?
Your corporation can deduct a bonus in the year it records it, as long as the bonus is actually paid within 180 days after the corporation's year-end. That comes from section 78 of the Income Tax Act. If it is paid later than that, the company can only deduct it in the year it is finally paid.
Take a company with a 31 December year-end. It records a bonus for its owner in its 2026 accounts and pays it in late June 2027. The company deducts the bonus in 2026. The owner reports it in 2027, because that is when the money arrived. The 180 days run from the company's own year-end, so a company with a 31 March year-end has until late September.
In practice the bonus should be decided and written down before the year-end (usually a directors' resolution), the amount should be reasonable for the work the owner does, and the tax, CPP and any other deductions should be withheld and sent to the CRA when the bonus is paid. Owners often use a bonus to bring the company's taxable income down toward the 0,000 small business limit, but whether that is worth it depends on your personal tax rate and how much cash you actually need.
How is a dividend different from a salary or bonus?
A dividend is paid from the company's after-tax profit, so the company gets no deduction for it. You pay personal tax on it at dividend rates, which take into account the tax the company has already paid. Dividends are also counted in the year they are paid to you.
Two things dividends do not do: they do not build your CPP pension, and they do not create RRSP contribution room. The company reports them on a T5 slip, due with the T5 summary by the last day of February, so 28 February 2027 for dividends paid in 2026.
If you are thinking of paying dividends to a spouse or adult child, check the tax on split income (TOSI) rules first. In many family companies those dividends are taxed at the top personal rate, which removes the benefit.
What about CPP and EI on an owner's own pay?
Salary and bonuses carry CPP contributions, paid twice: once by you through the deduction and once by the company as the employer. That cost is real, and it also builds your CPP retirement pension. Salary is earned income for RRSP purposes too, so it creates contribution room for the next year (18% of the previous year's earned income, up to the yearly limit).
EI is different. If you control more than 40% of the company's voting shares, your job is generally not insurable, so no EI premiums are taken and you would not collect regular EI benefits. Family members on the payroll can be in a similar position. When in doubt, ask the CRA for a ruling rather than guessing.
Do the same rules apply to a medical or dental professional corporation?
Yes. A doctor or dentist paid through a professional corporation faces the same salary, bonus and dividend choices, and the same 180-day rule. One difference matters: the TOSI exception that lets some family shareholders receive dividends at normal rates is not available for professional corporations. That makes paying family members through dividends harder, and it is worth reviewing before your year-end. Our page on accounting for doctors in Ontario covers this in more detail.
A year-end pay checklist to start in November
- Confirm your corporation's year-end. It may not be 31 December.
- Look at profit to date and an estimate for the rest of the year.
- Decide the salary, bonus and dividend mix with your accountant before the last pay run of the year.
- For a bonus: sign the resolution before year-end and diarize the 180-day payment date.
- For December salary: pay it so the money clears by 31 December, then remit the deductions by 15 January.
- For dividends: record the resolution, pay them, and issue T5 slips by the end of February.
- For yourself: if you pay personal tax instalments, the next one is due 15 December.
Our tax dates page lists the corporate filing and payment deadlines by year-end month.
The right mix depends on how much cash you need, the company's profit, your family situation and plans such as a holding company or pension. We work that out with you on a short call before your year-end.
General education only; not individualized accounting, tax or legal advice.