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Answers · Corporate Tax and Owner Pay

Do I issue myself a T4 or a T5 as an owner-manager?

A salary you pay yourself is reported on a T4, which requires a payroll account, source deduction remittances, and CPP contributions from both you and the corporation. A dividend is reported on a T5, supported by a directors’ resolution and due by the end of February following the year it was paid, with no payroll account or CPP involved. Many owner-managers issue both in the same year, taking a base salary and topping up with dividends.

By the AnalytIQ Accounting team · Last reviewed: September 6, 2026

It depends entirely on how you paid yourself

The slip follows the payment method, not the other way around. If you took a salary or bonus from your corporation during the year, that income is reported on a T4. If you took a dividend as a shareholder, that is reported on a T5. Many owner-managers do both in the same calendar year: a base salary reported on a T4, plus a dividend top-up reported on a T5, which means issuing yourself both slips is entirely normal rather than a sign something was done incorrectly. For help deciding the mix itself, see salary or dividends from my corporation.

What a T4 requires behind the scenes

Paying yourself a salary means your corporation needs a payroll (RP) account with the CRA, and it needs to remit source deductions, income tax, CPP, and generally EI, on the schedule that applies to its remittance frequency. As an owner-manager, you and the corporation both contribute CPP on your salary, covering the employee and employer portions. If you control more than 40% of the corporation’s voting shares, your employment is generally excluded from EI, which means no EI premiums and, correspondingly, no eligibility to claim EI benefits later.

Cash withdrawn from the corporation that is not documented as salary, dividends, or a repayment of a genuine shareholder loan is at risk of being treated as a shareholder benefit, taxable to you personally without the benefit of either the employment deduction structure of a T4 or the dividend tax credit of a T5. This is one of the more common issues we see in a first CRA review of an owner-managed corporation: draws taken informally throughout the year, with the paperwork sorted out, or not sorted out, only after the fact.

What a T5 requires behind the scenes

A dividend needs a directors’ resolution declaring it, recorded in the corporate minute book, before the T5 slip and summary are prepared. T5 slips are due by the last day of February following the calendar year the dividend was paid, the same general deadline as T4 slips, and the resolution should specify whether the dividend is eligible or non-eligible, since that designation flows onto the slip itself. There is no payroll account, no remittance schedule, and no CPP or EI involved anywhere in the process.

Why “management fees” are not a simple third option

Some owners consider invoicing their own corporation a management fee instead of taking a salary, hoping to sidestep payroll. For an individual doing the actual day-to-day work of the business through their own corporation, this generally does not hold up; if the substance of the relationship is employment, the CRA expects payroll withholding regardless of what the payment is labelled. Management fee arrangements are a legitimate tool between separate related corporations, such as a holding company charging a fee to an operating company for genuine services, but they are not a way for an individual to avoid issuing themselves a T4. A CRA payroll audit that recharacterizes a management fee arrangement as employment income can result in the corporation being assessed for the source deductions it should have withheld, plus interest and penalties, on top of whatever the individual already reported personally.

Choosing when to run payroll during the year

Some owners run payroll only once a year, at year end, declaring a full year’s compensation as a single salary payment; others run it every pay period like a regular employee. Both are valid, but a single year-end payroll run still requires remitting the associated source deductions by the applicable deadline, and waiting until the last possible day of the year to decide on salary versus dividends limits how much planning can actually happen, since a resolution and slip still need to be prepared and filed correctly afterward.

T4A for a different kind of payment

If you also receive payments from your corporation that are not salary and not dividends, such as certain director’s fees or, in specific circumstances, pension or retiring allowance amounts, a T4A rather than a T4 or T5 may be the correct slip. This is less common for a straightforward owner-manager taking salary and dividends, but it is worth knowing that T4 and T5 are not the only two slips a corporation might issue to its owner in a given year, and mislabelling one type of payment as another can create mismatches between what the corporation deducted and what you reported personally.

The bonus accrual timing quirk

A corporation can accrue a bonus at its fiscal year end and still deduct it in that year, provided the bonus is actually paid within 180 days of the year end. The T4 for that bonus is issued for the calendar year in which it is actually paid to you, not the year the corporation accrued and deducted it, which can shift the personal tax timing by several months relative to the corporate deduction. This is a useful planning lever around a non-calendar fiscal year end, but it needs to be tracked carefully so the bonus is both paid on time and reported in the correct calendar year.

How we handle this

We set up and run the payroll account when a salary is chosen, prepare the directors’ resolutions and T5 slips when dividends are declared, and keep bonus accruals inside the 180-day window so the corporate deduction and the personal T4 line up the way they were planned. This sits alongside our payroll services and bookkeeping for owner-managed corporations.

Rules at a glance · Corporate Tax and Owner Pay

Not sure which applies to you? Get a free proposal or book 15 minutes.

StructureCCPC statusOnly a Canadian-controlled private corporation earning active income gets the small business rate.
Key deadlineT2 six monthsBalance owing is due two months after year-end, or three months for a CCPC claiming the deduction.
Threshold$500,000 limitActive income to $500,000 is taxed near 12.2%; above that the general rate is about 26.5%.
Watch forPassive income grindInvestment income above $50,000 in the prior year shrinks the limit, gone entirely at $150,000.

What we take off your plate

Tax services for incorporated business owners, handled.

  • Salary-dividend mix set from integration, not a rule of thumb
  • T2 filed on time with instalments sized to what is actually owed
  • T2 and owner T1s filed together, deadlines tracked
  • GST/HST returns and instalments handled
  • CRA letters and reviews answered for you
  • Salary-versus-dividend plan reviewed every year

Mistakes we fix

Three things that go wrong for incorporated business owners.

  1. Paying a spouse dividends that fail the TOSI excluded-share or excluded-business test
  2. Leaving a shareholder loan unpaid past the one-year deadline and triggering full income inclusion
  3. Letting passive investment income creep past $50,000 and grind away the small business limit

Recognise one? Book a call and we will tell you what it is costing you.

How we can help · Corporate Tax and Owner Pay

Where we do the work.

Fixed fees, quoted after a short discovery call. Canadian and US filings under one roof.

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  1. Tell us about your business. The form takes about a minute.
  2. A short discovery call. Fifteen minutes to confirm what you need.
  3. A fixed fee in writing. We reply within one business day. No hourly surprises.
  • Canadian and US filings under one roof
  • Cloud-first: QuickBooks Online, Dext, Wagepoint
  • Brampton, Ontario, with clients across Canada and the US

Related questions.

Do I need a payroll account just to pay myself once a year?

Yes. Any salary, including a single annual bonus, requires the corporation to have a payroll account and remit the associated source deductions.

Is a T5 due at the same time as a T4?

Yes, both are generally due by the last day of February following the calendar year the payment was made, which is why owner-managers who issue both usually prepare them together.

Can I switch between salary and dividends from year to year?

Yes, there is no requirement to be consistent, and many owners adjust the mix annually based on cash flow, RRSP goals, and the corporation’s available GRIP and RDTOH balances.

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