# Pulling money out of the clinic corporation — the 2026 numbers (25 Oct 2026)

## The corporate rate changed this year — this matters for the decision
Ontario's small business rate **fell from 3.2% to 2.2% on 1 July 2026** (2026 Ontario Budget; Budget Measures
Act, Royal Assent 24 April 2026). Because Ontario prorates a straddling tax year by days
(Taxation Act, 2007, s.31(4)), a **calendar-year** corporation pays a blended Ontario rate of **2.696%** in
2026, not 2.2%. With the 9% federal SBD rate that is **11.696% combined on the first $500,000 of active
business income in 2026** — 11.2% on a full year at the new rate, from 2027 on.

Any "leave it in the corp at 12.2%" arithmetic is now out of date by about half a point.

## Personal rates, 2026 (unchanged from budget)
| Income type | Top combined rate |
|---|---|
| Regular income (salary) | **53.53%** |
| Non-eligible dividends (what a CCPC pays) | **47.74%** |
| Eligible dividends | 39.34% |
| Capital gains | 26.76% |

**Watch the 2027 change:** Ontario is cutting the non-eligible dividend tax credit from 2.9863% to 1.9863%
effective **1 January 2027**, which pushes the non-eligible dividend top rate from 47.74% to **48.89%**. If a
large dividend is coming out, the calendar matters.

## Salary vs dividend — computed, not estimated
Model assumptions: the amount is paid out of corporate pre-tax profit; the salary route includes **CPP on both
sides** (2026: YMPE $74,600, 5.95% each side, max $4,230.45 each; CPP2 4% each side to $85,000, max $416
each — so $9,292.90 of CPP in total at a salary of $85,000+); the dividend route pays 11.696% corporate tax
first and then 2026 non-eligible dividend rates.

| Corp pre-tax profit | Salary route — total tax | Dividend route — total tax | Dividend advantage |
|---|---|---|---|
| $100,000 (no other income) | $28,601 (28.6%) | $21,439 (21.4%) | **$7,162** |
| $200,000 (no other income) | $71,022 (35.5%) | $61,909 (31.0%) | **$9,112** |
| $100,000 (stacked on $120k of other income) | $52,821 | $45,641 | **$7,180** |
| $200,000 (stacked on $120k of other income) | $104,681 | $97,147 | **$7,535** |

**The dividend wins by roughly $7,000-$9,000 per $100,000-$200,000 pulled out**, and it wins by a similar
margin whether or not he already has a salary from IPEX.

### What that comparison leaves out — and it is not small
- **Salary creates RRSP room** (18% of earned income, to the annual cap). Dividends create **none**. If he has
  unused RRSP room, a salary can beat the table above after the refund.
- **Salary builds CPP entitlement.** Dividends do not. At 40-something with two young kids, that is a real
  but modest number — and the CPP cost above ($9,293 at $85k) is exactly what he is buying.
- **Salary is a deductible corporate expense** and needs a T4 and a payroll account; a dividend needs a
  directors' resolution and a T5, and it can only come out of **after-tax** retained earnings.
- **The non-eligible (not eligible) rate applies** because the corporation's income was taxed at the small
  business rate. Paying an eligible dividend out of SBD-taxed earnings is a tax error.
- **Passive income above $50,000** in the corporation starts grinding down the $500,000 small business limit
  — relevant the moment QLD or other investments sit inside the corp rather than personally.

## The shareholder-loan route — the one with a hard deadline
- **Prescribed rate for Q4 2026 is 3.00%** (CRA, in effect 1 Oct – 31 Dec 2026; it has been 3% all year).
- A loan to a shareholder must be **repaid by the end of the corporation's taxation year following the year
  the loan was made**, or it is included in his income as a deemed dividend — with no dividend tax credit.
  For a 31 December year-end, money taken in 2026 must be **back in the corporation by 31 December 2027**.
- Interest at the prescribed rate must be **paid within 30 days of the corporation's year-end**, or the
  benefit is computed at the prescribed rate anyway and the interest is deemed a benefit.
- **A shareholder loan is not a tax plan, it is a bridge.** If the money is not coming back, it is a salary or
  a dividend dressed up as a loan, and CRA treats it as such on audit.

## The HST point that costs directors personally
HST collected is **held in trust**. ETA s.323 makes directors **personally liable** for unremitted GST/HST,
and there is a due-diligence defence only if he can show he exercised care. Pulling cash out while leaving
the HST short converts a corporate problem into a personal one. **Ring-fence the HST and the income tax
instalments first**, then decide the extraction.

## Recommendation
**Dividend for the bulk, salary to top up to the RRSP/CPP level he wants** — that is the standard split, and
the arithmetic above supports it. Do not use a shareholder loan for money that is not coming back. Get the
accountant to confirm the corporation's **retained earnings and its GRIP/non-eligible pool** before a
resolution is drafted, because the dividend can only come out of after-tax retained earnings that exist.

Sources: Ontario 2026 Budget + Budget Measures Act (SBD rate 3.2%→2.2%, July 1 2026); Taxation Act 2007
s.31(4) day-proration; EY 2026 Ontario combined personal tax rate table; CRA CPP contribution rates and
maximums 2026 (YMPE $74,600, YAMPE $85,000); CRA prescribed interest rates, Q4 2026 (3%); ETA s.323.