CO' Tax Calculation Strategies for Businesses

Incorporated business owners and professionals in Canada need to decide how to pay themselves from their corporation. With the increasing capital gains inclusion rate, finding the optimal compensation strategy is more important now than ever. Here's how to do it: Optimal compensation is not a binary decision between salary and dividends, it's a different combination of salary and dividends each year. Understanding why starts with understanding the notional tax accounts: RDTOH, GRIP, and CDA. RDTOH means refundable dividend tax on hand. This is tax that the corporation has paid that is refunded at a rate of 38.33% when a dividend is paid to a shareholder. There are two types: eRDTOH: When a corporation receives an eligible dividend there is a 38.33% tax that is refunded when the corporation pays an eligible dividend to a shareholder. Eligible dividends also create general rate income pool (GRIP) - the amount that a corporation can pay out as eligible dividends. nRDTOH: When a corporation earns passive income from interest, foreign dividends, and realized capital gains, a 50.17% tax rate is applied in Ontario. 30.67% is refundable when a non-eligible dividend is paid to a shareholder. CDA: Finally, when a capital gain is realized in a corporation, the non-taxable portion of the gain - 50% as of today, and 33.33% after June 25 - creates capital dividend account, or CDA, which can be paid tax-free to a shareholder. Why does all this matter to how you pay yourself? Inflation erodes the real value of tax-free capital dividends, and there is an opportunity cost to having refundable taxes owed to you. You also don't want to constantly pay out dividends (paying personal tax) beyond what is needed to live just to keep your notional accounts depleted. We haven't even mentioned salary yet! Salary tends to be slightly favored by tax integration - you usually pay a bit less tax overall when you pay yourself salary rather than dividends. Salary also comes with benefits like access to CPP and RRSP room, but it does nothing to clear notional accounts. Optimal compensation balances all of these trade-offs from year-to-year while keeping an eye on the long-term view. An approximately optimal compensation plan generally looks something like this: 1. Start with how much you need to spend. 2. Deduct any mandatory income - like an outside salary. For the remaining income needs, prioritize: 1. Tax-free capital dividends. 2. Eligible dividends that release eRDTOH. 3. Non-eligible dividends that release nRDTOH. 4. Salary is typically next in line if there is no CDA or RDTOH available. Over time, the optimal mix of compensation will tend to start with salary, and then shift to dividends over time as the corporate investment portfolio increases in size, generating more CDA and RDTOH. If you want more on this, check out episode 13 of the Money Scope podcast. https://lnkd.in/eNwA92_h

𝗛𝗼𝘄 𝗠𝘆 𝗖𝗹𝗶𝗲𝗻𝘁 𝗣𝗮𝗶𝗱 𝗭𝗲𝗿𝗼 𝗶𝗻 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗜𝗻𝗰𝗼𝗺𝗲 𝗧𝗮𝘅 This wasn’t a small business doing less than ₦25 million.   There was no exemption status. No magic trick. They made over ₦𝟯 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝗶𝗻 𝗿𝗲𝘃𝗲𝗻𝘂𝗲 and generated ₦𝟯𝟬𝟬 𝗺𝗶𝗹𝗹𝗶𝗼𝗻 𝗶𝗻 𝗽𝗿𝗲-𝘁𝗮𝘅 𝗽𝗿𝗼𝗳𝗶𝘁   And paid ₦𝟬 𝗶𝗻 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗜𝗻𝗰𝗼𝗺𝗲 𝗧𝗮𝘅. No loopholes.   No favours from “someone who knows someone.” 𝗛𝗼𝘄? They used 𝗪𝗶𝘁𝗵𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗧𝗮𝘅 (𝗪𝗛𝗧) 𝗖𝗿𝗲𝗱𝗶𝘁𝘀. Now, I know what you’re thinking: 𝘉𝘶𝘵 𝘞𝘏𝘛 𝘪𝘴 𝘴𝘰 𝘢𝘯𝘯𝘰𝘺𝘪𝘯𝘨.” “𝘛𝘩𝘦𝘺 𝘬𝘦𝘦𝘱 𝘥𝘦𝘥𝘶𝘤𝘵𝘪𝘯𝘨 𝘮𝘺 𝘮𝘰𝘯𝘦𝘺!” Yes, it stings. You invoice ₦10 million. You receive ₦9.5 million.   It feels like a loss. But 𝗪𝗶𝘁𝗵𝗵𝗼𝗹𝗱𝗶𝗻𝗴 𝗧𝗮𝘅 𝗱𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻 𝗶𝘀𝗻’𝘁 𝗮 𝗽𝘂𝗻𝗶𝘀𝗵𝗺𝗲𝗻𝘁.   It’s a 𝗽𝗿𝗲𝗽𝗮𝘆𝗺𝗲𝗻𝘁.   And if you manage it well—it can wipe out your entire CIT bill. Here’s what our client did differently: ✅ They tracked every WHT deduction across all clients   ✅ They followed up to ensure 𝗮𝗰𝘁𝘂𝗮𝗹 𝗿𝗲𝗺𝗶𝘁𝘁𝗮𝗻𝗰𝗲 𝘁𝗼 𝗙𝗜𝗥𝗦   ✅ Their internal finance system was aligned to 𝗰𝗮𝗽𝘁𝘂𝗿𝗲, 𝗿𝗲𝗰𝗼𝗻𝗰𝗶𝗹𝗲, 𝗮𝗻𝗱 𝗿𝗲𝗽𝗼𝗿𝘁 𝗰𝗿𝗲𝗱𝗶𝘁𝘀 And by year-end they used the WHT credits to 𝗼𝗳𝗳𝘀𝗲𝘁 𝘁𝗵𝗲𝗶𝗿 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗜𝗻𝗰𝗼𝗺𝗲 𝗧𝗮𝘅 𝗰𝗼𝗺𝗽𝗹𝗲𝘁𝗲𝗹𝘆. This strategy works especially well for businesses with high revenue and thin margins Of course, the system isn’t perfect. And here’s where most companies get stuck: ❌ Vendors deduct—but never remit   ❌ Finance teams don’t track credits properly   ❌ Businesses didn't register properly ❌ There’s no proactive tax strategy—just last-minute panic. But the solution isn’t out of reach: 🔹 Set up a WHT tracking system   🔹 Follow up. Push for vendor compliance   🔹 Register and file in the right jurisdictions   🔹 Build a finance culture that understands—and uses—the tax tools available So the next time WHT gets deducted from your invoice?   Don’t get angry.   𝗚𝗲𝘁 𝗼𝗿𝗴𝗮𝗻𝗶𝘀𝗲𝗱.   And make it work for you. #myCFOng 𝗣.𝗦. Ever used WHT credits to wipe your CIT bill 𝘭𝘦𝘨𝘢𝘭𝘭𝘺?   🔁 Found this useful? Repost it and help someone stop leaving money on the table.

As a business owner or director in Kenya, how you extract money from your company matters. Most directors focus on how much profit the business makes. Very few stop to examine how they extract that profit. And yet, that decision alone can influence your tax exposure, loan eligibility, retirement security and even how investors perceive your company. Take a simple example: KES 100,000 per month. If you earn it as a salary, you will pay PAYE and statutory deductions like NSSF and SHIF. Your net take-home reduces in the short term. However, that salary becomes a deductible expense to the company, lowering corporate taxable profit. You also build retirement contributions, strengthen your personal income profile for credit applications, and create a clean separation between business earnings and personal income. If instead, you take the KES 100,000 as profit, the company first pays 30% corporate tax. The remaining balance is then subject to 5% dividend withholding tax. While dividends may look lighter at the personal level, they come after corporate tax has already been paid. There are no retirement contributions, no statutory health benefits, and no consistent payroll trail. What appears simpler can quietly be less strategic. At lower-to-mid remuneration levels , payroll beats dividends hands down. You keep more money today, build social security and reduce overall tax leakage. For very high amounts, a salary + dividend mix is often optimal to balance PAYE brackets and corporate tax. Smart directors do not just extract money. They design income flows intentionally. Tax is not merely about compliance. It is about structure, sustainability and long-term positioning. #BusinessOwners #TaxPlanning #FinanceTips

You don’t need to earn more. You need to keep more. Most people focus on income and ignore what taxes quietly take away. The real game: It’s not what you make. It’s what you keep. Start here: 1. Earn Through Tax-Efficient Structures ↳ Structure determines how much tax you pay ↳ Use businesses instead of personal income streams ↳ Plan income types before earning begins 2. Capture Every Legitimate Deduction ↳ Missed deductions reduce net income ↳ Track income-related expenses consistently ↳ Separate personal and business spending clearly 3. Leverage Depreciation Strategically ↳ Paper losses offset real income ↳ Invest in assets with depreciation benefits ↳ Accelerate depreciation where legally allowed 4. Reinvest to Defer Taxes ↳ Reinvestment delays taxes and compounds growth ↳ Roll profits into income-producing assets ↳ Avoid unnecessary taxable events 5. Optimize Income Timing ↳ Timing impacts how you’re taxed ↳ Shift income across tax years strategically ↳ Align timing with tax brackets 6. Use Tax-Advantaged Accounts ↳ Reduce taxable income legally ↳ Maximize contributions annually ↳ Use retirement, health, and education accounts 7. Protect Gains with Smart Planning ↳ Poor planning creates tax leakage ↳ Plan exits before investing ↳ Use long-term strategies for lower taxes Tax strategy isn’t a one-time move. It’s a loop you repeat every year. Earn. Protect. Reinvest. Repeat. Follow me Marc Henn for more. We want to help you Retire Early, Supercharge Your Cash Flow, and Minimize Taxes. Marc Henn is a licensed Investment Adviser with Harvest Financial Advisors, a registered entity with the U. S. Securities and Exchange Commission.

When a Client Wanted to “Reduce” Corporate Tax A client in the UAE reached out to me recently for Corporate Tax return filing. I prepared the financial statements carefully and sent them for his confirmation. A few hours later, he called me — “Kiri, the CT payable is too high. Can we add some more expenses to bring it down?” This is where my role as a tax professional truly comes into play. ✅ First, I reminded him: The UAE has one of the lowest tax rates globally — just 9%. ✅ Then, I explained: Artificially inflating expenses isn’t an option. It risks penalties, audits, and reputation damage. ✅ Finally, I showed him how to reduce CT the right way: 🔹 Checked all allowable deductions – made sure every legitimate business expense (rent, salaries, professional fees) was booked. 🔹 Reviewed depreciation & amortization – ensured correct treatment of fixed assets under IFRS so we maximize deductions. 🔹 Confirmed related-party transactions – aligned with transfer pricing rules to avoid adjustments later. 🔹 Considered exempt income – such as foreign dividends or qualifying free zone income, where applicable. 🔹 Utilized foreign tax credit (WHT)– where legally available. By the end of the call, he said: “Thanks, Kiri. I’d rather sleep peacefully knowing we filed correctly.” --- Takeaway: Corporate Tax planning isn’t about shortcuts — it’s about knowing the law and using it to your client’s advantage. When done right, compliance becomes a competitive edge.

📢📢UAE Corporate Tax Return—What every business should know The new corporate tax is about profit, not revenue. Here’s the process at a glance 👇 1) Tax rate (profits) 0% on the first AED 375,000 of taxable income 9% on taxable income above AED 375,000 Quick math example: If taxable profit is AED 500,000, tax = 9% × (500,000 − 375,000) = AED 11,250. 2) Filing deadline File your corporate tax return within 9 months after your financial year ends. Example: Year end 31 Dec → due by 30 Sep of the following year. 3) How to calculate taxable income Start with total revenue − allowable expenses. Check the AED 375k threshold and apply 9% only on the excess. File online through FTA e-Services before the deadline. 4) Penalties to avoid Late filing/payment can trigger monetary penalties and interest. Best practice: close books monthly and set reminders well ahead of the due date. 5) Deductible vs. non-deductible (in simple terms) Deductible: Costs wholly and exclusively for business (and not specifically disallowed). Non-deductible: Personal spend, or items explicitly disallowed under the law. Practical tips Keep clean records (invoices, contracts, payroll, bank recs). Maintain a fixed-asset register and track depreciation. Review expenses early to confirm what’s deductible. Don’t wait—file early to avoid portal rush and last-minute surprises. If you’d like help with registration, return preparation, or a deductible review, feel free to DM me. #UAE #CorporateTax #FTA #DubaiBusiness #SME #Accounting #TaxReturn #Compliance #Tally #ZohoBooks ---

𝗠𝗼𝘀𝘁 𝗽𝗲𝗼𝗽𝗹𝗲 𝗳𝗼𝗰𝘂𝘀 𝗼𝗻 𝗱𝗲𝗱𝘂𝗰𝘁𝗶𝗼𝗻𝘀. Few pay attention to timing. That’s where a lot of real tax savings hide. One of the most underused examples right now: 𝗖𝗼𝘀𝘁 𝘀𝗲𝗴𝗿𝗲𝗴𝗮𝘁𝗶𝗼𝗻 𝗳𝗼𝗿 𝗰𝗼𝗺𝗺𝗲𝗿𝗰𝗶𝗮𝗹 𝗼𝗿 𝗿𝗲𝗻𝘁𝗮𝗹 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗼𝘄𝗻𝗲𝗿𝘀. If a business buys a building, many assume the tax benefit must be claimed slowly over decades. That is only partly true. A proper cost segregation study can separate parts of the property into shorter-life assets such as:  • flooring  • lighting  • cabinetry  • parking improvements  • certain electrical components  • landscaping / site improvements That can accelerate depreciation into earlier years. 𝗠𝗲𝗮𝗻𝗶𝗻𝗴:  • Tax deductions come sooner  • Cash flow improves sooner  • Tax burden can reduce sooner 𝗦𝗶𝗺𝗽𝗹𝗲 𝗲𝘅𝗮𝗺𝗽𝗹𝗲: $𝟭,𝟬𝟬𝟬,𝟬𝟬𝟬 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗽𝘂𝗿𝗰𝗵𝗮𝘀𝗲. If a portion is reclassified into shorter-life assets, the first few years may look very different than standard straight-line treatment. For some owners, that means tens of thousands in earlier deductions. 𝗪𝗵𝘆 𝗺𝗮𝗻𝘆 𝗺𝗶𝘀𝘀 𝗶𝘁:  • accountant was never asked  • owner assumes building = one asset  • no study performed  • focus stays only on income, not asset strategy 𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝗽𝗼𝗶𝗻𝘁: This is not a loophole. It is an established tax planning method when done correctly. The real advantage: 𝗦𝗮𝘃𝗶𝗻𝗴 𝘁𝗮𝘅 𝗶𝘀 𝘂𝘀𝗲𝗳𝘂𝗹. Improving cash flow while growing a business is better. 𝗤𝘂𝗲𝘀𝘁𝗶𝗼𝗻: How many property owners are paying tax today on deductions they could have used earlier? #TaxStrategy #RealEstateTax #BusinessGrowth #Depreciation #HiteshPatelEA TaxicMinds Hitesh Patel, EA

2 owners can earn the same money and still pay wildly different taxes. Both projected $424K for 2025. The year went well and income jumped to $780K. Owner A took the money immediately and dealt with the tax later. Owner B worked with a strategist who helped them defer $287K of Q4 invoicing. Lowers his taxable income to $493K. And this year, he is using that income to invest in tax-advantaged assets that create legal deductions and lower their tax liability. The result: Lower tax rate for both years. Here's how to use this strategy for 2026 1. Confirm your accounting method 2. Forecast your income early 3. Decide timing intentionally (before Q4) 4. Pair high-income periods with planned deductions/retirement moves This can help you spread income across years so you're not stacking everything in one high-bracket year. If you're a business owner earning $500K+ and no one has shown you how to use income timing to cut your tax bill, follow me. I break down strategies like this every week, so your 2026 taxes reward your growth instead of punishing it.

I’ve tested these 14 tax strategies for over a decade. They are the most reliable for keeping more money in your pocket: For Real Estate Investors: Cost Segregation Studies: These remain valuable for accelerating depreciation on high-value assets, even with declining bonus depreciation rates 1031 Exchanges: Still available for deferring capital gains when selling properties. Real Estate Professional Status (REPS): This status continues to allow investors to deduct rental losses against active income Self-directed IRAs: These remain a viable option for investing in real estate while deferring taxation. For Business Owners: S Corp Tax Election: This strategy for reducing self-employment taxes is still applicable. QBI Deduction: The 20% Qualified Business Income deduction remains available for pass-through entities Home Office Deduction: Still available for those who use part of their home exclusively for business Hiring Family Members: This strategy for income shifting continues to be valid. Retirement Plan Contributions: Maximizing contributions to Solo 401(k)s and SEP IRAs remains an effective tax-reduction strategy For High-Income Earners: Municipal Bonds: These continue to provide tax-free interest income. HSAs & FSAs: These tax-advantaged accounts for medical expenses are still available. Charitable Giving Strategies: Donating appreciated assets remains a tax-efficient giving method. Tax-Loss Harvesting: This strategy for offsetting capital gains is still applicable. Deferred Compensation Plans: These plans continue to be useful for managing tax brackets. Don’t wait until your tax bill arrives—fix it before it’s too late.

If you're a freelancer, consultant, or small business owner, the Qualified Business Income (QBI) Deduction is your friend. It's one of the most powerful tax breaks in the US, but most people don't use it right- or don't know they qualify! What is QBI? (Section 199A): - The QBI Deduction allows eligible owners of non-corporate businesses (called "pass-through entities") to deduct up to 20% of their net business income. Who Qualifies? - Sole Proprietorships (Schedule C) - Partnerships - S Corporations - LLCs taxed as any of the above. - If your business income is taxed on your personal return (Form 1040), you are likely eligible. What is QBI? - Essentially, your net profit from the qualified business activity. - It generally excludes W-2 wages, capital gains/losses, and guaranteed payments to partners. Why does it exist? - It was created to give small businesses a comparable tax break when the corporate tax rate was significantly lowered. The Big Catch: Income Limits - While the deduction is simple at low incomes, it becomes complicated (or disappears) if your total Taxable Income (business + all other income) goes over certain thresholds. Below the Threshold: You generally get the full 20% QBI deduction with no limitations, regardless of your business type. Above the Threshold: - Specified Service Trades/Businesses (SSTBs): Your deduction is phased out and eventually eliminated (SSTBs include fields like health, law, accounting, consulting, and financial services). - All Other Businesses: The deduction becomes limited based on the W-2 wages paid by your business or the cost of business property (like equipment and real estate). Key Takeaway - If you are self-employed, the QBI deduction is not an optional write-off; it is a critical tax reduction. If your income is high, strategies like paying W-2 wages or buying business property might be needed to keep the deduction alive. Follow @thetaxsaaab on Instagram for more simple US tax breakdowns!