Tax Rates and Integration: Canadian Tax Seminar
The top marginal rate answers a question most owner-manager files don't ask. Get the 2025 personal and corporate rate tables, the mixed rate, and salary versus dividend at every bracket in three provinces.
Tax Rates and Integration: 2025 Personal and Corporate Rates, Salary Versus Dividend, and the RDTOH Mixed Rate
The remuneration recommendation gets made off the top marginal rate. The client's income sits three brackets lower, where the gap between salary and an eligible dividend is materially wider, and where salary would have created RRSP room. The answer also reverses depending on whether the income was taxed at the small business rate or the general rate.
Integration is a design objective, not a result. It holds reasonably well for small business income paid out as a non-eligible dividend, and it breaks in both directions everywhere else. High-rate active income favours salary. Passive income taxed under the refundable system costs more overall than salary at the top bracket. The eligible dividend rate varies more across the provinces than any other rate in the system. There is no single conclusion that survives the move from one province to the next, or from one bracket to the next.
- check_circle 2025 personal tax rates, all provinces and territories. Top marginal rates on ordinary income and interest, capital gains, eligible dividends and non-eligible dividends, and the spread across jurisdictions that is far wider on eligible dividends than on anything else.
- check_circle Graduated 2025 rates by bracket for Ontario, British Columbia and Alberta. Marginal rates at every bracket for all four income types, the thresholds where the rate steps up sharply, and the effect of the dividend gross-up in pushing an individual into a higher bracket.
- check_circle 2025 corporate rates: general, M&P, small business and investment income. Federal and provincial components set out separately for Ontario, British Columbia and Alberta, and the refundable portion of the investment income rate recovered on payment of a dividend at 38.33%.
- check_circle The mixed rate. Where the federal small business deduction is denied because of passive income but the provincial deduction is still allowed, what that combination does to the corporation's rate, and why it opens the door to paying eligible dividends.
- check_circle Salary versus dividend, bracket by bracket. The combined corporate and personal cost of paying out small business income and high-rate active income, compared against salary at every bracket in Ontario, British Columbia and Alberta.
- check_circle The integration worksheet. A reusable method for taking a dollar of corporate income through the corporate rate, the dividend refund, the dividend and the personal rate, and setting the result against salary.
What You'll Learn
Eight sections, in the order the seminar builds them. The rate tables first, personal and then corporate, then the worksheet that puts them together, then integration tested against salary at every bracket in three provinces.
expand_more Top 2025 Personal Tax Rates by Province and Territory: Ordinary Income, Capital Gains, Eligible and Non-Eligible Dividends
One table covering every jurisdiction, and the three observations that come out of it.
- The four columns Ordinary income and interest, capital gains, eligible dividends and non-eligible dividends, at the top bracket in every province and territory plus the federal rate alone.
- Ordinary income Rates that sit within a narrow band across the country.
- Capital gains Half the rate on ordinary income in every jurisdiction.
- Eligible dividends The widest spread of any rate in the system, with the highest-rate province charging materially more than the lowest, and no obvious policy reason for the gap.
- Non-eligible dividends A much narrower range, sitting only a few points below the top rate on ordinary income.
- Why the table is the starting point Every remuneration and integration conclusion in the seminar is read off these rates.
expand_more Graduated 2025 Personal Rates by Bracket: Ontario, British Columbia and Alberta, and the Dividend Gross-Up
The top rate is the wrong rate for most owner-manager files.
- Full bracket tables Every taxable income band with the marginal rate on ordinary income, capital gains, eligible dividends and non-eligible dividends, set out for three provinces.
- Marginal, not average Why the analysis is run on marginal rates while the overall rate is what the client actually pays, and how to use the tables as a guide rather than an answer.
- Where the rate steps up The bracket thresholds at which the eligible dividend rate rises steeply, and the benefit of keeping income below them.
- Eligible dividends at moderate income A rate low enough that the gap to the top bracket is one of the largest single planning variables on the file.
- Non-eligible dividends The same trend, with the benchmark being the 38.33% dividend refund rate, above which additional tax is incurred over and above the refund.
- The gross-up effect A dividend grossed up at 1.38 pushing the individual into a higher bracket, so the rate applied is not the rate the cash amount would suggest.
- Income splitting The bracket tables as the basis for measuring what splitting income is actually worth.
- Rates versus brackets Rates largely unchanged in recent years while the brackets have expanded, which is why prior-year working papers mislead.
expand_more 2025 Corporate Rates: General, M&P, Active Business Income to $500,000, and Investment Income Under the RDTOH System
Federal and provincial components broken out, because the planning turns on which layer applies.
- Four rates per province General non-M&P, M&P, active business income within the small business limit, and investment income, for Ontario, British Columbia and Alberta.
- The general rate Federal and provincial components shown separately, with the provincial component varying widely across the country.
- The small business rate The federal component plus a provincial rate that ranges from nil upward depending on the jurisdiction.
- The investment income rate The federal component including the additional refundable tax, combined with the provincial general rate.
- The refundable portion The part of the investment income tax recovered when a dividend is paid, at 38.33% of a non-eligible dividend.
- Why the split matters Federal and provincial treatment can diverge on the same dollar of income, which is what produces the mixed rate.
expand_more The Mixed Rate: Federal Small Business Deduction Denied on Passive Income, Provincial Deduction Allowed, and the Provincial Business Limits
A rate that appears on no rate table and is useful precisely because of it.
- How it arises The federal small business deduction ground away by passive income while the provincial deduction continues to apply.
- The resulting rate The federal general component combined with the provincial small business component.
- Why it is useful Income taxed at the federal general rate supports the payment of eligible dividends, which is where the personal rate advantage sits.
- The provincial small business limit $500,000 in most jurisdictions, with Nova Scotia at $700,000 and Prince Edward Island and Saskatchewan at $600,000.
- The second route to a mixed rate Provinces with a higher business limit producing the same federal and provincial mismatch on income between the two limits.
- The rate ranges to keep in view Provincial small business rates running from nil to 3.2%, and provincial general corporate rates from 8% in Alberta to 15% in Prince Edward Island.
expand_more The Integration Worksheet: Corporate Tax, Dividend Refund, Dividend, Personal Tax, and the Salary Comparison
The method, set up so it can be rebuilt for any province, bracket or income type on a live file.
- The structure Start with a fixed amount of corporate income, apply the corporate rate, deduct the dividend refund where one arises, and pay the balance out.
- The characterisation step Determining whether what is paid out is an eligible or a non-eligible dividend, which drives the personal rate applied.
- The result Net amount retained subtracted from the starting income to give total tax, then set against the tax on salary of the same amount.
- Reading the output correctly The worksheet applies marginal rates, so it does not capture the benefit of the graduated brackets and functions as a guide rather than a computation.
- Where the inputs come from The personal and corporate rate tables already worked through, at the top bracket for all provinces and by bracket for three of them.
expand_more Integration Tested at the Top Bracket: Small Business Income, Passive Income, High-Rate Active Income, and Capital Gains
Four income types run through the worksheet, with four different answers.
- Active income within the small business limit Taxed at the small business rate and paid out as a non-eligible dividend, compared against salary at the top bracket.
- Passive income Taxed under the refundable system, the dividend refund recovered on payment, and the overall cost compared to salary.
- The passive income conclusion A combined cost that exceeds the salary alternative, which is the deferral cost of holding investment income inside the corporation.
- High-rate active income Taxed at the general rate and paid out as an eligible dividend, run against salary on the same basis.
- Capital gains realized in the corporation The taxable half taxed under the refundable system, the balance distributed without further personal tax, and the combined result set against a capital gain realized personally.
- What the four comparisons establish That integration is close on some income types and materially off on others, and which ones.
expand_more Salary Versus Dividend Across the Ontario Brackets: Small Business Income, High-Rate Income, and the RRSP Consideration
The same question answered at every bracket rather than only at the top.
- Small business income across the brackets Corporate tax at the small business rate plus personal tax on the non-eligible dividend, set against salary at each band.
- The conclusion on small business income The combined cost of a dividend approximates salary across the brackets, so tax alone does not decide it in Ontario.
- High-rate income across the brackets Corporate tax at the general rate plus personal tax on the eligible dividend, against salary at each band.
- The conclusion on high-rate income A preference for salary, most pronounced in the lower brackets.
- The RRSP point Salary generating contribution room, which is a live objective on most owner-manager files and costs nothing where the tax result is neutral.
- What the tables do not capture The non-tax variables that sit outside the comparison and still have to be weighed.
expand_more Salary Versus Dividend Across the British Columbia and Alberta Brackets
The same analysis in two more provinces, because the Ontario conclusion does not transfer.
- British Columbia, small business income Combined corporate and personal cost of the non-eligible dividend against salary at every bracket.
- British Columbia, high-rate income The eligible dividend comparison, and how the pattern differs from Ontario at the lower brackets.
- Alberta, small business income The same comparison run on Alberta's rate structure and its wider set of brackets.
- Alberta, high-rate income The eligible dividend against salary, with the gap tracking differently again.
- The comparative point Three provinces, three rate structures, and conclusions that cannot be carried across a provincial boundary.
- Using the tables on a file Locating the client's actual bracket and income type before the remuneration recommendation is made.
Learn Directly from Tax Experts
Managing partner at Cadesky Tax, practising since 1980 and a Fellow of CPA Ontario. Past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Co-author of 11 books on tax subjects.
Independent tax consultant who has taught income tax for over 30 years. Hugh has written courses for CPA Canada and over 10 papers for the Canadian Tax Foundation and STEP Canada. From 1990 to 1992 he worked at the CRA's Rulings Directorate in Ottawa writing butterfly tax rulings, and is a past Governor of the Canadian Tax Foundation.
Frequently Asked Questions
Can I start right away? expand_more
Yes. Recorded live on October 21, 2025 and available on demand. Register and begin immediately at your own pace.
Does this course provide verifiable CPD? expand_more
Yes. You will receive a verifiable CPD certificate for 1.0 hour of instructional learning upon completion.
What is included with registration? expand_more
The full seminar recording and the slides with detailed notes, with one year of access from your date of registration.
Who is this course for? expand_more
CPAs and tax professionals advising owner-managed businesses, and anyone setting remuneration for an owner-manager, deciding between salary and dividends, planning distributions out of a corporation holding passive income, or working across more than one province.
Is there a cost to register? expand_more
Registration is $150 CAD, a one-time payment with no subscription required.