Work Permit Owner Salary and Payroll Calculator
Owning more than forty per cent of the voting shares takes you out of insurable employment, so no EI is payable and none is available. Work out the full payroll cost of paying yourself, what lands on the T4, and why the immigration file often decides this before the tax does.
total cost to the corporation
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What the Corporation Pays
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What Reaches You
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Immigration and Compliance Points
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Points That Decide This
What to Do Next
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Disclaimer: Under the Employment Insurance Act and its regulations, employment of a person who controls more than 40% of the voting shares of the employing corporation is excluded from insurable employment, so neither employee nor employer EI premiums are payable and no EI benefits accrue from that employment. Employment remains pensionable for Canada Pension Plan purposes and both employee and employer contributions are required, calculated on pensionable earnings between the basic exemption and the year’s maximum pensionable earnings. Ontario employer health tax applies to Ontario remuneration subject to the exemption and rate structure in the Employer Health Tax Act. A person who is authorised to work in Canada and who is resident in Canada for tax purposes is generally taxable on worldwide income and must file a Canadian income tax return; residence for tax purposes is determined on the facts and is separate from immigration status. Whether a particular individual is permitted to perform work for a corporation they own depends on the terms of their work authorisation and on immigration law, and an employer-specific work permit restricts work to the employer named on it. Whether income supports a permanent residence application or a work permit renewal is an immigration question determined by the relevant program requirements, and paid employment evidenced on a T4 is generally treated differently from dividend income; advice should be obtained from an immigration professional. The contribution rates, maximum earnings figures and basic exemption used in this calculator are defaults that should be replaced with the current published figures before being relied on, as all change annually. This page is general information, not tax, legal or immigration advice.
The Forty Per Cent Rule
Employment of a person who controls more than forty per cent of the voting shares of the corporation employing them is excluded from insurable employment. That single rule shapes the whole payroll for an owner.
No employee EI premium is deducted. No employer EI premium is paid. And no EI benefit ever accrues from that employment, which is the part that matters when the business slows down or when a parental leave is being planned.
It cuts both ways and it is not optional. The saving is real, roughly the employee premium plus a larger employer premium on insurable earnings. The cost is that regular EI is simply unavailable, and an owner who assumed otherwise finds out at the worst possible moment.
CPP Still Applies in Full
Pensionable employment is a different test and the ownership percentage does not remove it. Both the employee and the employer contribution are payable on pensionable earnings, which means an owner paying themselves a salary funds both halves out of the same business.
That is not wasted money, since it builds CPP entitlement, but it should be understood as a real cost of the salary route rather than overlooked.
| Contribution | Owner With More Than 40% | An Ordinary Employee |
|---|---|---|
| Employee CPP | Payable | Payable |
| Employer CPP | Payable | Payable |
| Employee EI | Not payable | Payable |
| Employer EI | Not payable | Payable |
| EI benefits available | No | Yes |
Why Salary Often Wins Regardless of the Tax
For most owner-managers the salary against dividend question is answered on tax and pension considerations. For someone on a work permit it frequently is not, because the immigration file has its own requirements and they usually point to salary.
Employment income reported on a T4, with source deductions remitted and a real employment relationship behind it, is the evidence most immigration programs are built around. Dividend income is a return on shares rather than a record of paid work, and it does not establish the same thing.
This is the point where tax optimisation and immigration strategy pull in opposite directions. An owner advised purely on tax may be paid in dividends for three years and then discover that the work history needed for a permanent residence application was never documented. The cost of getting that wrong is not measured in dollars.
The Permit Itself Comes First
An employer-specific work permit authorises work for the employer named on it. Where that employer is your own corporation, the permit and the payroll need to match: the same legal entity, consistent with the conditions the permit was issued under.
Paying yourself from a different corporation, or performing work outside the scope of the permit, is an immigration problem rather than a tax one, and it is not solved by the payroll being processed correctly.
Tax Residence Is a Separate Question
Immigration status and tax residence are determined differently. Someone living in Canada on a work permit is generally resident here for tax purposes, which means Canadian tax on worldwide income and a Canadian return each year, regardless of not being a permanent resident.
That catches people with income or assets in their home country, who assume that being temporary in immigration terms makes them temporary for tax. It usually does not, and foreign reporting obligations can apply from the first year.
Foreign property and foreign corporations bring their own reporting. A Canadian tax resident with foreign assets above the reporting threshold, or with an interest in a foreign company, has filing obligations with substantial penalties for missing them, and those obligations begin on becoming resident rather than on obtaining permanent residence.
Practical Points for the First Year
- Register the payroll account before the first payment rather than afterwards
- Remit on time from the first month, since remittance failures reach directors personally
- Keep the employment relationship real, with duties, a reasonable rate and records
- Check the EI exclusion against your actual shareholding, since it turns on voting control
- Confirm the tax residence position and any foreign reporting from year one
- Keep the T4s, because a future application may ask for several years of them
What This Calculator Does Not Cover
- Whether your work permit allows you to work for your own corporation, which is an immigration question
- Whether income qualifies for a specific immigration program, which each program defines separately
- Your tax residence determination, which turns on ties and facts rather than status
- Foreign income and foreign reporting obligations arising on becoming resident
- The dividend alternative in detail, which is a separate comparison
- Provinces outside Ontario and their different employer taxes
Coordinate the tax advice with the immigration advice rather than taking them separately. Our payroll service covers the account registration, the remittances and the T4s, and we will work alongside your immigration counsel so the two strategies do not contradict each other.
Frequently Asked Questions
Common questions on paying yourself as a work permit holder who owns the business.
Related Calculators and Guides
More tools for newcomers running a Canadian corporation.
Get the Payroll and the Immigration File Pointing the Same Way
Tell us your work authorisation, your shareholding and what you are working toward. We will set the payroll up, confirm the EI and CPP position, handle the remittances and T4s, and make sure the tax planning does not undermine the immigration strategy.