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Lower Tax rates – By being incorporated, the Contractor can take advantage of the lower tax rates that are available to his registered company. Registered small Canadian businesses may be able to pay less than 17% Federal/Provicial tax rate, whereas money earned on a personal level can be taxed at up to 40%.
Contractors can elect not to pay Canada Pension Plan (CPP) if they are not paying themselves a salary. They are not eligible for Employment Insurance (EI) (- updates on EI changes are available). Not having to pay these items can save them approximately an additional $2,800 per year. This amount should be invested into savings plans (which will generally produce better retirement income than CPP), and an appropriate Insurance plan. Independent Advisors will be able to advise the best set up for the specific needs of each contractor.
Business Expenses – Contractors can deduct expenses and the ongoing operating costs for their home office. Many of these costs were previously paid for in after tax dollars and were not deductible. KPC provides the contractor with an information package giving details on how to set up a home office, manage acorporate bank account, and record and manage expenses.
Company Structure / Income – Contractors can take advantage of the use of dividends, director and management fees and other allowable forms of compensation including wages and salaries when paying themselves.
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