Many dentists—whether Associates or Practice Owners—eventually incorporate a Dentistry Professional Corporation (DPC). This often happens once their income exceeds what’s needed to cover personal expenses and debt repayment. A common question that follows is: “Should I invest personally, or keep funds in the corporation and invest through the DPC?”

While there are clear benefits to personal investing through RRSPs, TFSAs, and FHSAs—and some important tax considerations when investing inside a corporation—the lower corporate tax rate often means more after-tax dollars available for investment. For most dentists, it makes sense to consider doing at least some investing within the DPC.

Tax Deferral Means More Money Working for You

Because corporate tax rates are lower than personal rates, keeping funds in your DPC lets you invest a larger amount upfront. Over time, this larger capital base benefits from:

• Greater compounding
• Access to better investment options
• Lower management fees
• Increased portfolio diversification

Example:
If your DPC earns $100,000:

• You retain approx. $87,800 after corporate tax
• If paid out personally as a dividend, you might keep only $45,884 (at top marginal rate)

That’s nearly double the capital working for you inside the corporation.

Corporate Investment Income Is Tax-Advantaged

Investment income earned inside a DPC—especially dividends and capital gains—comes with favourable tax treatment:

Capital Gains:

• • Only 50% is taxable
  • The other 50% goes to your Capital Dividend Account (CDA) and can be paid out tax-free

Canadian Dividends:

• • Taxed at 38.33% initially
  • Fully refunded when you pay yourself a dividend (no net tax)

Foreign Dividends:

• • Taxed at 50.2%
  • 30.67% refunded through the RDTOH mechanism

When managed properly, these tools can significantly improve after-tax returns.

Flexibility in Retirement and Estate Planning

Investing through your DPC creates long-term planning advantages. With tax deferral, the CDA, and RDTOH, you can better control how and when income is drawn. If you’ve structured your investments through an associate or management company:

• You can draw dividends gradually in retirement, often at lower tax rates
• You can smooth out income and reduce your lifetime tax burden
• You may be able to reduce the final tax bill on assets unlikely to be spent during your lifetime

A Final Thought

While investing through your DPC can be beneficial, it’s not without complexity. If you haven’t reviewed your corporate investment approach recently, it may be worth a second look to ensure it still aligns with your long-term goals.

We’re always happy to have that conversation—no pressure, just thoughtful planning.