No, a corporation cannot directly hold retained earnings inside an RRSP. RRSPs are personal investment accounts registered in your name as an individual, not in the name of your corporation. However, as a business owner, you can use corporate retained earnings to fund a personal RRSP contribution, which is a smart tax strategy for many incorporated business owners in Canada. This approach allows you to shelter investment growth from taxes while reducing your personal taxable income. When you incorporate your business, you create a legal entity separate from yourself. Your corporation earns income, pays corporate taxes, and can accumulate profits as retained earnings. An RRSP, by contrast, is a personal savings vehicle that only individuals can own and contribute to directly. The key insight for incorporated business owners is that retained earnings can be withdrawn from the corporation (as dividends or salary) and then contributed to your personal RRSP. This two-step process is where the real tax benefit lies. Retained earnings are profits your corporation keeps after paying corporate taxes and dividends.
No. RRSPs are personal registered accounts that only individuals can own. Your corporation cannot open or contribute to an RRSP. However, you as the owner can extract money from the corporation and contribute it to your personal RRSP.
Your RRSP contribution room is based on your earned income from the prior year, shown on your notice of assessment. For incorporated owners, earned income typically includes salary you paid yourself, not just corporate profits. You can check your room on CRA My Account or your latest notice of assessment.
It depends on your specific situation, including your marginal tax rate and your corporation's tax rate. Generally, if your personal rate is higher than your corporate rate, you may benefit from extracting dividends. Use the salary vs. dividend calculator to model both scenarios for your province.
No. The corporation cannot deduct the dividend itself. However, once the dividend is in your personal hands, you can contribute it to your RRSP and claim the RRSP deduction on your personal return, which may generate a refund.
You can only contribute as much money as you actually have available. If you have more RRSP room than you can extract from your corporation, you can carry the unused room forward to future years. There's no penalty for not using all your contribution room in one year.