This paper offers analysis to compare the efficacy of an incorporated individual paying personal tax on salary and dividends in order to utilize their RRSP and TFSA as opposed to retaining earnings in their corporation for investment. The analysis shows that, on an after-tax basis, the RRSP and TFSA can accommodate greater long-term wealth accumulation compared to a taxable corporate investment account.
This result is driven by the higher after-tax returns that can be earned in the RRSP and TFSA compared to taxable investments held in a corporation.