Should I still pay myself salary or dividends if my Ontario corporation had a bad year with no profit?

If your corporation has no taxable income, paying yourself a salary in a loss year is still worth considering for specific personal goals — particularly building RRSP room. The salary is a deductible expense that creates or increases the corporation's non-capital loss, which can be carried back three years or forward 20 years to offset future taxable income. The deferred tax saving from the loss carryforward can exceed the current cost of paying CPP contributions.

Dividends can only be paid out of retained earnings — if the corporation has a negative retained earnings balance or no distributable surplus, it cannot legally declare a dividend. Some corporations carry positive retained earnings from prior years even in a loss year, so dividends may still be available, but paying them in a loss year adds no further corporate deduction.

If neither salary nor dividends makes financial sense because the corporation is genuinely running out of cash, shareholder loans from you to the corporation are a way to inject capital without triggering personal income. The priority in a loss year should be stabilizing the business while preserving tax attributes — carry-forward losses are valuable and should not be wasted. Get advice tailored to your specific retained earnings and loss position.