Double taxation is a term used to describe the way taxes are imposed on corporate shareholders who are also employees and owners of the corporation. Double taxation works like this:
- The "owner" of the corporation receives a salary as an employee. This salary is taxed at the regular personal income tax rate.
- In addition, the owner is also a shareholder. If the corporation pays dividends on the profits of the corporation, the owner must pay the tax on those dividends on his/her personal tax return.
