On this page
- Why owners look poorer on paper than they are
- Five set-ups and how each is read
- Dividends and the gross-up trap
- Retained earnings and company revenue
- Sole proprietors and contractors
- The document set for owners
- Frequently asked questions
Why owners look poorer on paper than they are
Canadian owner-managers often leave profit in the corporation and draw a mix of salary and dividends that suits their tax position. That is sensible planning, but it means the personal return shows less than the business earns. Official rule The UAE ceiling refers to gross salary and regular income from a defined and specific source.[1] Bank practice Banks read that strictly: what is not paid out to you and documented over time does not count.
Five set-ups and how each is read
| Your set-up | Personal income documents | How it is usually read |
|---|---|---|
| Owner on salary | T4 from your own corporation | Read like employment income, plus proof that the company can keep paying it |
| Owner on dividends | T5 slips, T1 General, Notice of Assessment | Counted if regular and documented over time; watch the gross-up on your return |
| Owner on salary and dividends | T4, T5, T1, NOA | The most common Canadian mix; both parts need two years of history |
| Sole proprietor | T1 with form T2125, NOA | Net income after expenses counts, not revenue |
| Contractor through a personal corporation | T4 or T5 from the corporation, contracts, invoices | Contract length and renewal history matter as much as the rate |
Bank practice Every lender has its own detail, but the direction is the same everywhere: the more your income looks like a regular payment to you, the easier the file.
Dividends and the gross-up trap
Official rule On your Canadian return, dividends are not shown at the amount you received. For dividends paid since 2019 the taxable amount is grossed up by 15 % for dividends other than eligible dividends, typical for a small private corporation, and by 38 % for eligible dividends.[2]
Worked example You pay yourself a salary of CAD 80,000 and dividends of CAD 70,000 other than eligible dividends. Cash you actually received: CAD 150,000. Taxable amount of the dividends on your return: CAD 80,500. Total income on the return: CAD 160,500, which is CAD 10,500 more than you received.
Bank practice Some underwriters work from the total on the Notice of Assessment, others from the T5 slips. Either way, hand the bank a one-page reconciliation: salary from the T4, dividends actually paid from the T5, and the gross-up shown separately. It saves a round of questions and stops anyone from building your file on a figure you never received.
Retained earnings and company revenue
A corporation with CAD 300,000 in retained earnings and a strong year still does not raise your personal income by a dollar until it pays you. Bank practice Lenders may read the financial statements to judge whether the company can keep paying your salary and dividends, and a healthy balance sheet helps that argument. They do not add the profit to your income.
Company revenue is even further away: it is gross sales before expenses and tax. Presenting it as income in a conversation with a bank does more harm than good.
Sole proprietors and contractors
As a sole proprietor you report business income on form T2125 with your T1. Bank practice The figure that counts is net business income from form T2125, which flows into the total income confirmed on your Notice of Assessment, usually averaged over two years. Generous deductions lower your tax and your borrowing capacity at the same time.
Contractors who bill through a personal corporation are read as owners: what the corporation pays you is your income. Bank practice Contract length, renewal history and the number of clients carry weight, because the bank is judging whether the income continues.
The document set for owners
- T1 General and Notices of Assessment for two years.
- T4 and T5 slips from your corporation for the same years.
- Corporate financial statements and corporate tax returns (T2) for two years, ideally prepared by an accountant.
- Articles of incorporation and proof of your shareholding.
- Six months of personal and business bank statements, showing salary and dividends arriving personally.
- A one-page reconciliation of salary, dividends received and the gross-up.
- For contractors: current contracts, renewal history and recent invoices.
Existing Canadian debt counts on top of all this; see Your Canadian mortgage, HELOC and other debts. For the cash side use the cash-to-close calculator, and for the whole process the guide for Canadians. Our general page for self-employed buyers from any country covers the parts that are not specific to Canada.
Frequently asked questions
Can the bank use my company's profit instead of my salary?
How many years of history do I need?
Should I pay myself more before applying?
Can the corporation own the Dubai property?
Do accountant-prepared financial statements help?
Sources
- Central Bank of the UAE, Regulations Regarding Mortgage Loans: maximum loan-to-value for expatriates 80 % on a first home under AED 5 million, 70 % above it, 60 % on a second or investment property and 50 % on off-plan property; debt burden ratio up to 50 % of gross income; maximum tenor 25 years; valuation required before the loan. Non-residents are not defined as a separate category. rulebook.centralbank.ae
- Canada Revenue Agency, Completing the T5 slip: for dividends paid in 2019 or later the taxable amount is grossed up by 15 % for dividends other than eligible dividends and by 38 % for eligible dividends. canada.ca
Initial financing assessment
If you live in Canada, or are a Canadian living elsewhere, and are looking at a property in Dubai, fill in this short form. We will tell you which questions need answering before a lender is approached. This is not a credit approval or an offer of finance, and it commits you to nothing. You will hear from us within one business day at the latest.