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Should I take wages or dividends from my privately owned corporation? What is the best way of taking

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

money out of my company? In other words, what will result in the least amount of income taxes?

A

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

Canadian accountant will perform a dividend-salary mix calculation to determine the best way of wit

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

drawing money from the corporation.

Even though Canadian income tax laws are different from othe

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

jurisdictions, some of the same principles of tax planning will still apply.

In order to qualify

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

or Canada Pension Plan (C.P.P.) benefits or to make Registered Retirement Savings Plan (R.R.S.P.)

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

contributions, there must be some earned income. This requires the payment of wages. In fact, many

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

accountants will make sure that their clients have maximized their C.P.P. and R.R.S.P. contributio

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

s for the year in order to ensure sufficient future retirement benefits, even if it costs a littl

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

more in income tax and/or payroll taxes.

On the other hand, the Dividend Tax Credit reduces the tax

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

payable on dividends received from the corporation, since the corporation has already been taxed

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

n its income. Therefore, the accountant may recommend that the corporation pay some dividends.

S

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

metimes, if the owner doesn't require the cash, the income is simply retained inside the corporatio

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

and tax is paid at the lower small business rate by the corporation. If the corporation had inco

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

e in excess of the Small Business Deduction, it likely would pay it out in wages.

Depending on the

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

circumstances of the taxpayer, wages may be the least expensive way of taking money out of the corp

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ration. Sometimes, dividends are better. Generally, a mix of both is required.

An accountant wil

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

have to balance many factors to come out with the optimal mix for you. He will consider your famil

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

situation, other income sources, losses, investment and retirement objectives, et cetera. Keep i

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

mind that the lowest possible tax bill for the current year is not always in your best interests

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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