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In Canada, can a limited corporation be used as an income tax shelter?
Revenue Canada allows for some amount of tax deferral via several methods. The point is that none of them allow you to avoid tax, but by deferring from years when you have high income to years when you have lower income allows you to realize less total tax paid due to the marginal rate for personal income tax. The corporate dividend approach (as explained in another answer) is one way. TFSAs are another way, but as you point out, they have limits.  Since you brought TFSAs into your question: About the best and easiest tax deferral option available in Canada is the RRSP. If you don't have a company pension, you can contribute something like 18% of your income. If you have a pension plan, you may still be able to contribute to an RRSP as well, but the maximum contribution amount will be lower. The contribution lowers your taxable income which can save you tax. Interest earned on the equity in your RRSP isn't taxed. Tax is only paid on money drawn from the plan because it is deemed income in that year. They are intended for retirement, but you're allowed to withdraw at any time, so if you have little or no income in a year, you can draw money from your RRSP. Tax is withheld, which you may or may not get back depending on your taxable income for that year. You can think of it as a way to level your income and lower your legitimate tax burden