The short answer.
- Money you take from the company without salary or dividends is recorded as a shareholder loan. If you owe the company, the clock is running.
- The one-year rule: a loan to a shareholder is generally included in their income unless it is repaid within one year after the end of the corporation's tax year in which it was made, and the repayment is not part of a series of loans and repayments.
- Even if repaid in time, a low- or no-interest loan can create a deemed interest benefit at CRA's prescribed rate.
- If the company owes you (a credit balance), you can usually withdraw that amount tax-free. That balance is often the cheapest money in the company.
What a shareholder loan actually is.
Your accountant tracks a shareholder loan account for every owner. Personal expenses paid by the company, cash withdrawals without payroll or dividends, and money you lend to the company all flow through it. A debit balance means you owe the company. A credit balance means the company owes you.
A debit balance is not automatically a problem. It becomes one when it stays outstanding past the deadline in subsection 15(2).
The one-year repayment rule.
Subsection 15(2) includes a loan to a shareholder in that person's income. Subsection 15(2.6) excludes it if the loan is repaid within one year after the end of the corporation's tax year in which it was made, and the repayment is not part of a series of loans or other transactions and repayments.
Example: a corporation with a December 31 year-end lends its owner $80,000 in March 2026. The owner has until December 31, 2027 to repay. If it is not repaid, the full $80,000 is added to the owner's 2026 income, taxed at their marginal rate, and the corporation gets no deduction.
Repaying on December 30 and borrowing it back on January 2 is exactly the series pattern CRA looks for. Repayments are generally applied to the oldest loans first.
The deemed interest benefit.
Under section 80.4, if a shareholder loan carries interest below CRA's prescribed rate, the difference is a taxable benefit, unless the loan is already included in income under 15(2). The prescribed rate is set quarterly. Interest actually paid by January 30 of the following year reduces the benefit.
When loans are allowed.
Subsection 15(2.4) has limited exceptions for loans received because of employment rather than shareholding: for example, to buy a home, a car used for work, or newly issued shares of the company, with bona fide repayment terms. CRA looks closely at whether a non-owner employee would have received the same loan. For most owner-managers of small corporations, relying on this exception is risky.
Taking money out instead.
Most shareholder loan problems are a symptom: the company has surplus cash and the owner needs money personally. The usual answers are salary, dividends, a credit-balance withdrawal, a capital dividend if the CDA has a balance, or planning that moves value to the next generation more efficiently.
For owners whose company holds more than it needs, a common question is whether that surplus should sit in taxable investments or be used for corporate-owned permanent insurance, which can grow tax-sheltered and later pay out through the capital dividend account. See how to take money out of a corporation.
Frequently asked questions.
How long do I have to repay a shareholder loan in Canada?
Generally until one year after the end of the corporation's tax year in which the loan was made. If it is not repaid by then, or the repayment is part of a series of loans and repayments, the loan is included in the shareholder's income for the year it was made.
Do I have to charge myself interest on a shareholder loan?
If the loan bears no interest or interest below CRA's prescribed rate, the difference can be a taxable benefit under section 80.4, unless the loan is already included in income under subsection 15(2).
What happens if the company owes me money?
If your shareholder loan account has a credit balance, the company owes you that amount. You can generally withdraw it tax-free because it represents money you already put in or income already taxed.
Can I borrow from my corporation to buy a house?
Subsection 15(2.4) allows certain loans to employees to buy a home, but the loan must be received because of employment, not shareholding, with bona fide repayment terms. For most owner-managers this exception is difficult to rely on.
Where to go deeper.
Primary sources cited in this guide
Disclaimer. This guide is general educational information published by Goald & Co Financial Inc. It is not tax, legal or accounting advice. Examples are illustrative composites, not real clients. Outcomes vary by province, corporation and shareholder facts and changes in law. Verify every figure with your CPA and legal counsel before acting.