A shareholder loan is money that moves between a corporation and a shareholder outside of payroll and dividends, recorded as a loan on the books. It is simple in concept, and one of the easiest ways for a corporation to create an unexpected personal tax problem.
In Canada, the rules are not vague: if a shareholder receives a loan or becomes indebted to the corporation by virtue of the shareholding, the amount can be included in the shareholder’s income unless a specific exception applies.
This guide explains what shareholder loans are, how the shareholder loan account works, and the key CRA and Income Tax Act rules you need to understand to keep the amount treated as a loan, not taxable income.
Important: this is general information, not legal advice.
A shareholder loan is either:
In bookkeeping, both are tracked in a shareholder loan account, a running balance that shows who owes whom, and why.
Most shareholder loans are not created by a formal “loan document.” They show up because money moved, and nobody treated it as payroll or a dividend.
Common triggers include:
Example: personal travel, personal vehicle payments, groceries, home-related bills.
If it is not a business expense, and it is not processed as salary or declared as a dividend, it often ends up in the shareholder loan account.
Example: a transfer from the corporate bank account to a personal account with no payroll remittance and no dividend paperwork.
Example: the shareholder uses a personal credit card for corporate software or insurance.
This usually creates a credit balance, meaning the corporation owes the shareholder.
Shareholder loans can be legitimate, especially for timing:
The problem is not that shareholder loans exist. The problem is when the account becomes a long-term parking spot for personal spending.
Subsection 15(2) is the core shareholder-loan rule. It applies when a person has received a loan from, or become indebted to, a corporation in circumstances tied to the shareholder relationship, and the law includes the loan or indebtedness amount in the person’s income for the year.
Two important tighten-ups:
If you want the practical takeaway: if you are a shareholder taking money out, you should assume subsection 15(2) is relevant unless you can clearly fit into an exception.
The most common exception people rely on is the repayment rule in subsection 15(2.6).
It says subsection 15(2) does not apply if the loan is repaid within one year after the end of the corporation’s taxation year in which the loan was made, and it is established that the repayment was not part of a series of loans or other transactions and repayments.
Two details that matter:
CRA is explicit about what the anti-abuse rule is trying to stop.
The folio explains the purpose of the series rule in subsection 15(2.6): preventing a taxpayer from perpetually deferring tax by using new loans to repay existing loans.
CRA also says determining whether a repayment is part of a series requires reviewing all relevant facts and circumstances.
A common bad pattern:
CRA notes a repayment would generally be viewed as part of a series in situations where a loan is repaid before the end of the lender’s tax year and an amount is re-borrowed.
There is also a useful practical carve-out: repayments that result from applying dividends, salaries, or bonuses owed to the borrower are not considered part of a series for subsection 15(2.6) purposes, even where the repayment is followed by additional borrowings.
Translation: repayment mechanics matter, and “repay then reborrow” can blow up the exception.
This is the part many people miss.
CRA notes that even where an exception to subsection 15(2) applies, a low-interest or interest-free loan to a shareholder can still result in a deemed interest benefit under subsection 80.4(2).
How the benefit is measured, in plain terms:
CRA publishes prescribed interest rates quarterly. For January 1, 2026 to March 31, 2026, CRA lists the rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans as 3%.
Do not assume this rate stays the same. Check it each quarter.
If you want shareholder loans to behave like loans, treat them like loans.
Before you post anything, pick the correct bucket:
A shareholder loan account is not a strategy, it is an account.
Waiting until tax time is how owner-draw balances become unfixable. The one-year repayment rule is tied to the corporation’s year-end, so late cleanup can remove options fast.
At minimum:
If your goal is “no surprises,” you need to manage both.
They can be. If the loan is received or the debt is incurred in circumstances tied to shareholding, the amount can be included in income under subsection 15(2), unless an exception applies.
Subsection 15(2.6) is the key rule people rely on: repayment within one year after the end of the corporation’s taxation year in which the loan was made, and not as part of a series of loans and repayments.
Not necessarily. A deemed interest benefit under 80.4(2) can still apply to low-interest or interest-free loans, depending on the facts, and the prescribed rate is set quarterly by CRA.
A shareholder loan is not a free withdrawal. It is a bookkeeping entry with tax rules attached.
If you want a clean, low-risk approach: