Why this decision matters
It feels natural: the company has cash, you need cash, and you own the company. But the Income Tax Act treats shareholder borrowing with suspicion, because an untaxed loan that never gets repaid is indistinguishable from an untaxed salary.
The core rule is blunt. A loan from your corporation is included in your personal income — the full principal — unless it is repaid within one year after the end of the corporation's taxation year in which it was made, and the repayment is not part of a series of loans and repayments.
The central idea
A shareholder loan is a bridge, not a residence. Cross it within the deadline or pay tax on the whole span.
Suppose your corporation's year-end is December 31 and you borrow in March 2026: repayment by December 31, 2027 keeps the principal out of your income. Repaying each year and re-borrowing days later does not — CRA treats back-to-back cycles as a series, and the inclusion applies from the original loan.
Even compliant loans carry a cost: unless you pay interest at the prescribed rate, a taxable interest benefit is added to your income for the time the loan is outstanding. And remember the ledger runs both ways — amounts you have loaned to the company (your shareholder loan credit) can be withdrawn tax-free at any time, which is why an accurate, current shareholder account is one of the most valuable schedules in your books.
Educational use notice
This publication is part of the Numera Decision Library and is provided for education only. It is general information — not accounting, tax, legal, or investment advice — and it does not consider your personal circumstances. Every guide is grounded in official guidance from government and regulated authorities — including the Canada Revenue Agency (CRA), the Department of Finance Canada, Service Canada and Employment and Social Development Canada, the Internal Revenue Service (IRS), and the Canadian Centre for Cyber Security — with the sources listed at the end of each guide. Tax rules and dollar limits change; confirm current figures with the official source, and speak with a qualified professional before acting on any decision discussed here.
Official references
Sources are official government and regulated-authority publications. Official sites reorganize periodically — search the document title if a link has moved.