Tax Calculator
Shareholder Loan Deadline & Tax Exposure Checker
Find the subsection 15(2) repayment deadline for every advance, estimate the income inclusion and subsection 80.4 interest benefit, and see the Part XIII withholding exposure where the borrower is a non-resident.
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A shareholder loan is only as safe as the record behind it.
TaxDesk tracks each advance and repayment against the corporation it came from, keeps the loan agreement and interest calculations attached to the entity, and turns every subsection 15(2) repayment deadline into a dated obligation you can see coming — instead of finding it a year after the year-end.
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How the shareholder loan repayment deadline works in Canada
Subsection 15(2) of the Income Tax Act is a blunt rule. If a corporation lends money to a shareholder, to a person connected with a shareholder, to a member of a partnership that is a shareholder, or to a beneficiary of a trust that is a shareholder, the full amount of the loan is included in that person's income. There is no netting, no gross-up, and no offsetting deduction for the corporation.
What saves most loans is subsection 15(2.6). It turns the inclusion off where the loan is repaid within one year after the end of the lender's taxation year in which the loan was made — and where the repayment is not part of a series of loans or other transactions and repayments.
The single most misunderstood part of this rule is that the clock starts at the corporate year-end, not at the advance. Two loans of the same size taken three weeks apart can have deadlines a full year apart if a year-end falls between them.
For the background on how these balances arise and how they differ from intercompany loans, see our guide to shareholder loans and intercompany loans in Canada.
| Corporate year-end | Loan advanced | Year-end it falls into | 15(2) repayment deadline |
|---|---|---|---|
| December 31 | January 5, 2026 | December 31, 2026 | December 31, 2027 |
| December 31 | December 20, 2026 | December 31, 2026 | December 31, 2027 |
| June 30 | July 10, 2026 | June 30, 2027 | June 30, 2028 |
| June 30 | June 20, 2026 | June 30, 2026 | June 30, 2027 |
The two June 30 rows are ten days apart and their deadlines are a year apart. This is why the date of each advance has to be tracked individually rather than as a single year-end balance.
Shareholder loan tax consequences at a glance
If the loan is repaid in time
- • No subsection 15(2) income inclusion.
- • A subsection 80.4(2) deemed interest benefit still arises on the outstanding balance at the prescribed rate.
- • Interest actually paid in the year, or within 30 days after year-end, reduces that benefit dollar for dollar.
- • Section 80.5 may make the deemed interest deductible where the funds earned income.
If the loan is not repaid in time
- • The principal is included in income for the year the loan was received, often requiring a reassessment.
- • Ordinary income treatment — no dividend tax credit, no corporate deduction.
- • Paragraph 80.4(3)(b) turns off the interest benefit on that amount.
- • Paragraph 20(1)(j) allows a deduction in the year the loan is eventually repaid.
- • Arrears interest runs from the balance-due date of the year of inclusion.
Four situations this tool is built for
The owner-manager draw
An owner takes $75,000 out of their corporation during the year without declaring salary or dividends. The bookkeeper posts it to the shareholder loan account. If it is still there one year after the corporate year-end, the full $75,000 goes into the owner's income for the year they took it — at full marginal rates, with no corporate deduction.
The year-end round trip
The balance is cleared with a bank transfer in late December and the same amount is re-advanced in early January. The repayment looks timely, but subsection 15(2.6) denies the exception where the repayment is part of a series of loans and repayments — which is exactly what a pre-arranged round trip is.
The home purchase loan
A corporation lends its owner-manager funds to buy a home, with a written agreement, a market rate of interest, and a repayment schedule. Paragraph 15(2.4)(b) is available even to a specified employee, but only if the loan was received because of employment rather than shareholdings — which turns on reasonable salary and terms comparable to other employees.
The loan to the foreign parent
A Canadian subsidiary advances funds to its non-resident parent. Subsection 15(2) applies, paragraph 214(3)(a) deems a dividend paid on the advance date, and Part XIII withholding was due the following month. A 15(2.11) PLOI election avoids all of that at the cost of section 17.1 imputed interest at the prescribed rate plus 4%.
Non-resident shareholder loans in Canada
When the borrower is a non-resident, subsection 15(2) still applies — but the consequence changes shape. Paragraph 214(3)(a) deems the amount that would be included under 15(2) to have been paid to the non-resident as a dividend, at the time the loan was made. Subsection 212(2) then imposes Part XIII withholding tax at 25%, which most of Canada's treaties reduce to 5% or 15% depending on the recipient's ownership level and entitlement to treaty benefits.
The timing mismatch is what catches groups out. The inclusion only becomes final one year after the corporate year-end, but the deemed dividend is treated as paid on the advance date — so the withholding was already due on the 15th day of the following month. By the time the exposure is identified, arrears interest has usually been accruing for well over a year, and failure-to-remit penalties may apply.
Repayment is not necessarily wasted. Subsection 227(6.1) allows the Part XIII tax to be refunded on written application where the loan is repaid and the repayment is not part of a series — generally within two years after the end of the calendar year of repayment.
The PLOI alternative — 15(2.11)
Where a Canadian-resident corporation controlled by a non-resident lends to that non-resident or a non-arm's-length non-resident, a pertinent loan or indebtedness election takes the loan out of 15(2) entirely. Section 17.1 then imputes interest income to the Canadian corporation at the prescribed rate plus 4% for as long as the loan is outstanding. The election is generally due by the corporation's filing-due date for the year the loan arose.
Rules to clear before you reach 15(2)
- • Section 212.3 — foreign affiliate dumping.
- • Section 247 — transfer pricing on the interest rate charged.
- • Subsection 18(4) — thin capitalization, where the debt runs the other way.
- • Section 18.2 — the EIFEL interest deductibility limits.
- • Treaty limitation-on-benefits and the principal purpose test.
For the treaty rates themselves, see the Canadian withholding tax calculator, and for interest deductibility in leveraged groups see the EIFEL calculator.
How this checker works
We show our assumptions and sources so you can audit the logic.
Calculation steps
- Map each advance to the first corporate year-end on or after its date.
- Set the 15(2.6) deadline one year after that year-end.
- Trace repayments against the oldest outstanding advance first (FIFO).
- Include any principal still outstanding at its deadline, unless an exception applies.
- Scan for repayment-then-re-advance patterns that suggest a series.
- Impute interest at the prescribed rate on balances not caught by 15(2), less interest actually paid.
- For a non-resident, convert the inclusion to a 214(3)(a) deemed dividend and apply the Part XIII rate.
Key assumptions
- FIFO tracing of repayments — the CRA's usual administrative approach, but not a statutory rule.
- A single annual prescribed rate is applied; the actual rate is set quarterly.
- The borrower is an individual with a calendar taxation year.
- Series detection is a heuristic flag, not a legal conclusion.
- Provincial rules, GAAR, section 84.1, and the attribution rules are not modelled.
- Results are estimates for screening purposes and require professional review.
Sources
- Income Tax Act, s. 15 — shareholder benefits, loans, and the 15(2.3)–15(2.6) exceptions
- Income Tax Act, s. 80.4 — deemed interest benefit on loans
- Income Tax Act, s. 214(3) — deemed payments to non-residents
- Income Tax Act, s. 212(2) — Part XIII tax on dividends
- CRA: Prescribed interest rates
- CRA Guide T4130: Employers' Guide — Taxable Benefits and Allowances
- CRA Guide T4061: NR4 — Non-Resident Tax Withholding, Remitting, and Reporting
Verify the current prescribed rate and any treaty position against the primary sources before filing or remitting. Statutory references are to the Income Tax Act (RSC 1985, c. 1 (5th Supp.)).
Publisher
TaxDesk provides Canadian tax tools and educational resources for business owners and finance teams.
Reviewed by TaxDesk Research Team.
Frequently Asked Questions
What is the shareholder loan repayment deadline in Canada?
A shareholder loan must be repaid by the end of the corporation's taxation year following the taxation year in which the loan was made — in practice, one year after the corporate year-end that the advance falls into. For a December 31 year-end, a loan advanced on June 15, 2026 falls into the year ending December 31, 2026 and must be repaid by December 31, 2027. The deadline runs from the corporate year-end, not from the date of the advance, so a loan taken the day after a year-end effectively gets almost two years while a loan taken the day before a year-end gets about one.
What happens if a shareholder loan is not repaid in time?
Subsection 15(2) of the Income Tax Act includes the full principal in the borrower's income for the taxation year in which the loan was received — not the year the deadline was missed. That usually means an already-filed return has to be reassessed, with arrears interest running from that year's balance-due date. The inclusion is ordinary income: there is no dividend gross-up or tax credit, and the corporation gets no deduction. Paragraph 20(1)(j) gives an offsetting deduction in the year the loan is eventually repaid.
What is the subsection 15(2.6) repayment exception?
Subsection 15(2.6) is the provision that creates the deadline. It turns off the 15(2) inclusion where the loan is repaid within one year after the end of the lender's taxation year in which the loan was made, and the repayment is not part of a series of loans or other transactions and repayments. Both conditions matter — repaying on time does not help if the repayment is part of a series.
What counts as a series of loans and repayments?
The classic pattern is repaying the balance shortly before the deadline and re-borrowing a similar amount shortly afterwards, so the shareholder is never actually out of funds. The CRA looks at whether the repayment was funded independently, how long the balance stayed at zero, and whether the round trip was pre-arranged. There is no bright-line day count in the legislation. A revolving shareholder account with frequent draws and deposits is difficult to defend, because it is hard to show any particular repayment stood on its own.
How is the subsection 80.4 interest benefit calculated?
Where a shareholder loan is outstanding and no 15(2) inclusion applies, subsection 80.4(2) imputes a taxable benefit equal to interest on the outstanding balance at the CRA's prescribed rate for the period, less any interest actually paid in the year or within 30 days after the end of the year. The benefit is included in the borrower's income under subsection 15(9) as a shareholder benefit. Paragraph 80.4(3)(b) turns the benefit off for amounts already included under 15(2), so the two rules do not stack on the same principal.
Can an owner-manager avoid the 15(2) inclusion by charging interest?
No. Charging interest at or above the prescribed rate eliminates the subsection 80.4(2) deemed interest benefit, but it does nothing to the subsection 15(2) inclusion of the principal. Only actual repayment within the 15(2.6) window, or one of the statutory exceptions in 15(2.3) or 15(2.4), takes the principal out of income.
What are the 15(2.4) exceptions for employee loans?
Subsection 15(2.4) exempts loans received because of employment rather than shareholdings, where bona fide repayment arrangements were made when the loan was advanced. The covered purposes are: a loan to an employee who is not a specified employee (someone owning less than 10% of any class of shares); a loan to acquire a dwelling for the employee's own habitation; a loan to acquire previously unissued shares from treasury; and a loan to acquire a motor vehicle used in employment. The last three are available even to specified employees, which is why the home-purchase loan is the exception owner-managers most often rely on.
How are loans to non-resident shareholders taxed in Canada?
Where subsection 15(2) applies to a non-resident, paragraph 214(3)(a) deems the amount to have been paid as a dividend to the non-resident at the time the loan was made. That triggers Part XIII withholding tax under subsection 212(2) at 25%, commonly reduced to 5% or 15% by treaty. The critical point is timing: because the dividend is deemed paid when the loan was advanced, the withholding was due on the 15th of the following month, and arrears interest runs from then — even though the inclusion itself only crystallizes a year after the corporate year-end.
Can Part XIII tax on a shareholder loan be refunded if the loan is repaid?
Yes. Where the loan is repaid and the repayment is not part of a series of loans and repayments, subsection 227(6.1) allows the non-resident to apply in writing for a refund of the Part XIII tax. The application must generally be made within two years after the end of the calendar year in which the repayment was made.
What is a PLOI election under subsection 15(2.11)?
A pertinent loan or indebtedness election lets a Canadian-resident corporation controlled by a non-resident take a loan to that non-resident (or a non-arm's-length non-resident) out of subsection 15(2), avoiding the deemed dividend and Part XIII withholding. The trade-off is section 17.1, which imputes interest income to the Canadian corporation at the prescribed rate plus 4% for as long as the loan is outstanding. The election is generally due by the corporation's filing-due date for the taxation year in which the loan arose.
Does subsection 15(2) apply to a loan from a shareholder to the corporation?
No. Subsection 15(2) targets amounts owed to the corporation by a shareholder or connected person. Money flowing the other way — a shareholder funding their company — creates a credit balance in the shareholder loan account that can generally be repaid tax-free, though other rules such as thin capitalization in subsection 18(4) and the EIFEL rules in section 18.2 can limit the corporation's interest deductions where the lender is a non-resident.
Does repaying a shareholder loan with a dividend count as repayment?
Generally yes. Declaring a dividend or bonus and setting it off against the outstanding balance is normally accepted as a repayment, provided the declaration is real — recorded in directors' resolutions, reflected in the corporation's accounts, and reported on the corresponding T5 or T4. A year-end journal entry with no supporting declaration is weak evidence and is a common audit finding.
This tool produces a preliminary risk assessment based only on the information entered. It is not tax, legal, or accounting advice, and it does not create a professional relationship. Shareholder loan positions are fact-dependent and should be reviewed by a qualified Canadian tax professional before you file or remit.
© 2026 TaxDesk. This tool is not affiliated with the Canada Revenue Agency or the Department of Finance.