The Shareholder Loan Account: Personal Credit Cards and Money Out of the Company

A shareholder loan account tracks money moving between you and your corporation in both directions. When the company owes you, taking it back is tax-free. When you owe the company, subsection 15(2) can add the entire loan to your personal income - not the interest, the whole principal - unless it is repaid within one year of the corporation's fiscal year end.

The 60-second version

Direction decides everything. A credit balance means the company owes you and you can draw it out with no tax. A debit balance means you owe the company, and that is where the risk lives.[1]
Subsection 15(2) includes the full amount of the loan in your income, not a benefit on it, if it is still outstanding past the deadline.[1]
The deadline runs off the corporation's year end, not the calendar. A loan is exempt if repaid within one year after the end of the corporation's taxation year in which it was made.[1]
Repay-and-reborrow does not work. The exception is unavailable where the repayment is part of a series of loans and repayments.[1]
Personal credit card purchases for the business are entirely legitimate. They increase what the company owes you, and reimbursement is a repayment of debt, not income.[5]

One account, two directions

Every incorporated business has a shareholder loan account, whether or not anyone maintains it. It is the running record of money that has moved between the owner personally and the corporation without being salary, dividends, or a purchase.

The account swings both ways, and the two directions have almost nothing in common in tax terms.

Credit balance - the company owes you. You put money in to cover payroll. You bought a $2,400 laptop for the business on your personal Visa. You paid the company's insurance from your own chequing account. Each of those makes the corporation your debtor.

Debit balance - you owe the company. You took $5,000 out to cover a personal expense. The company paid your property tax bill. You used the corporate card at a restaurant with your family. Each of those makes you the corporation's debtor.

Drawing down a credit balance is repayment of a debt the corporation owes you. It is not income and it is not taxed. This is the single most useful and most underused feature of a small corporation: an owner who has genuinely funded the business over the years can often take significant money out with no personal tax at all, because the company is simply paying them back.

Building a debit balance is where owners get hurt.

Subsection 15(2), and why it is worse than people expect

When a shareholder - or a person connected with a shareholder - receives a loan from or becomes indebted to the corporation, subsection 15(2) includes the amount of the loan or indebtedness in computing that person's income for the year.[1]

Read that again. Not a benefit. Not imputed interest. The principal.

Take $60,000 out of your company as a shareholder loan, leave it outstanding past the deadline, and $60,000 goes on your personal return as income - on money you have already spent, with no withholding taken, and no corporate deduction on the other side. Owners routinely assume the worst case is a small interest benefit. It is not.

The provision reaches further than the shareholder personally. It applies to a person connected with a shareholder, meaning someone who does not deal at arm's length with, or is affiliated with, the shareholder.[1] A loan to the owner's spouse or adult child from the corporation is caught the same way.

The one-year rule, and the year end people get wrong

The main relief is subsection 15(2.6): subsection 15(2) does not apply to a loan repaid within one year after the end of the taxation year of the lender in which the loan was made.[1]

Two details in that sentence cost people money.

First, the clock runs off the corporation's taxation year, not yours and not the calendar. Work an example with a 31 December year end:

You borrow $20,000 in March 2026. That falls in the corporate year ending 31 December 2026. You have until 31 December 2027 to repay - about 21 months.
You borrow $20,000 in December 2026. Same corporate year. Same deadline: 31 December 2027 - about 12 months.

Borrowing early in the fiscal year buys you the longest runway. Borrowing in the last weeks of the year gives you the shortest. Same rule, very different practical effect, and it is worth knowing before you take the money rather than after.

A non-calendar year end changes it again. With a 30 June year end, a loan taken in July 2026 falls in the year ending 30 June 2027 and must be repaid by 30 June 2028.

Second, the exception applies only where it is established that the repayment was not part of a series of loans or other transactions and repayments.[1] Repaying on 30 December and drawing the same amount back out on 5 January is precisely the pattern that language exists to defeat. A repayment that is real - funded from salary, a declared dividend, or outside money, and not immediately reversed - holds up. A round trip does not.

The interest benefit that applies even when you do everything right

Repaying inside the window keeps the principal out of your income. It does not make the loan free.

Section 80.4 deems a benefit where a loan is received because of shareholding or employment and carries no interest, or interest below the prescribed rate. The benefit is the prescribed-rate interest for the period, less interest actually paid.[2] For an employee the amount flows into income under subsection 6(9); for a shareholder it is included under subsection 15(9).[3]

The prescribed rate for calculating taxable benefits from interest-free and low-interest loans is set quarterly. For the quarter running 1 July to 30 September 2026 it is 3%.[4] Check the current quarter before computing anything - this number moves, and it has ranged widely in recent years.

Two points that matter in practice. Interest you actually pay to the corporation reduces the benefit, but only if it is paid during the year or within 30 days after the end of the year.[2] And the corporation has to report the benefit - it is a taxable benefit on a T4 or T4A, not something that quietly settles itself.[6]

Personal credit cards, and why a business expense on a personal card is fine

A great many Canadian small businesses run at least partly on the owner's personal credit card. That is not a problem, and it is not a red flag on its own. It is a shareholder loan in the useful direction.

When you pay $2,400 for a business laptop on your personal Visa, three things should happen:

The corporation records the laptop as its own asset, in the correct capital cost allowance class - Class 50 for computer hardware.
The offsetting credit goes to the shareholder loan account, because the company now owes you $2,400.
If the corporation is registered, it claims the GST/HST input tax credit, on the strength of the supplier's invoice.

When the company reimburses you later, that payment is a repayment of the loan account. No T4, no T5, no personal tax. The expense was always the corporation's; who happened to hold the card is a financing question.

What ruins this is not the personal card. It is the absence of a ledger. A receipt with no matching corporate bank entry is not a bogus receipt - it is almost always a personal-card purchase that was never posted to the loan account. If the account is not maintained, there is no record that the company owes you, and years later there is no defensible basis for taking money out tax-free.

The same logic covers reimbursements for home office costs and for per-kilometre vehicle allowances paid by the corporation to the owner-manager.

What good bookkeeping looks like here

One account. Both directions. Every entry dated, described, and supported.

Do not net the loan account against a salary or a dividend that has not actually been declared and documented. An owner who draws $4,000 a month and calls it "salary at year end" has, until that decision is documented and the payroll or dividend paperwork exists, been running a debit balance in the loan account all year. If the year end passes without the declaration, the deadline is already running.

Reconcile the account at every fiscal year end and know its sign. A corporation whose owner believes it owes them $40,000 and whose ledger shows the owner owing $12,000 has a problem worth discovering in month one of the following year, when there is still time to fix it, rather than at the audit.

Keep the supporting documents on the credit side especially hard. The credit balance is the asset. It is what lets you take money out of your company without tax, potentially for years, and it is only worth what you can prove.

Clearing a debit balance before the deadline

If the account is on the wrong side and the deadline is approaching, there are three real options and one that is not.

Pay it back with outside money. Cleanest. Ends the exposure completely.

Declare a dividend and apply it against the balance. The dividend is taxable to you, but at dividend rates and with the corporation's tax already accounted for, and the loan is extinguished. This is a real repayment, not a round trip.

Pay salary or a bonus and apply it. Deductible to the corporation, taxable to you as employment income, subject to payroll withholding and CPP. Whether this beats a dividend depends on your circumstances - RRSP room, CPP position, and the corporation's tax rate.

What does not work: repaying from a personal line of credit on 30 December and drawing the money back out in January. That is the series of loans and repayments the exception explicitly excludes.[1]

Frequently asked questions

What is a shareholder loan account?

It is the ledger account tracking money moved between an owner and their corporation that is not salary, dividends or a purchase. A credit balance means the corporation owes the shareholder and can repay them without personal tax. A debit balance means the shareholder owes the corporation, which triggers the subsection 15(2) rules.

How long can a shareholder loan stay outstanding in Canada?

Subsection 15(2.6) exempts a loan repaid within one year after the end of the corporation's taxation year in which the loan was made. With a 31 December year end, a loan taken any time in 2026 must be repaid by 31 December 2027. The exception does not apply if the repayment is part of a series of loans and repayments.

What happens if I do not repay a shareholder loan in time?

The full amount of the loan or indebtedness is included in computing your income for the year it was received - the principal, not just an interest benefit. There is no corresponding corporate deduction, and no tax was withheld at source, so the liability arrives as a personal tax bill on money already spent.

Can I buy business supplies on my personal credit card?

Yes. The corporation records the expense or asset, credits the shareholder loan account for what it now owes you, and claims any GST/HST input tax credit on the supplier's invoice. Reimbursement later is repayment of the loan account, not taxable income. The only real requirement is that the account is actually maintained.

Do I have to charge interest on a shareholder loan?

You do not have to, but section 80.4 deems a taxable benefit equal to prescribed-rate interest less interest actually paid. The prescribed rate for taxable benefits from interest-free and low-interest loans is set quarterly and is 3% for the quarter beginning 1 July 2026. Interest paid counts only if paid within the year or in the 30 days after year end.

Does the rule apply to a loan to my spouse from the company?

Yes. Subsection 15(2) applies to a person connected with a shareholder, defined as a person who does not deal at arm's length with, or is affiliated with, the shareholder. A loan from the corporation to a non-arm's-length family member is caught on the same terms.

Sources cited in this article

Income Tax Act - section 15
Subsection 15(2), which includes the amount of a shareholder loan in income; 15(2.1), the meaning of connected; 15(2.6), the one-year repayment exception and the series-of-loans limitation; and 15(9).
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-15.html
Income Tax Act - section 80.4
The deemed interest benefit on loans received because of employment or shareholding, and the treatment of interest actually paid within the year or 30 days after.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-80.4.html
Income Tax Act - section 6
Subsection 6(9), which brings the section 80.4 benefit into employment income.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-6.html
CRA - Prescribed interest rates, third calendar quarter 2026
The 3% rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans, in effect 1 July to 30 September 2026.
https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates/2026-q3.html
CRA - Loans and employee debt
CRA's administrative guidance on calculating and reporting the interest-free and low-interest loan benefit.
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/financial/loans-interest-free-low-interest.html
CRA - T4130, Employers' Guide, Taxable Benefits and Allowances
How a loan benefit is reported on a T4 or T4A, and the employer's obligations.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4130.html
CRA - Prescribed interest rates
The quarterly index. Check this before computing a benefit for any period other than the quarter cited above.
https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html
CRA - T4012, T2 Corporation Income Tax Guide
Corporate reporting of amounts owing to and from shareholders, and the schedules on which they appear.
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012.html

All sources verified 2026-08-13. Spotted a link that has moved? Email support@mapleexpense.com and we will correct it.