What is a shareholder loan, and why does it matter?
Money you take from your corporation that isn’t salary or dividends sits in a shareholder loan account — and if it stays borrowed too long, CRA taxes it as income.
Every dollar that moves between you and your corporation lands somewhere. When you take money out that is not payroll and not a declared dividend, it books to your shareholder loan account — you owe the corporation.
The one-year rule
A shareholder loan generally must be repaid within one year after the end of the corporation’s tax year in which you borrowed it. Miss that window and CRA includes the whole amount in your personal income — without the dividend tax credit softening it. Repay-and-reborrow patterns get caught too.
How balances sneak up
It is rarely one big withdrawal. It is the corporate card at the grocery store, an e-Transfer to cover a personal bill, a “temporary” draw — unrecorded until year-end, when the accountant finds a five-figure balance and limited options.
The clean version
Books that are current catch the balance monthly, and your accountant clears it deliberately — salary, dividend, or repayment — on a schedule you chose, not one CRA imposes.
This is general information, not tax advice for your situation. Book a call and a Canadian accountant will give you the answer for your business.
Common questions
I took money out of my corporation this year. Is that a problem?
Not if it is dealt with deliberately — cleared as salary, dividends, or repayment within the allowed window. It becomes a problem when nobody notices until the deadline has passed.
Can my corporation lend me money for a house?
There are narrow exceptions with strict conditions for certain employee loans, and they are easy to get wrong. Treat any large personal borrowing from your corporation as a plan-with-your-accountant-first event.