Benefit conferred on shareholder

Legislative history

Subsection 15(1) derives from paragraph 8(1)(c) of the Income Tax Act, R.S.C. 1952, c. 148, construed by the Exchequer Court in Pillsbury, which the Federal Court of Appeal continues to apply (Laliberté, paras. 34–35; Servais, para. 13). The Justice Laws consolidation lists the amendments below. Its point-in-time series begins on 31 August 2004; the changes described from 2007 were confirmed by comparing successive point-in-time versions and reading the amending Acts, and the earlier Acts were read in their as-assented versions on the Parliament of Canada website.

• S.C. 1994, c. 7, Sch. II, s. 11, and Sch. VIII, s. 5; S.C. 1994, c. 21, s. 9; S.C. 1995, c. 21, s. 4; S.C. 1997, c. 10, s. 269; S.C. 1998, c. 19, s. 75; S.C. 2000, c. 12, s. 142. The Income Tax Amendments Revision Act (S.C. 1994, c. 7, royal assent 12 May 1994) restated earlier amendments in terms of the revised Act. Schedule II, s. 11, replaced paragraph 15(1)(b) (dividends and stock dividends, for benefits conferred after June 1988) and the housing and share-purchase loan exceptions then in subparagraphs 15(2)(a)(ii) and (iii) (1985 and later years, and loans after 1981, respectively). Schedule VIII, s. 5, extended subsection 15(1) to a person in contemplation of becoming a shareholder and replaced paragraph 15(1)(c), for benefits conferred on or after 20 December 1991, and replaced subsection 15(1.4) with an inclusion of 7% of certain benefits arising from supplies other than zero-rated or exempt supplies, for 1991 and later years. S.C. 1994, c. 21, s. 9 (royal assent 15 June 1994), deemed classes of common shares differing only in voting rights to be identical for paragraph 15(1)(c) (benefits conferred after 19 December 1991), excluded automobile benefits from subsection 15(1.4), and re-enacted subsection 15(5) (1993 and later years). S.C. 1995, c. 21, s. 4 (royal assent 22 June 1995), introduced the forgiven-amount rule in subsections 15(1.2) and (1.21), for taxation years ending after 21 February 1994. S.C. 1997, c. 10, s. 269 (royal assent 20 March 1997), replaced subsections 15(1.3) and (1.4) with the present subsection 15(1.3), which includes tax in cost, and added subsection 6(7) to the provisions applied by subsection 15(5), for 1996 and later years; IT-432R2 describes the earlier subsections 15(1.3) and (1.4) (paras. 21–22). The Income Tax Amendments Act, 1997 (S.C. 1998, c. 19, royal assent 18 June 1998), s. 75, re-enacted subsection 15(2), added subsections 15(2.2) to (2.7) (the exceptions and the partnership-employee rule), and repealed subsection 15(8), for loans made and indebtedness arising in 1990 and later years, reading paragraph 15(2.4)(e) out for loans before 26 April 1995 and the specified-employee carve-out in subsection 15(2.5) out for loans before 20 June 1996 (s. 75(5)). The Modernization of Benefits and Obligations Act (S.C. 2000, c. 12), s. 142 and Sch. 2, s. 1(b), substituted “spouse or common-law partner” in paragraphs 15(2.4)(b) and (e), for 2001 and later taxation years or, by joint election, from the 1998, 1999, or 2000 taxation year (ss. 143–144).
• S.C. 2007, c. 2, s. 43 (Budget Implementation Act, 2006, No. 2, royal assent 21 February 2007). Subsection 15(1.1) was replaced to exclude amounts otherwise included under paragraphs 82(1)(a), (a.1), and (c) to (e), for dividends paid after 2005 (s. 43(2)).
• S.C. 2012, c. 31, s. 5 (Jobs and Growth Act, 2012, royal assent 14 December 2012). A pertinent loan or indebtedness was excluded from subsection 15(2), and subsections 15(2.11) to (2.15) were added, for loans received and indebtedness incurred after 28 March 2012; an election otherwise due within 120 days after royal assent was deemed timely if filed within 365 days (s. 5(5)). Subsection 15(2.15) applies to amalgamations occurring, and windings-up beginning, after 28 March 2012 (s. 5(6)).
• S.C. 2013, c. 34, s. 177 (Technical Tax Amendments Act, 2012, royal assent 26 June 2013). Subsection 15(1) was rewritten to reach members of a partnership that is a shareholder and to recast the existing rule for persons in contemplation of becoming shareholders as a reference to a “contemplated shareholder” (defined in paragraph 15(1.4)(a)), with separate exclusions for resident corporations (paragraph (a)) and non-resident corporations (paragraph (a.1)), and subsection 15(1.4) was added, both for benefits conferred on or after 31 October 2011 (s. 177(6)). Paragraph 15(1.4)(e), on foreign divisions, applied to divisions on or after 24 October 2012 (s. 177(8)). Subsection 15(2.1) was extended to partnerships and to persons affiliated with the shareholder, for loans made and indebtedness arising after 31 October 2011 (s. 177(9)).
• S.C. 2014, c. 39, s. 4 (Economic Action Plan 2014 Act, No. 2, royal assent 16 December 2014). Subsection 15(2.14) was extended to subsection 18(5), for taxation years ending after 28 March 2012, subject to an election under subsection 49(3) of the Jobs and Growth Act, 2012 (s. 4(2)).
• S.C. 2016, c. 12, s. 5 (Budget Implementation Act, 2016, No. 2, royal assent 15 December 2016). The back-to-back rules in subsections 15(2.16) to (2.192) were added. Where the immediate funder is itself a debtor, or the holder of a specified right, under a funding arrangement with an ultimate funder, they apply to loans and indebtedness after 21 March 2016 and to any portion of an earlier loan outstanding on 22 March 2016, treated as a new loan made that day; otherwise they apply from 1 January 2017 on the same basis (s. 5(2)).
• S.C. 2018, c. 27, s. 2 (Budget Implementation Act, 2018, No. 2, royal assent 13 December 2018). Paragraph 15(1.4)(e) was repealed, with effect from 24 October 2012, and replaced by subsection 15(1.5), for divisions after 23 October 2012 (s. 2(3) and (4)).
• S.C. 2023, c. 26, s. 6 (Budget Implementation Act, 2023, No. 1, royal assent 22 June 2023). Subsection 15(2.3) was replaced to add the 90% arm’s-length condition to the money-lending exception, and subsection 15(2.31) was added, for loans made after 2022 and for the portion of an earlier qualifying loan outstanding on 1 January 2023, treated as a new loan made that day (s. 6(3)). The English version of subsection 15(5) was revised for taxation years beginning after 2022 (s. 6(4)).
• S.C. 2024, c. 15, s. 5 (Fall Economic Statement Implementation Act, 2023, royal assent 20 June 2024). Subsection 15(2.51) (loans to employee ownership trusts) was added, for transactions on or after 1 January 2024 (s. 5(2)).

No amendment to section 15 appears among the amendments not in force listed on the Justice Laws Website (Act current to 3 September 2026). Clause 3 of the technical amendments released by the Department of Finance on 23 July 2026 would add a list of excluded debtors as subsection 15(2.01) (loans and indebtedness after 31 October 2011), add foreign affiliates to that list and remove paragraphs 15(2.1)(a) and (b) (after 12 August 2024), and extend subsection 15(5) (2026 and later taxation years). The first two measures repeat clause 4 of the technical amendments released in August 2024. They are not enacted. Application provisions are not part of the consolidation and must be read in the amending Acts.

Interpretation and application →

Interpretation and application

Section 15 is the residual charge on value that passes from a corporation to its shareholders outside the ordinary channels of dividends, reductions of capital, and winding-up distributions. Its two central rules are the benefit rule in subsection 15(1) and the shareholder loan rule in subsection 15(2); the other subsections value particular benefits, reach indirect arrangements, or create exceptions. Subsection 15(7) confirms that subsections (1), (2), and (5) apply whether or not the corporation, lender, or creditor is resident or carries on business in Canada.

Benefit conferred on a shareholder (subsection 15(1))

The Federal Court of Appeal applies three steps: whether a benefit was conferred on the shareholder qua shareholder; what the benefit is; and its value, being what the shareholder would have paid for it had he or she not been a shareholder (Laliberté, para. 33, citing Fingold, Pillsbury, Youngman, and ARPEG). As stated in Pillsbury and adopted by the Court, the provision reaches benefits that flow to a shareholder “by some route other than the dividend route” and that might be expected to arrive as dividends if the parties dealt at arm’s length (Servais, para. 13). Any use of corporate property by a shareholder is therefore potentially taxable (para. 14).

No benefit is conferred by a bona fide transaction with a shareholder, as opposed to a device or arrangement for conferring a benefit qua shareholder, and the distinction is one of fact (Laliberté, para. 34, quoting Pillsbury; Chopp, para. 7). The inquiry usually turns on business or personal purpose. In Laliberté, findings that a space trip paid for by the controlling shareholder’s holding company was overwhelmingly personal, and that 90% of its cost was a benefit, were upheld (paras. 2, 37, and 47). The corporation’s decision not to deduct the cost was relevant but not determinative, deductibility and shareholder benefit being distinct but “to a certain extent inter-twined” (para. 40), and the controlling shareholder’s subjective intent, particularly one formed after the commitment, did not govern (paras. 43–45). The benefit must be real: section 69 does not deem a benefit where a shareholder sells property to the corporation above market value but the corporation paid no more than it would otherwise have had to pay (Colubriale, paras. 27–28 and 33–35). Subsection 15(1) does not distinguish common from preferred shareholders (1048547 Ontario, para. 10).

The benefit is included for the shareholder’s taxation year that includes the time it is conferred. It is excluded to the extent section 84 deems it a dividend, and where it is conferred in the ways listed in paragraphs (a) to (d): for a resident corporation, a reduction of paid-up capital, a redemption, acquisition, or cancellation of shares, a winding-up, discontinuance, or reorganization of its business, or a transaction to which subsection 88(1) or (2) applies; for a non-resident corporation, the parallel events in paragraph (a.1); a dividend or stock dividend; identical rights issued to all common shareholders; and conversions of contributed surplus under paragraph 84(1)(c.1), (c.2), or (c.3). The corporation obtains no deduction for the benefit (IT-432R2, para. 14). Where the benefit is a bargain acquisition of capital property, subsection 52(1) adds the amount included to the shareholder’s cost for capital gains purposes, subject to its exclusions.

Valuation of the benefit

Where the Act prescribes no method, value is determined under the case law (Servais, para. 14). For property placed at a shareholder’s disposal, the benefit is the right to have the property available, and its value is the return the corporation’s capital could have earned if productively employed, which is what an arm’s-length person would pay for the use of that capital (ARPEG, paras. 21–22, explaining Youngman and Fingold). Recreational properties not on the rental market were therefore valued on this cost-of-capital basis rather than by the rent for days of actual use, because they were at the shareholders’ disposal throughout, with credit for fixed costs the shareholder bore (paras. 18, 22, and 24). The CRA begins with fair market rent and uses an “imputed rent” (a normal rate of return on the greater of cost and fair market value, plus operating costs) where fair market rent gives no reasonable return, as for a luxury residence or yacht (IT-432R2, para. 11).

The court may fix the value on all the evidence, including the Crown’s cross-examination of the taxpayer’s witnesses (Laliberté, para. 56). Subsection 15(1) speaks of the “amount or value” of the benefit, not its fair market value; the Federal Court of Appeal has noted that value and fair market value usually coincide at arm’s length but can diverge, citing subsection 15(1) as an example of the Act’s use of “value” alone (Walby, paras. 65–66). Where cost measures a benefit, subsection 15(1.3) requires it to include the GST/HST and any other tax payable, or that would be payable but for an exemption.

Shareholder or employee capacity

Whether a benefit was received qua shareholder or qua employee is a finding of fact (Servais, para. 16). A 40% shareholder who worked only part time and made 45% personal use of a company truck received the benefit as a shareholder; had the use been attributable to employment, section 6 would have applied on the same valuation principles (paras. 16–17). The distinction matters because a benefit under paragraph 6(1)(a) is employment income, subject to source deductions and employment reporting, whereas a subsection 15(1) benefit is income from property for which the corporation has no deduction. The CRA decides capacity on all the facts (IT-432R2, para. 1). The burden of displacing the Minister’s assumption on capacity lies on the taxpayer (1048547 Ontario, para. 10).

Mistakes, appropriations, and unrecorded withdrawals

A genuine bookkeeping error that the shareholder did not know of or sanction, and that departs from the corporation’s established practices, is not a device for conferring a benefit (Chopp, paras. 6–8; Laliberté, para. 35). Intent is not always needed, however: the Court in Chopp did not disturb the Tax Court’s view that a benefit may be conferred without intent where the shareholder or corporation ought to have known of it and did nothing to reverse it, particularly if the amount is significant (paras. 4 and 7). In Franklin, the majority upheld a finding of no benefit where a shareholder reinvested the proceeds of corporate property in the corporation and never drew more than his correct loan balance, while not condoning inaccurate records (paras. 5–8); Strayer J.A., dissenting, would have found a benefit once the funds came under the shareholder’s control (paras. 10–13). A recorded repayment of an amount the corporation owes the shareholder is not a benefit (Deyab, para. 27), but the amounts owing must be proved with specificity, not by “a general and vague description” (para. 38). The CRA assumes that an appropriation by a shareholder not dealing at arm’s length with the corporation has the corporation’s concurrence (IT-432R2, para. 8).

Benefits to related and affiliated individuals (subsection 15(1.4))

Paragraph 15(1.4)(c) treats a benefit conferred on an individual who does not deal at arm’s length with, or is affiliated with, a shareholder (or partnership member or contemplated shareholder) as conferred on that shareholder, except to the extent it is included in the income of the individual or any other person. A benefit to a shareholder’s spouse or child is therefore taxed to the shareholder unless taxed to the recipient. An “excluded trust”, in which no such individual is beneficially interested, is outside the rule (paragraph (d)). Paragraph (a) defines a contemplated shareholder, and paragraph (b) looks through tiered partnerships. Subsections 56(2) and 246(1), which the CRA treats as supplementing subsection 15(1) (IT-432R2, para. 17), also reach indirect benefits.

Value-shifting stock dividends (subsection 15(1.1))

Stock dividends are excluded from subsection 15(1), but subsection 15(1.1) includes the fair market value of a stock dividend where one of the purposes of paying it was to significantly alter the value of the interest of any specified shareholder, except to the extent otherwise included under paragraphs 82(1)(a), (a.1), and (c) to (e). The CRA’s example is a stock dividend that shifts a future capital gain (IT-432R2, para. 19).

Forgiveness of shareholder debt (subsections 15(1.2) and (1.21))

Where an obligation issued by a debtor is settled or extinguished, subsection 15(1.2) deems the value of the benefit to be the “forgiven amount”. Subsection 15(1.21) adopts the definition in subsection 80(1), broadly the principal less any amount paid in satisfaction, with modifications: the obligation is treated as a commercial obligation; amounts included in income because of the settlement are ignored, other than under paragraph 6(1)(a); paragraphs (f) and (h) of the description of B are disregarded; and section 80 is read without paragraphs 80(2)(b) and (q). Subsection 15(1.2) values a benefit that subsection 15(1) otherwise includes; it does not itself establish that the forgiveness was conferred qua shareholder. The treatment of a forgiven loan already included under subsection 15(2) is not expressly addressed, and neither folio discusses it (Folio S3-F1-C1, para. 1.99; Folio S3-F1-C2, para. 2.16). Subsection 15(1.21) leaves in place paragraph (j) of the description of B, which subtracts the principal amount of an “excluded obligation”, a term that includes an obligation the proceeds from the issue of which were included in computing the debtor’s income (subsection 80(1), “excluded obligation”, subparagraph (a)(i)); no authority was found on whether a subsection 15(2) inclusion satisfies that condition. The pre-1995 subsection 15(1.2), as IT-432R2 describes it, expressly subtracted any benefit included in the shareholder’s income when the obligation arose (para. 20). To be verified: authority on forgiveness of a loan already included under subsection 15(2) The CRA still refers readers to IT-432R2 for subsection 15(1.2) (Folio S3-F1-C1, para. 1.99; Folio S3-F1-C2, para. 2.16), although that bulletin predates the forgiven-amount definition (IT-432R2, para. 20).

Divisions of non-resident corporations (subsection 15(1.5))

Where a non-resident corporation divides under foreign law, subsection 15(1.5) treats the new shares a shareholder receives as a dividend in kind at their fair market value if each class receives new shares pro rata, and otherwise as a benefit of that value, except to the extent subparagraphs 15(1)(a.1)(i) to (iii) or paragraph 15(1)(b) apply. The original corporation’s gain or loss on the distribution is nil, and property passing to the new corporation moves at fair market value.

Automobiles (subsection 15(5)) and deemed interest benefits (subsection 15(9))

Subsection 15(5) values the benefit from an automobile made available to a shareholder, or to a person related to the shareholder, by applying subsections 6(1), (1.1), (2), and (7) as if the corporation were the employer, unless an amount is determined under subparagraph 6(1)(e)(i) for the same automobile, which prevents double taxation of a shareholder-employee (Servais, para. 8). The rule displaces the case law only for an “automobile” as defined in subsection 248(1); the use of any other vehicle, such as an excluded pickup truck, is valued under the general principles (Servais, paras. 11 and 14–15). The July 2026 proposals would extend the rule to any person not dealing at arm’s length with the shareholder, consistent with paragraphs 6(1)(a) and (e).

Subsection 15(9) deems an amount that section 80.4 deems a benefit to be a benefit conferred on a shareholder for subsection 15(1), unless subsection 6(9) or paragraph 12(1)(w) applies. Imputed interest on a shareholder loan is thus included under subsection 15(1), and is a deemed dividend for Part XIII purposes where the debtor is non-resident (Folio S3-F1-C2, para. 2.41).

Shareholder loans and indebtedness (subsections 15(2) and (2.1))

Subsection 15(2) includes the amount of a loan received, or indebtedness incurred, in a taxation year by a person (other than a corporation resident in Canada) or a partnership (other than one whose members are all such corporations) that is a shareholder of a particular corporation, is connected with a shareholder, or is a member of a partnership or beneficiary of a trust that is a shareholder, where the creditor is the particular corporation, a related corporation, or a partnership of which either is a member. A pertinent loan or indebtedness is excluded. The purpose is “to include in a shareholder’s income amounts received from a corporation in the guise of loans or other indebtedness” (Lust, para. 8).

Under subsection 15(2.1), a person or partnership is connected with a shareholder if it does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, it is a foreign affiliate of the particular corporation or of a person resident in Canada that does not deal at arm’s length with the particular corporation. Arm’s length is determined under section 251 and affiliation under section 251.1.

A debtor-creditor relationship “must exist in one form or another”, and calling an instrument a loan does not make it one (Gillette, paras. 9 and 14). The relationship need not be contractual: a majority shareholder who spent on personal expenses advances that a third party paid him under its loan to his corporation was indebted to the corporation in unjust enrichment, and the indebtedness was included (Lust, paras. 13–16 and 20). Where property is taken without any debtor-creditor relationship, subsection 15(1) may apply instead (Folio S3-F1-C1, para. 1.13). The Minister may choose between the provisions; the Tax Court declined to recast a subsection 15(1) assessment as a debit to the shareholder loan account where subsection 15(1) applied (De Pellegrin, paras. 185 and 206). Personal expenses charged to the shareholder’s account are indebtedness to which subsections 15(2) and (2.6) apply (Kufsky, paras. 52–53). The inclusion is made in the borrower’s taxation year of the loan, not the lender’s (Folio S3-F1-C1, paras. 1.16–1.17), and the CRA treats revolving credit and credit card balances as loans or debts (para. 1.12).

Pertinent loan or indebtedness (subsections 15(2.11) to (2.15))

A loan by a corporation resident in Canada (the “CRIC”) to its controlling non-resident corporation, or to a non-resident corporation not dealing at arm’s length with the controller, will often be caught by subsection 15(2) and, through paragraph 214(3)(a), attract Part XIII tax. Under subsection 15(2.11), the CRIC and the controlling non-resident corporation may jointly elect that an amount becoming owing after 28 March 2012 be a pertinent loan or indebtedness, excluded from subsection 15(2), by the CRIC’s filing-due date for the year in which it becomes owing; a parallel election applies to amounts owing to a qualifying Canadian partnership (subparagraph 15(2.11)(d)(ii), with the partnership defined in paragraph 15(2.14)(a)). The CRIC then includes an amount under section 17.1, computed by reference to a prescribed rate of interest. A late election may be made within three years on payment of $100 for each month or part of a month (subsections 15(2.12) and (2.13)). Subsection 15(2.15) provides continuity on amalgamations and windings-up.

Back-to-back arrangements (subsections 15(2.16) to (2.192))

The back-to-back rules prevent subsection 15(2) and subsection 80.4(2) from being avoided where a corporation funds its shareholder indirectly, for example by lending to an arm’s-length person on condition that that person lend to the shareholder (explanatory notes of October 2016, clause 5). Subsection 15(2.17) applies whenever the conditions in subsection 15(2.16) are met: the intended borrower owes the shareholder debt to an immediate funder; subsection 15(2) would not otherwise apply to it; a funder has a connected debt or specified right meeting the tests in paragraph (c); and a funder is an ultimate funder. Paragraph (b) avoids overlap with a loan already caught, and paragraph (c) excludes a funder’s debt to which subsection 15(2) applies, to prevent double taxation (explanatory notes of October 2016, clause 5).

The intended borrower is then deemed, for section 15 and section 80.4, to receive a loan from each ultimate funder equal to A × B/C – (D – E). Variable A caps the deemed loan at the lesser of the shareholder debt and the total funding from ultimate funders; B/C prorates it among them; and D and E prevent a fresh loan from being deemed at each moment, net of deemed repayments. When the shareholder debt or the ultimate funder’s funding is repaid, or the value of property subject to a specified right falls or the right is extinguished, subsections 15(2.18) and (2.19) deem a repayment, as does subsection 15(2.191) where the formula gives a negative amount. Deemed repayments count for section 15, paragraph 20(1)(j), section 80.4, and subsection 227(6.1). The terms funder, funding arrangement, specified right, and ultimate funder are annotated with their definitions. No decision of the Federal Court of Appeal or the Tax Court applying these subsections was found on the courts’ websites, and the CRA treats a detailed discussion as beyond the scope of its folio (Folio S3-F1-C1, para. 1.18).

Loans between non-residents and ordinary-course loans (subsections 15(2.2), (2.3), and (2.31))

Subsection 15(2) does not apply to indebtedness between non-resident persons (subsection 15(2.2)); the CRA requires both to be non-resident when the loan is made (Folio S3-F1-C1, para. 1.24). Subsection 15(2.3) excludes a debt arising in the ordinary course of the creditor’s business, and a loan made in the ordinary course of the lender’s ordinary business of lending money, where bona fide arrangements for repayment within a reasonable time were made at the outset. For loans made after 2022, the money-lending branch is unavailable to a business less than 90% of whose outstanding loans are owing by arm’s-length borrowers, so that “internal or ‘captive’ money lenders within a corporate group” cannot use it (explanatory notes of April 2023, clause 6), and subsection 15(2.31) applies the arm’s-length test at partnership and partner levels. The CRA’s indicators of a money-lending business and its treatment of trade debts are at Folio S3-F1-C1, paras. 1.29–1.34.

Employees, employee trusts, and employee ownership trusts (subsections 15(2.4), (2.5), (2.51), and (2.7))

Subsection 15(2.4) excludes loans to an employee who is not a specified employee (paragraph (a)); to an employee, or an employee’s spouse or common-law partner, to acquire a dwelling or cooperative housing share for the individual’s habitation (paragraph (b)); to an employee of the lender or a related corporation to acquire previously unissued, fully paid shares of either, held for the employee’s own benefit (paragraph (c)); and to an employee to acquire a motor vehicle used in the employee’s duties (paragraph (d)). In each case the loan must reasonably be attributable to employment and not to any person’s shareholdings (paragraph (e)), and bona fide arrangements for repayment within a reasonable time must have been made when it was made (paragraph (f)). A specified employee is a specified shareholder (broadly, a 10% holder of any class, counting non-arm’s-length holdings) or a person not dealing at arm’s length with the employer (subsection 248(1)). A director holds an office and is therefore an employee (subsection 248(1), “employee” and “office”). Subsection 15(2.7) deems a partnership employee a specified employee if he or she is a specified shareholder of corporations entitled together to at least 10% of the partnership’s income or loss.

Paragraph (e) is the usual point of contention for owner-managers. The CRA asks whether non-shareholder employees receive loans on the same terms or, for a sole employee, what comparable employers offer; loans available only to shareholders, on better terms, to a shareholder who can influence the corporation, or large relative to retained earnings without security, point to shareholding (Folio S3-F1-C1, paras. 1.57–1.59). The CRA considers that refinancing and renovation loans generally fall outside paragraph (b) (paras. 1.51 and 1.53) and that repayment arrangements must fix a reasonably determinable period (para. 1.68).

Subsection 15(2.5) excludes loans to a trust of which a private corporation is settlor and sole beneficiary, whose sole purpose is to facilitate fair market value share transactions with employees who are not specified employees. Subsection 15(2.51) excludes a loan by a qualifying business to the employee ownership trust that controls it immediately after a qualifying business transfer, if its sole purpose is to facilitate the transfer and bona fide arrangements were made for repayment within 15 years; paragraph 80.4(3)(c) excludes such a loan from imputed interest if it is repaid within that period.

Repayment within one year (subsection 15(2.6)) and the deduction under paragraph 20(1)(j)

Subsection 15(2.6) excludes a loan or indebtedness repaid within one year after the end of the lender’s taxation year in which it arose, where it is established, by subsequent events or otherwise, that the repayment was not part of a series of loans or other transactions and repayments. Because the test depends on later events, the borrower may need to amend the return for the year of the loan in either direction (Folio S3-F1-C1, paras. 1.73–1.74). A loan included under subsection 15(2) and later repaid is deductible in the year of repayment under paragraph 20(1)(j), subject to the same series condition and to the bracketed exception for amounts deductible in computing taxable income for the year of inclusion, which has been questioned where the inclusion was split income (see Lee, under Policy purpose and commentary). In Poce, the Tax Court upheld inclusions, including for years the taxpayer contended were statute-barred, after the auditor traced them to the corporation’s journal entries, together with paragraph 20(1)(j) deductions for later repayments (paras. 69–70); the Crown also conceded an amount that belonged to a year not under appeal (para. 68).

The phrase “series of loans or other transactions and repayments” is not defined, and no decision of the Federal Court of Appeal interpreting it in subsection 15(2.6) was found on the Court’s website. The CRA’s view is that the rule targets perpetual deferral through re-borrowing, so that a repayment followed by a re-borrowing will generally be part of a series, as may a repayment funded by a new loan unless that loan came from an independent source, for a genuine business purpose, and not to repay the shareholder loan (Folio S3-F1-C1, paras. 1.84–1.85). Repayments by applying declared dividends, salary, or bonuses are not part of a series, even if borrowing resumes (para. 1.86). The CRA applies repayments to the oldest balance first unless the facts clearly indicate otherwise (para. 1.81), accepts repayment in property at fair market value or by set-off (paras. 1.80 and 1.82), and applies these principles to running loan accounts (para. 1.87 and Example 7).

Imputed interest (section 80.4 and subsection 15(9))

A shareholder loan that escapes subsection 15(2) remains subject to subsection 80.4(2) if received by virtue of shareholdings: the benefit is interest at the prescribed rate for the period outstanding, less interest paid in the year or within 30 days after it, and it is included under subsections 15(1) and (9). Subsection 80.4(2) does not apply to a loan included in income under Part I, a loan at an arm’s-length commercial rate, or a qualifying employee ownership trust loan (subsection 80.4(3)). Section 80.5 deems the benefit to be interest paid, so that it is deductible under paragraph 20(1)(c) where the borrowed money is used to earn income. The prescribed rate is set quarterly under section 4301 of the Income Tax Regulations (Folio S3-F1-C2, para. 2.27). The CRA considers that a borrower cannot avoid subsection 15(2) by voluntarily reporting an imputed interest benefit (para. 2.15). A loan received qua employee falls instead under subsections 80.4(1) and 6(9).

Non-resident debtors, Part XIII, and upstream loans

Where the debtor or shareholder is non-resident, paragraph 214(3)(a) deems an amount that section 15 would include if Part I applied to be a dividend from a corporation resident in Canada, subject to 25% tax under subsection 212(2) unless reduced by treaty. For a loan, paragraph 214(3)(a) has effect only if subsection 15(2) would apply to it (Gillette, para. 4, describing the Tax Court’s reasoning). On a later repayment that is not part of a series, subsection 227(6.1) refunds the lesser of the tax paid and the tax on a dividend equal to the repayment, on written application within two years after the end of the calendar year of repayment. The deemed dividend is for Part XIII only and supports no dividend refund (Folio S3-F1-C1, para. 1.98).

A loan by a foreign affiliate of a taxpayer resident in Canada to the taxpayer, or to a person not dealing at arm’s length with it (a “specified debtor”, defined in subsection 90(15) with exclusions for certain foreign affiliates), falls under the upstream loan rules. Subsection 90(6) applies “except where subsection 15(2) applies” and includes the specified amount in the Canadian taxpayer’s income, subject to the exceptions in subsection 90(8), including repayment within two years otherwise than as part of a series, and the deduction in subsection 90(9); subsection 90(7) has its own back-to-back rule. The CRA’s folio does not address upstream loans (Folio S3-F1-C1, Summary).

Income bonds and debentures (subsections 15(3) and (4))

Interest or a dividend paid on an income bond or income debenture by a resident corporation is deemed a dividend on a share unless the corporation may deduct it (subsection 15(3)); a payment by a non-resident corporation is deemed a dividend to the recipient unless deductible under the law of the corporation’s country of residence (subsection 15(4)).

← Legislative historyPolicy purpose and commentary →

Policy purpose and commentary

The benefit rule rests on the premise that a corporation’s normal distributions to shareholders qua shareholders are dividends, reductions of capital, and winding-up distributions, and that Parliament intended to sweep in value reaching shareholders by any other route (Servais, para. 13, quoting Pillsbury). The Federal Court of Appeal has described its purpose as taxing, in the shareholder’s hands, property the shareholder appropriates (Colubriale, para. 33). The shareholder loan rule prevents the same value from being extracted as a loan; in the Department of Finance’s words, it keeps a shareholder or connected person “from avoiding tax by receiving property from the corporation as an otherwise non-taxable loan, rather than as a taxable dividend or other taxable amount” (explanatory notes of October 2016, clause 5; to similar effect, explanatory notes of July 2026, clause 3). In the CRA’s view, the series condition in subsection 15(2.6) is aimed at “perpetually deferring tax by using new loans to repay existing loans” (Folio S3-F1-C1, para. 1.84).

A benefit usually costs more than a dividend of the same amount: the corporation has no deduction, and the amount is not a taxable dividend eligible for the gross-up and dividend tax credit. The Tax Court judge in Laliberté, whose reasons the Federal Court of Appeal quoted, observed that “going offside can often result in double taxation once corrected” (para. 26).

The later amendments address particular structures. The pertinent loan rules of 2012 let a Canadian corporation controlled by a non-resident corporation elect an income inclusion under section 17.1 in place of subsection 15(2) and Part XIII tax. The back-to-back rules of 2016, modelled on the Part XIII back-to-back loan rules, reach indirect funding (explanatory notes of October 2016, clause 5). The 2023 amendment closed the money-lending exception to captive group lenders (explanatory notes of April 2023, clause 6), and the 2024 amendment facilitates sales to employee ownership trusts (explanatory notes of November 2023, clause 5). The July 2026 proposals would confirm that subsection 15(2) does not apply to partnerships held, directly or through other partnerships, only by Canadian corporations, and would stop the foreign affiliate exceptions from depending on the connected test (explanatory notes of July 2026, clause 3).

Selected commentary:

• Daniel Morrison, “Including Shareholder Benefits in ACB: Subsection 52(1)” (2022) 12:1 Can. Tax Focus: explains how subsection 52(1) adds a subsection 15(1) benefit from a bargain purchase of non-depreciable capital property to the shareholder’s cost, and notes the statutory and judicial exclusions.
• Erica Hennessey, “Another Reason To Avoid Shareholder Benefits” (2016) 6:1 Can. Tax Focus: on Parihar and Bleau, argues that a shareholder benefit from a corporation with unpaid tax can expose the shareholder both to tax on the benefit and to a section 160 assessment, an effective rate above 100%.
• Martin Lee, “Shareholder Loans: Does TOSI Prevent a Deduction on Repayment?” (2019) 9:2 Can. Tax Focus: asks whether the bracketed words in paragraph 20(1)(j) deny the deduction on repayment where the subsection 15(2) inclusion was split income under section 120.4; an author’s note of December 2021 on the publisher’s page records that the CRA later stated, at the Foundation’s 2021 conference round table, that the words should not be read to bar the deduction.
• James C. Konopka, “Life Insurance and Shareholder Benefits” (2022) 12:2 Can. Tax Focus: on Harding v. The Queen, 2022 TCC 3, where premiums on corporate-owned insurance whose beneficiaries were family members were a shareholder benefit.
• To be added: Canadian Tax Journal commentary on sections 15 and 80.4, including the back-to-back rules and subsection 15(2.6)

← Interpretation and applicationRelevant case law →

Relevant case law

• Laliberté v. Canada, 2020 FCA 97. The three-step framework (para. 33); bona fide transactions and devices for conferring benefits (paras. 34–36); the corporation’s tax treatment is relevant but not determinative (para. 40), and the controlling shareholder’s subjective intent is not determinative (paras. 43–45); valuation on all the evidence (para. 56).
• ARPEG Holdings Ltd. v. Canada, 2008 FCA 31. Property at a shareholder’s disposal is valued by the income the corporation’s capital could have earned, not by rent for days of use (paras. 21–22); credit for fixed costs the shareholder bore (para. 24).
• Servais v. The Queen, 2003 FCA 329. Any use of corporate property is potentially a benefit (para. 14); subsection 15(5) displaces the case law only for an “automobile” (para. 15); capacity is a question of fact (paras. 16–17).
• Canada v. Chopp (1997), 221 N.R. 185, [1998] 1 C.T.C. 407 (F.C.A.) (report citations as given in Laliberté, para. 35), reasons delivered from the bench on 13 November 1997. An unsanctioned bookkeeping error contrary to established practice did not confer a benefit (paras. 6–8).
• Canada v. Franklin, 2002 FCA 38. Whether a benefit was conferred is for the trier of fact; no benefit where bookkeeping errors left the shareholder’s true position unchanged (paras. 6–8); Strayer J.A. dissenting (paras. 10–13).
• Colubriale v. Canada, 2005 FCA 329. A benefit must be real, and section 69 does not deem one on a sale to the corporation above market value where the corporation paid no more than it had to (paras. 27–28 and 33–35).
• Canada v. Gillette Canada Inc., 2003 FCA 22. Subsection 15(2) requires a debtor-creditor relationship (para. 9); a substituted instrument is not a loan whatever the documents call it (paras. 13–14); for a loan, paragraph 214(3)(a) depends on subsection 15(2) applying (para. 4, describing the Tax Court’s reasoning).
• Lust v. Canada, 2007 FCA 62. Purpose of subsection 15(2) (para. 8); indebtedness in unjust enrichment is included (paras. 13–16 and 20).
• Deyab v. Canada, 2020 FCA 222 (leave to appeal refused, SCC 39587, 10 June 2021, as noted in Khanna, para. 24). Recorded repayments to a shareholder are not benefits (para. 27); failing to keep a shareholder loan account was neglect justifying reassessment beyond the normal period (paras. 40–41), but not gross negligence (paras. 57–63 and 73–78).
• Khanna v. Canada, 2022 FCA 84. Unreported income does not by itself justify a subsection 163(2) penalty; wilful blindness requires deliberate ignorance (paras. 24–27).
• 1048547 Ontario Inc. v. Canada, 2024 FCA 113. The taxpayer must demolish the assumptions, and the auditor’s conduct is irrelevant (para. 8); subsection 15(1) applies to preferred shareholders (para. 10).
• Kufsky v. Canada, 2022 FCA 66. A section 160 appeal in which dividends credited to the shareholder’s account reduced her indebtedness and the amount otherwise included under subsection 15(2) (paras. 35–36 and 52–53).
• Walby v. Canada, 2025 FCA 94. “Value” and “fair market value” may differ; subsection 15(1) uses “value” (paras. 65–66).
• Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336. The onus to demolish the Minister’s exact assumptions and its shift once a prima facie case is made (paras. 92–95).
• Poce v. The King, 2026 TCC 34. Subsection 15(2) inclusions and paragraph 20(1)(j) deductions across open and contested years (paras. 66–70); subsection 80.4(3) (paras. 71–72).
• De Pellegrin v. The King, 2025 TCC 7. The Minister may assess an appropriation under subsection 15(1) rather than subsection 15(2) (paras. 185 and 206); the gross negligence penalty on the unreported benefit was not justified where the taxpayer relied on professionals in a voluntary disclosure (paras. 204–207).
• Parihar v. The Queen, 2015 TCC 52. A shareholder assessed under subsection 15(1) may also be assessed under section 160 for the same transfer, and a waiver settling the subsection 15(1) assessment did not estop the section 160 assessment (paras. 42 and 45, citing Bleau v. The Queen, 2006 TCC 36).

Canada v. Fingold, [1998] 1 F.C. 406 (C.A.), Youngman v. Canada, [1990] 2 C.T.C. 10 (F.C.A.), and M.N.R. v. Pillsbury Holdings Ltd., [1965] 1 Ex. C.R. 676, are not held on the Federal Court of Appeal’s website; they are described only as characterized in Laliberté, ARPEG, Servais, Chopp, and Colubriale, with report citations as given there. Laliberté (para. 33) styles the last case Pillsbury Canada Ltd v. Minister of National Revenue, while Chopp (para. 7) and Servais (para. 13) style it Pillsbury Holdings Ltd. Decisions are available on the websites of the Federal Court of Appeal, the Tax Court, and the Supreme Court.

← Policy purpose and commentaryCRA documents →

CRA documents

• Income Tax Folio S3-F1-C1, Shareholder Loans and Debts, effective 10 April 2025, which cancels and replaces IT-119R4, Debts of Shareholders and Certain Persons Connected with Shareholders (Application). It covers the conditions for subsection 15(2) and the connected test, with notes on the August 2024 proposals (paras. 1.2–1.10 and 1.21), the exceptions (paras. 1.19–1.72), amended returns and paragraph 20(1)(j) (paras. 1.73–1.79), repayments and series (paras. 1.80–1.87), non-residents (paras. 1.88–1.98), and forgiven amounts (para. 1.99). It excludes upstream loans and international intra-group financing (Summary).
• Income Tax Folio S3-F1-C2, Deemed Interest Benefit on Shareholder Loans and Debts, effective 10 April 2025, which cancels paragraphs 6, 7, 10, 12, 13, and 26 of IT-421R2 (Application). It covers the subsection 80.4(2) calculation (para. 2.25), back-to-back deemed loans (para. 2.26), interest paid by a group corporation for the shareholder (para. 2.29), netting (para. 2.37), section 80.5 (para. 2.39), and information returns (para. 2.40).
• IT-432R2, Benefits Conferred on Shareholders (10 February 1995, archived; e-text version read). Both folios still refer readers to it for subsection 15(1), but it predates every amendment since 1995 and describes a superseded subsection 15(1.4). Its paragraphs 1, 8, 11, 14, 17, 19, 20, and 21–22 are cited above.
• IT-421R2, Benefits to Individuals, Corporations and Shareholders from Loans or Debt (9 September 1992, archived), of which paragraphs 6, 7, 10, 12, 13, and 26 are cancelled by Folio S3-F1-C2. The remaining paragraphs were not read.
• GST/HST Memorandum 9.1, Taxable Benefits (Other than Automobile Benefits) (November 2011), which replaces GST Memorandum 400-3-2 of 19 February 1992. It explains section 173 of the Excise Tax Act for shareholder benefits (paras. 4–5 and 20–24), the exclusion of exempt supplies such as an interest-free loan (para. 27(a)), paragraph 170(1)(c) (para. 31), and the time of liability (paras. 45–47). GST/HST Memorandum 9.2, on automobile benefits, was not read.
• CRA technical interpretations are not published on canada.ca, and none is cited here.

← Relevant case lawRegulations, forms, and elections →

Regulations, forms, and elections

• Income Tax Regulations, C.R.C., c. 945, s. 4301: the quarterly prescribed rate for subsection 80.4(2), based on 90-day Government of Canada Treasury Bills; the rate for section 17.1 is set separately by paragraph 4301(b.1).
• Income Tax Regulations, s. 200(2)(h) and (i): a person who confers a benefit included under subsection 15(5), or deemed by subsection 15(9) to be conferred on a shareholder, must file an information return in prescribed form; the CRA identifies the T4A for a subsection 80.4(2) benefit (Folio S3-F1-C2, para. 2.40).
• The pertinent loan or indebtedness election under paragraph 15(2.11)(d) is a joint election “in writing”, due by the CRIC’s filing-due date, for which the Act prescribes no form; late elections are governed by subsections 15(2.12) and (2.13). The CRA’s procedural page, to which the folio refers (Folio S3-F1-C1, para. 1.23), asks electing parties to file Form T1521, Election for a Pertinent Loan or Indebtedness under Subsection 15(2.11), signed by an authorized officer of the CRIC and of the controlling non-resident corporation (or by the members of the qualifying Canadian partnership), and, for elections filed on or after 11 April 2022, accepts one election for all amounts arising under a single loan agreement if a copy of the agreement is filed (Understanding interest, “Pertinent loans or indebtedness (PLOI)”).
• Form T400A, Notice of Objection – Income Tax Act, for objecting to a notice of assessment under the Act; the CRA also accepts objections through its online “File a formal dispute” service.

← CRA documentsCompliance →

Compliance

• Timing. A subsection 15(1) benefit is included in the shareholder’s taxation year in which it is conferred, and a subsection 15(2) loan in the borrower’s taxation year in which it is received, although the one-year exception runs from the lender’s year-end. A return filed on the expectation that subsection 15(2.6) would apply must be amended if it does not (Folio S3-F1-C1, para. 1.73).
• Information returns. Benefits under subsections 15(5) and (9) are reported on an information return (Regulations, s. 200(2)(h) and (i)); a benefit taxed under section 6 is reported as employment income.
• GST/HST. A registrant that confers a subsection 15(1) benefit generally accounts for tax under section 173 of the Excise Tax Act in the reporting period that includes the last day of its taxation year in which the benefit was conferred (subparagraph 173(1)(d)(vii); GST/HST Memorandum 9.1, para. 46).
• Part XIII. The person deemed to pay the dividend must withhold and remit the tax (subsection 215(1); Folio S3-F1-C1, para. 1.90). The CRA does not assess penalty or interest if the tax is remitted by the 15th day of the 13th month after the end of the lender’s taxation year in which the loan was made or, for a series, by the 15th day of the month after the lender’s year-end in which the net increase occurred (paras. 1.90–1.91). A refund under subsection 227(6.1) must be applied for within two years after the end of the calendar year of repayment.
• Elections. A pertinent loan or indebtedness election, which the CRA asks to be made on Form T1521, is due by the CRIC’s filing-due date; a late election may be made within three years on payment of $100 for each month or part of a month (subsections 15(2.11) to (2.13)).
• Penalties. Unreported benefits and loans may attract the gross negligence penalty in subsection 163(2), the greater of $100 and 50% of the tax attributable to the false statement or omission as computed under that subsection, with the burden of proof on the Minister (subsection 163(3)).
• Reassessment period. The normal reassessment period is three years for individuals and Canadian-controlled private corporations and four years for other corporations and mutual fund trusts (subsection 152(3.1)); a later reassessment generally requires a misrepresentation attributable to neglect, carelessness, or wilful default, fraud, or a waiver (paragraph 152(4)(a)), subject to the extended periods in paragraph 152(4)(b).
• Records. Keep an accurate shareholder loan account recording every advance, repayment, and credit, supported by resolutions and documents. Without one, a shareholder may be unable to prove that withdrawals repaid amounts owing, and the failure may be neglect that opens statute-barred years (Deyab, paras. 40–41).

← Regulations, forms, and electionsPlanning and dispute notes →

Planning and dispute notes

Planning

• Prefer salary, bonus, or dividends to a benefit, which is not deductible to the corporation and is not a dividend eligible for the dividend tax credit (see Laliberté, para. 26, quoting the Tax Court on the resulting double taxation). Bonuses and dividends declared and credited to the shareholder loan account before the one-year deadline are, in the CRA’s view, genuine repayments and not part of a series, even if borrowing resumes (Folio S3-F1-C1, para. 1.86; see Kufsky, para. 36).
• Manage the one-year window from the lender’s year-end. Clear each year’s debit balance by the end of the following corporate year, and do not fund the repayment with a new corporate loan or with a short-term bank loan repaid from a new corporate advance, which the CRA treats as a series (Folio S3-F1-C1, paras. 1.84–1.85 and Example 5). Where a balance cannot be cleared, consider including it and relying on paragraph 20(1)(j) on repayment, or documenting a loan within subsection 15(2.4), with bona fide repayment terms fixed at the outset.
• For shareholder-employees, a loan under subsection 15(2.4) must be explicable by employment, not shareholding: offer the same terms to non-shareholder employees where possible, and keep evidence of comparable employers’ practices (Folio S3-F1-C1, paras. 1.57–1.59). Imputed interest under subsection 80.4(1) or (2) applies unless interest at the prescribed rate is paid within 30 days after the year-end, and section 80.5 may make the imputed amount deductible.
• For personal use of corporate property, charge and collect a fair market rent or quantify and report the benefit. For residential and recreational property, expect the benefit to be measured on the capital tied up, whether or not the property is used (ARPEG, paras. 21–22). Leasing property primarily for a shareholder’s personal use also forfeits input tax credits unless the corporation charges fair market value (Excise Tax Act, paragraph 170(1)(c); GST/HST Memorandum 9.1, para. 31).
• Benefits to family members are taxed to the shareholder under paragraph 15(1.4)(c) unless taxed to the recipient; pay family members as remuneration for services actually rendered or as dividends on shares actually held.
• In corporate groups, identify every loan to a non-resident parent or sister company and every financing routed through a third party. Consider the pertinent loan or indebtedness election, test indirect funding against subsections 15(2.16) and (2.17) and, for foreign affiliates, subsections 90(6) to (8), and track the July 2026 proposals.
• Before forgiving a shareholder loan, quantify the forgiven amount under subsections 15(1.2) and (1.21), consider the capacity in which the forgiveness is conferred, and compare a bonus or dividend applied against the balance.

Disputes

• Identify the provision assessed. The Minister may proceed under subsection 15(1) or subsection 15(2) (De Pellegrin, paras. 185 and 206); only the latter carries the one-year exception and the paragraph 20(1)(j) deduction.
• The taxpayer must first demolish the Minister’s assumptions on the civil standard (Hickman Motors, paras. 92–95; 1048547 Ontario, para. 8), preferably with documents. Adverse inferences may be drawn from the failure to call the accountant or bookkeeper (Deyab, paras. 45–48) or from the taxpayers’ failure to testify (1048547 Ontario, paras. 3 and 9, upholding the Tax Court).
• Contest valuation separately from liability: the court may fix value on all the evidence (Laliberté, para. 56), and amounts borne by the shareholder can reduce the benefit (ARPEG, para. 24).
• Argue capacity where the facts support it; a benefit received qua employee is taxed under section 6 (Servais, paras. 16–17), and in Servais the Crown had pleaded section 6 in the alternative (para. 17).
• Bookkeeping errors, recorded repayments, and amounts leaving the shareholder’s true position unchanged are factual defences (Chopp, paras. 6–8; Franklin, paras. 6–8; Deyab, para. 27), but they require evidence of the true position.
• For years beyond the normal period, the Minister must prove a misrepresentation attributable to neglect, carelessness, or wilful default (Deyab, paras. 23–25). The gross negligence penalty requires more: conduct “tantamount to intentional acting” or indifference to compliance, proved by the Minister, with the benefit of the doubt to the taxpayer where two viable and reasonable hypotheses exist (paras. 56–63 and 73–77; Khanna, paras. 24–27). A taxable benefit does not in itself establish gross negligence (Deyab, para. 65).
• An individual (other than a trust) or a graduated rate estate may object to an assessment for a taxation year within the later of one year after the filing-due date and 90 days after the notice is sent; other taxpayers have 90 days (paragraphs 165(1)(a) and (b)).
• Watch for derivative exposure. Where the corporation has unpaid tax, a shareholder already taxed under subsection 15(1) may also be assessed under section 160 for the same transfer, because the provisions have different purposes and conditions, and a settlement of the subsection 15(1) assessment does not estop the section 160 assessment (Parihar, paras. 42 and 45). A shareholder who accepted reassessments treating amounts as dividends credited to a loan account could not dispute that characterization in a later section 160 appeal (Kufsky, paras. 35 and 61–64), although the concurring judge left that point open (paras. 83–86).

← ComplianceProvincial and treaty parallels →

Provincial and treaty parallels

• Ontario. The Taxation Act, 2007, S.O. 2007, c. 11, Sch. A, has no separate shareholder benefit or loan inclusion and does not refer to section 15 of the federal Act. An individual’s “income” is income determined for the purposes of the federal Act (subsection 1(1), “income”), Ontario tax is computed on the individual’s “tax base”, which is taxable income (subsection 3(1) and section 6), and a corporation’s income and taxable income are those determined for the purposes of the federal Act (subsection 1(1), “income”, and subsection 26(1), “taxable income”). Amounts included under section 15 therefore flow into Ontario tax without a parallel provision.
• Quebec. Division IV of the Taxation Act, CQLR c. I-3, “Benefits conferred on a shareholder” (sections 111 to 119.1), parallels section 15: section 111 corresponds to subsection 15(1), section 111.1 to subsections 15(1.2) and (1.21) (by reference to section 485), section 112 to paragraphs 15(1)(a) to (d), section 112.1 to subsection 15(1.1), section 112.3 to subsection 15(1.3), and sections 112.3.1 and 112.3.2 to subsections 15(1.4) and (1.5). Section 113, the loan rule, builds the “does not deal at arm’s length with, or is affiliated with” test into its text; sections 113.1 to 113.3 cover pertinent loans or indebtedness and sections 113.4 to 113.7 back-to-back arrangements. Section 114 combines the ordinary-course exception, with the 90% arm’s-length condition, and the employee exceptions; section 114.1 covers employee share trusts; section 115 is the one-year rule; section 116 excludes loans to Canadian corporations, loans between non-residents, and the foreign affiliate cases; and section 116.1 corresponds to subsection 15(2.7). Section 117 values automobile benefits by reference to the employment rules, section 118 corresponds to subsection 15(7), and section 119 to subsections 15(3) and (4). No counterpart to subsection 15(2.51) was found in Division IV.
• GST/HST. Under section 173 of the Excise Tax Act, a registrant that makes a supply (other than an exempt or zero-rated supply) of property or a service to an individual or a related person, giving rise to an amount included under subsection 15(1), must account for tax on the benefit amount, computed as a tax-included fraction using 4% (or, where the individual is resident in a participating province at the end of the year, 4% plus the percentage determined for that province), or a prescribed percentage for certain automobile operating benefits (subparagraph 173(1)(d)(vi)). For a subsection 15(1) benefit, the tax is deemed collected on the last day of the registrant’s taxation year (subparagraph 173(1)(d)(vii)). No tax is payable where section 170 denied the input tax credits, as it does for property leased primarily for a shareholder’s personal use unless a fair market value charge is made (paragraph 170(1)(c)). The income tax value of the benefit, in turn, includes the GST/HST (subsection 15(1.3)). Exempt supplies, such as interest-free loans, are outside section 173 (GST/HST Memorandum 9.1, para. 27(a)).
• Tax treaties. The 25% rate in subsection 212(2) on amounts deemed dividends by paragraph 214(3)(a) may be reduced by treaty, and the particular treaty must be examined (Folio S3-F1-C1, para. 1.89). To be verified: treaty definitions of “dividends” as applied to amounts deemed by paragraph 214(3)(a)

← Planning and dispute notesAnnotated cross-references →

Annotated cross-references

• Subsection 6(1), paragraphs (a) and (e), and subsection 6(9): employment benefits and employee loans, which apply where the benefit or loan is received qua employee.
• Section 80.4 and section 80.5: imputed interest and its deductibility; subsection 80.4(8) contains a connected test parallel to subsection 15(2.1).
• Paragraph 20(1)(j): deduction on repayment of a loan included under subsection 15(2).
• Section 17.1 and subsection 18(5): deemed interest on a pertinent loan or indebtedness, and the definition of “specified right”.
• Subsection 52(1): cost addition for amounts included in income in respect of property.
• Subsection 56(2) and subsection 246(1): indirect payments and benefits.
• Paragraph 69(1)(b): deemed fair market value proceeds to the corporation on a non-arm’s-length disposition at an undervalue.
• Section 80 and section 84: the forgiven-amount definition borrowed by subsection 15(1.21), and deemed dividends, which take priority over subsection 15(1).
• Subsections 90(6) to (15): upstream loans, which apply “except where subsection 15(2) applies”.
• Subsection 212(2), paragraph 214(3)(a), subsection 215(1), and subsection 227(6.1): Part XIII tax on non-resident shareholders and debtors, withholding, and refund on repayment.
• Section 152, section 163, and section 165: reassessment periods, penalties, and objections.
• Section 160: transferee liability where the corporation has unpaid tax.
• Subsection 248(1): “shareholder”, “employee”, “office”, “specified employee”, “specified shareholder”, “automobile”, “employee ownership trust”, “qualifying business”, and “qualifying business transfer”; sections 251 and 251.1: arm’s length and affiliation.

← Provincial and treaty parallelsSources →

Sources

• Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 15 and prior versions: Justice Laws Website (Act current to 3 September 2026); point-in-time versions from 31 August 2004, 21 February 2007, 14 December 2012, 26 June 2013, 16 December 2014, 15 December 2016, 13 December 2018, and 22 June 2023; amendments not in force. Related provisions on the same site: ss. 6, 12, 17.1, 18, 20, 52, 56, 69, 80, 80.4, 80.5, 84, 90, 152, 163, 165, 212, 214, 215, 227, 246, 248, 251, and 251.1; Income Tax Regulations, ss. 200 and 4301.
• Amending Acts on Justice Laws: S.C. 2007, c. 2, s. 43; S.C. 2012, c. 31, s. 5; S.C. 2013, c. 34, s. 177; S.C. 2014, c. 39, s. 4; S.C. 2016, c. 12, s. 5; S.C. 2018, c. 27, s. 2; S.C. 2023, c. 26, s. 6; S.C. 2024, c. 15, s. 5. As-assented Acts on the Parliament of Canada website: S.C. 1994, c. 7 (Bill C-15), Sch. II, s. 11, and Sch. VIII, s. 5; S.C. 1994, c. 21 (Bill C-27), s. 9; S.C. 1995, c. 21 (Bill C-70, 35th Parl., 1st Sess.), s. 4; S.C. 1997, c. 10 (Bill C-70, 35th Parl., 2nd Sess.), s. 269; S.C. 1998, c. 19 (Bill C-28), s. 75; S.C. 2000, c. 12 (Bill C-23), ss. 142–144 and Sch. 2.
• Department of Finance Canada: Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Texts (October 2016), clause 5; Explanatory Notes Relating to the Income Tax Act and Other Legislation (April 2023), clause 6; Explanatory Notes Relating to the Income Tax Act and the Income Tax Regulations (November 2023), clause 5; Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations (Technical Amendments) and explanatory notes (July 2026), clause 3, with the news release of 23 July 2026; technical amendments of August 2024, clause 4.
• Federal Court of Appeal: Laliberté, ARPEG, Servais, Chopp, Franklin, Colubriale, Gillette, Lust, Deyab, Khanna, 1048547 Ontario, Kufsky, Walby.
• Tax Court of Canada: Poce, De Pellegrin, Parihar. Supreme Court of Canada: Hickman Motors.
• Canada Revenue Agency: Folios S3-F1-C1 and S3-F1-C2, IT-432R2, IT-421R2, and GST/HST Memorandum 9.1, as linked under “CRA documents”; Forms T1521 and T400A and the Understanding interest page, as linked under “Regulations, forms, and elections”.
• Canadian Tax Foundation: the Canadian Tax Focus items linked under “Selected commentary”.
• Ontario e-Laws: Taxation Act, 2007, ss. 1(1), 3(1), 6, and 26(1). LégisQuébec: Taxation Act (up to date as at 10 June 2026), ss. 111 to 119.1. Justice Laws: Excise Tax Act, s. 170 and s. 173.

← Annotated cross-references