# Shareholder loans in Canada: the one-year rule, the series rule and deemed interest (2026) Shareholder loans in Canada: when a loan becomes income (the one-year rule), the series rule, and deemed interest. Worked example, CRA-sourced, 2026. When you take money out of your own corporation as a loan, it isn't tax-free for long. If the loan isn't repaid within one year after the end of the company's tax year in which you took it, the whole amount goes into your income for the year you took it [1]. Repaying it just before the deadline and borrowing it straight back may not count as repaying it. And while the loan is out, a low or zero interest rate creates a taxable benefit at the CRA's prescribed rate, which is 3% for the fourth quarter of 2026 [2] [10]. So the deadline isn't one year from the day you took the money. It depends on the company's year-end, and on the date of each advance. This guide shows how to work out each deadline, what counts as repaying, how the interest benefit is figured, and how to keep the account right every month so the deadline never takes you by surprise. General information, not advice. Every rule here is from the CRA's own pages, read on 2026-10-19. How to clear a loan, and what it costs you in tax, is your decision, made with your accountant. ## What a shareholder loan is In a corporation, money moving between you and the company goes through a shareholder loan account. It's sometimes called "due to shareholder" or "due from shareholder". The CRA notes these may be called "loan accounts, drawings accounts, or other similarly named accounts" [1]. They collect: 1. money the company lends you, 2. payments the company makes to someone else on your behalf, such as a personal bill paid from the business account, and 3. advances against salary, rent or dividends you expect to receive [1]. When the balance is in your favour (the company owes you), there's no problem. The rules below apply when you owe the company. ## The one-year rule Under subsection 15(2) of the Income Tax Act, a person who receives a loan from a corporation because they're a shareholder "is generally required to include the amount of the loan or debt in income for the year" [1]. The rule exists to stop "dividends from being paid out in the guise of loans" [11]. The main exception is in subsection 15(2.6). The loan stays out of your income if two things are both true [1]: 1. it is repaid "within one year after the end of the tax year of the lender or creditor in which the loan was made", and 2. the repayment "is not part of a series of loans or other transactions and repayments". The year that counts is the company's tax year, not the calendar year and not yours. A loan taken early in the company's year can stay out for almost two years. A loan taken on the last day of its year has exactly one. The CRA's folio also sets out other exceptions, such as certain loans to shareholders who are also employees, including loans to buy a home [1]. Whether one fits you is a question for your accountant. ## Which year does the loan count as income? If the loan isn't repaid in time, it counts as income in the year you received it, not the year the deadline passed [1]. A loan taken in March 2026 from a company with a December 31 year-end has a deadline of December 31, 2027. Miss it, and the loan belongs in your 2026 income. By then your 2026 return will usually have been filed, so it would have to be reassessed to add the loan. If you repay a loan after it has been included in your income, you can deduct the repayment in the year you repay it, under paragraph 20(1)(j). That deduction isn't allowed if the repayment is part of a series of loans and repayments [1]. ## Repaying and borrowing again: the series rule The obvious way to beat the deadline is to repay the loan just before it, then take the money out again a few days later. That's the case the series rule is for. It exists "to prevent a taxpayer from perpetually deferring tax by using new loans to repay existing loans" [1]. If a repayment is part of a series, it doesn't count, and the original loan goes into income. So repaying and borrowing straight back may not count as repaying. Repayments that come from applying a dividend, salary or bonus the company owes you are "not considered part of a series" [1]. Those are taxed in their own way, but they do clear the loan. ## What interest rate does the CRA use? For October 1 to December 31, 2026, the CRA's prescribed rate for interest-free and low-interest loans to shareholders is 3% [10]. The rate is set every quarter from 90-day Government of Canada Treasury bill rates [2]. The rate for each quarter since the start of 2025: | # | Quarter | Prescribed rate for shareholder loans | |---|---|---| | 1 | January to March 2025 | 4% [3] | | 2 | April to June 2025 | 4% [4] | | 3 | July to September 2025 | 3% [5] | | 4 | October to December 2025 | 3% [6] | | 5 | January to March 2026 | 3% [7] | | 6 | April to June 2026 | 3% [8] | | 7 | July to September 2026 | 3% [9] | | 8 | October to December 2026 | 3% [10] | A loan outstanding across several quarters uses each quarter's rate for the days it was outstanding in that quarter [2]. Under section 80.4, a loan that stays out of your income but charges you less than that rate creates a taxable benefit [2]: 1. The benefit is the interest at the prescribed rate on what you owed, for the time you owed it. 2. Interest you actually pay, in the year or within 30 days after it ends, reduces the benefit. The two rules don't both apply to the same loan. Once a loan has been included in your income under subsection 15(2), there's no deemed-interest benefit on it [2]. There's also none if the loan charges at least the rate that parties dealing at arm's length would have agreed [2]. On a $10,000 loan outstanding for all of October to December 2026 with no interest paid, the benefit for that quarter is about $75: 3% a year is $300, and a quarter of that is $75. Each other quarter uses that quarter's rate. ## Worked example This example is made up. Check the dates with your accountant. 1. ABC Ltd. has a December 31 year-end. In March 2026 the owner takes $10,000 from the company and pays nothing back. 2. The loan was made in the company's 2026 tax year, so it must be repaid by **December 31, 2027**. If it isn't, the $10,000 goes into the owner's **2026** income. 3. If it's repaid in time but carries no interest, the owner has a deemed-interest benefit for each quarter it was outstanding, at that quarter's rate (3% for October to December 2026). Interest the owner pays by January 30 of the following year reduces the benefit. 4. If the owner repays on December 28, 2027 and takes $10,000 out again on January 3, 2028, that looks like a series, and the repayment may not count. 5. Two clean ways to clear it are to repay from personal money, or to have the company declare a bonus or dividend and apply it to the loan. Each is taxed differently, and the choice belongs to the owner and their accountant. ## Keeping the shareholder loan account right each month The deadline counts from the company's year in which each advance was made. So a running balance isn't enough. Your books need to show when each part of it arose. Each month, as part of the [month-end close](/month-end-close-checklist): 1. **Code every personal payment and transfer.** Personal spending on a business card or account, and every transfer between you and the company, goes to the shareholder loan account, not to an expense. 2. **Keep the date of each advance.** That date sets its deadline. 3. **At year-end, list the balance by the year each part arose**, with each part's repayment deadline, and send it to your accountant with the year-end package. 4. **Three months before each deadline**, decide with your accountant how that part will be cleared. 5. **Flag repay-then-borrow patterns.** A repayment shortly before year-end followed by a similar draw shortly after should be raised with your accountant, not just booked. ## What to do next If your shareholder loan account hasn't been kept month by month, the dates of the advances are the first thing to recover. We're setting up catch-up bookkeeping that brings your books up to date in your own QuickBooks or Xero file, at a fixed price for each month behind. [Join the catch-up list](/offers/catch-up-bookkeeping?ref=shareholder-loan) to hear when it opens. ## Sources 1. CRA, Income Tax Folio S3-F1-C1, Shareholder Loans and Debts, read 2026-10-19: subsection 15(2) and its purpose; loan, drawings and similar accounts (1.11); the one-year exception in subsection 15(2.6); the series rule and repayments from dividends, salaries or bonuses; exceptions for certain loans to shareholder-employees; repayment of a loan already included in income is deductible in the year repaid under 20(1)(j) (1.76), but not as part of a series (1.77). 2. CRA, Income Tax Folio S3-F1-C2, Deemed Interest Benefit on Shareholder Loans and Debts, read 2026-10-19: the section 80.4 benefit is interest at the prescribed rate for the period outstanding, less interest paid in the year or within 30 days after; the rate is set quarterly from 90-day Treasury bill rates (2.27); no benefit where the rate is at least an arm's-length rate (2.14) or the loan has been included in income (2.15). 3. CRA, Prescribed interest rates for January to March 2025, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 4%. 4. CRA, Prescribed interest rates for April to June 2025, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 4%. 5. CRA, Prescribed interest rates for July to September 2025, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 6. CRA, Prescribed interest rates for October to December 2025, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 7. CRA, Prescribed interest rates for January to March 2026, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 8. CRA, Prescribed interest rates for April to June 2026, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 9. CRA, Prescribed interest rates for July to September 2026, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 10. CRA, Prescribed interest rates for October 1 to December 31, 2026, read 2026-10-19: the rate for taxable benefits for employees and shareholders from interest-free and low-interest loans is 3%. 11. CRA, Income Tax Audit Manual, chapter 24, read 2026-10-19: subsection 15(2) prevents dividends from being paid out in the guise of loans. --- Published 2026-10-19. Web page: https://www.bookkeepingforsmallbusiness.com/shareholder-loan