What is a Shareholder Benefit? 

Shareholder benefits describe anything of value received by a shareholder from a corporation by virtue of the shareholder’s relationship with the corporation and for which the corporation was not otherwise compensated at fair market value. Shareholder benefits exclude payments to a shareholder such as dividends, shareholder loans, employment income or any other payments that are taxable under another section of the Income Tax Act. The shareholder benefit definition is fairly broad and includes, for example:

  • A shareholder utilizing a corporate vehicle or property for personal use
  • A shareholder receiving cash from a corporation which was not a dividend, employment income or another amount 
  • A shareholder receiving goods produced by the corporation for personal use and not paying for said goods. 

A shareholder benefit may also apply where the person enjoying the benefit is not the shareholder but is a person who is related to the shareholder, such as a spouse or child of the shareholder. For example, a shareholder’s spouse using the corporation’s box seats to attend a game with friends could be considered a shareholder benefit. 

The value of a shareholder benefit is the fair market value of the benefit received. Subsection 15(1) is meant to prevent a shareholder from extracting wealth from a corporation tax-free. Pursuant to subsection 15(1) of the Income Tax Act, shareholders must report shareholder benefits on their income tax returns. The shareholder, not the related individual, will be assessed for the shareholder benefit in cases where the individual enjoying the shareholder benefit is not the shareholder. 

Taxpayers may also engage in diverting payments, such as an employee requesting his or her salary be paid directly to a creditor of the employee. These payment diversion arrangements often have a legitimate purpose, but do not necessarily prevent the taxpayer from being taxed on the diverted amount. Subsection 56(2) of the Income Tax Act will include in the taxpayer’s income any payment which was:

  • made to a person other than the taxpayer;
  • made pursuant to the direction of, or with the concurrence of, the taxpayer;
  • made for the benefit of the taxpayer or as a benefit that the taxpayer desired to have conferred on the other person; and
  • would have been included in the taxpayer’s income if it had been made to the taxpayer.

If a shareholder was to cause the corporation to pay funds to an arm’s length third party, that may trigger a subsection 56(2) income inclusion if the payment would have been considered a shareholder benefit had it been paid to the shareholder directly. 

During a tax audit, if the Canada Revenue Agency tax auditor sees amounts being transferred between the corporation and the shareholder without explanation, the auditor is likely to assume these were shareholder benefits. Shareholders should ensure they carefully document all amounts and benefits received from their corporations as well amounts paid to the corporation to ensure the CRA cannot utilize the lack of documentation to take a position advantageous to itself.  It is very important to properly maintain a shareholder loan account and to be aware of the income inclusion rules in subsection 15(2) for a shareholder loan that is not repaid.for a shareholder loan that is not repaid.

GST/HST Applied on Shareholder Benefit

Shareholder benefits may be subject to GST/HST where the requirements of subsection 173(1) of the Excise Tax Act are met. Subsection 173(1) requires GST/HST to be applied where a registrant makes a supply of property or service to an individual or a person related to an individual, and an amount is assessed in respect of that supply as a shareholder benefit under subsection 15(1) of the Income Tax Act. 

Subsection 173(1) does not apply to:

  • Exempt supplies – Supplies where no GST/HST is applied 
  • Zero-Rated supplies – Supplies where GST/HST is applied, but at a zero percent rate 
  • Where the registrant cannot claim input tax credits due to subsections 170(1) and 170(2) of the Excise Tax Act

The GST/HST is deemed to have been collectable on the last day of the registrant’s taxation year to which the taxation year applies. 

Example of GST/HST on Shareholder Benefits

The following is a high-level example of where GST/HST may be charged on shareholder benefits. Taxpayers should consult with one of our experienced Canadian Tax Lawyers about their specific situations. 

Michael is the sole shareholder of a corporation that purchases, refurbishes and sells furniture. In 2018, he takes a few pieces the corporation refurbished to use in his own home. He does not report a shareholder benefit on the furniture pieces. In 2020, he personally sells the pieces and does not report the income. 

During an audit, the Canada Revenue Agency uncovers the unreported 2020 income and the furniture pieces. Michael is assessed for a shareholder benefit on the furniture pieces. Further, the corporation is assessed for GST/HST on the shareholder benefit pursuant to the formula in subsection 173(1). 

If the corporation had sold the furniture pieces in normal course to an arm’s length customer, it would have collected and remitted the GST/HST on the sale. Subsection 173(1) thus ensures the same taxation result when the furniture is given to the shareholder.   

Money as Shareholder Benefits 

Subsection 173(1) applies in respect of “property or services”. Property and services are both defined terms in the Excise Tax Act. In particular, property is “any property, whether real or personal, movable or immovable, tangible or intangible, corporeal or incorporeal, and includes a right or interest of any kind, a share and a chose in action, but does not include money”. Services include everything other than property, money and certain exclusions related to employment. 

Money is explicitly excluded from both the definition of services and property. If the shareholder benefit consists solely of money, no GST/HST is applicable to these amounts. However, the shareholder benefit will still be taxable under the Income Tax Act

Cryptocurrency as a Shareholder Benefit 

If the corporation owns cryptocurrency, it may provide crypto as a benefit to the shareholder. Provided the definition outlined at the start of this article is met, those cryptocurrency amounts should be assessed at their fair market value as a shareholder benefit. 

Whether a shareholder benefit of cryptocurrency would be GST/HST taxable pursuant to Subsection 173(1) of the Excise Tax Act is something of an unanswered question. Many argue that cryptocurrency is another form of currency, just like Canadian Dollars, the Euro, or Mexican Pesos, and thus should be considered “money” for the purposes of the Excise Tax Act. As stated above, money is exempt from subsection 173(1) of the Excise Tax Act. However, the Canada Revenue Agency takes the position that cryptocurrencies are a commodity, not money, and thus taxable under the Excise Tax Act. The Canada Revenue Agency’s position is not legally binding. For further discussion on whether cryptocurrencies are money for GST/HST purposes, please see our article “Is Crypto-Currency Trading Exempt from GST/HST”.

Pro Tax Tip- Shareholder Benefits vs. Shareholder Loans 

Subsection 15(1) in the Income Tax Act and Subsection 15(2) – Shareholder Loans are closely related. A shareholder can lend money to and borrow money from a corporation he or she owns tax-free provided certain rules are followed. If the rules set out in the Income Tax Act for tax-free shareholder loans are not followed, the amounts borrowed or lent may become taxable to the appropriate party. Since subsection 15(1) and 15(2) both deal with funds flowing from the corporation to its shareholder, the Canada Revenue Agency may mistake a shareholder loan for a shareholder benefit or vice versa during a tax audit. The Canada Revenue Agency is additionally typically reluctant to recognize amended or reconstructed shareholder loan accounts provided at a later date. For this reason, shareholder loans should be meticulously tracked and documented. Unlike shareholder benefits, there is no provision applying GST/HST to shareholder loans.  

Our experienced Canadian tax lawyers have dealt with numerous shareholder loan and shareholder benefit related disputes, and can assist you with contesting these amounts with the Canada Revenue Agency.


Shareholder benefits describe anything of value received by a shareholder from a corporation by virtue of the shareholder’s relationship with the corporation for which the corporation was not otherwise compensated. Shareholder benefits do not include amounts which are otherwise categorized for tax purposes, such as dividends. Shareholder benefits are assessed pursuant to subsection 15(1) of the Income Tax Act.
Yes. Unless the shareholder benefit is money, exempt supplies, zero-rated supplies or where the registrant cannot claim input tax credits due to subsections 170(1) and 170(2) of the Excise Tax Act, GST/HST may be applied to the shareholder benefit.