Loading Website ...


I would like to purchase a new home, but will need to finance a significant portion of the purchase. I have a consulting corporation in which I am an employee and the sole officer and shareholder. I have two full-time employees. I was wondering if instead of going to the bank for a traditional mortgage if I could borrow the money from my corporation?



Generally, if a shareholder borrows or withdraws money from their corporation the amount borrowed or withdrawn needs to be repaid by the shareholder within one year after the end of the taxation year of the corporation in which the loan was made. If the loan is not repaid in time, the full principal amount of the loan must be included in the shareholders income.

For example, if the corporation’s taxation year end if December 31st and it loaned money to the shareholder on January 15, 2015, the shareholder would have until December 31, 2015 to repay the loan without it being included in the shareholders income. This is assuming that one loan and one repayment is made, not a series of loans and repayments.

There is an exception if the loan is made to you in your capacity as an employee of the corporation and not because of your shareholdings and the loan is used to purchase a home in which you will live.

If the loan qualifies for this exception, there will also need to be a bona fide written arrangement detailing the repayment of the loan. The arrangement should also include an adequate interest rate on the loan to avoid any deemed interest benefit. To avoid the deemed interest benefit, the corporation should charge interest equal to the CRA prescribed rates.

To meet this exception, the CRA would determine whether it is reasonable to conclude that the same loan would be have been made to an arms-length employee who is not a shareholder of your corporation.

Generally, owner managed businesses would have a very difficult time taking the “in the capacity of an employee” position for housing loans and the CRA would consider the loan a shareholder loan and include it in your income pursuant to subsection 15(2) of the Income Tax Act.

We always recommend consulting with a qualified professional before considering taking any large sum of money from your corporation.

3.7 3 votes
Article Rating
Notify of
Oldest Most Voted
Inline Feedbacks
View all comments
2 years ago

This seems like a great way to essentially defer personal income tax and save on interest payments, as you’re essentially paying the interest to yourself. From a CRA perspective, they still get their piece of the pie, since you’d be making loan+interest payments to the corporation from your after tax income. But I guess their issue is the fact you’ve gained a benefit from the full loan amount “now” which would not have been subject to personal taxes; the CRA is not collecting on that until the loan amount is paid, which could be 25-30 years depending on your terms.

I have the same question as the other two though: how does this change if you’re transferring a mortgage to your corporation for a home you already own?

My corporation will probably only ever have one employee (myself). If I had a larger company with additional employees (arms length), and the capital, I’d probably offer them a reasonable home purchase loan + interest, sure. This just seems like such a grey area, and you’re on that razor edge of the rules. I certainly wouldn’t want to get hit with a massive income tax bill from this…

3 years ago

I have the exact same question as Sonny. Would this be applicable if I already own my home and want to transfer the remaining mortgage to the corporation.

4 years ago

Is the above answer still valid if I am not purchasing a home but already have a home with mortgage and would like to transfer that mortgage to the corporation after my 5 year term matures with my bank this year?

Rob Brown

Contact Rob Brown

Contact Me

The information contained in this article is for general use only and should not be viewed as professional advice. Accounting and tax rules and regulations regularly change and individuals should contact a competent professional to obtain accounting and tax advice based on their specific situation.


More from this Author

Our dynamic Team are always contributing the latest tips and techniques to keep you in the know with all things tax, accounting, and bookkeeping. See more from this author below.