Income Tax Act

Marginal note:Benefit conferred on shareholder

• 15 (1) If, at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholder

  • (a) where the corporation is resident in Canada at the time,

    • (i) by the reduction of the paid-up capital of the corporation,

    • (ii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock,

    • (iii) on the winding-up, discontinuance or reorganization of the corporation’s business, or

    • (iv) by way of a transaction to which subsection 88(1) or (2) applies;

  • (a.1) where the corporation is not resident in Canada at the time,

    • (i) by way of a distribution to which subsection 86.1(1) applies,

    • (ii) by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies,

    • (iii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, or

    • (iv) on the winding-up, or liquidation and dissolution, of the corporation;

  • (b) by the payment of a dividend or a stock dividend;

  • (c) by conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph,

    • (i) the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation if

      • (A) the voting rights attached to the particular class differ from the voting rights attached to the other class, and

      • (B) there are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, and

    • (ii) rights are not considered identical if the cost of acquiring the rights differs; or

  • (d) by an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies.

• Marginal note:Conferring of benefit

  (1.1) Notwithstanding subsection (1), if in a taxation year a corporation has paid a stock dividend to a person and it may reasonably be considered that one of the purposes of that payment was to significantly alter the value of the interest of any specified shareholder of the corporation, the fair market value of the stock dividend shall, except to the extent that it is otherwise included in computing that person’s income under any of paragraphs 82(1)(a), (a.1) and (c) to (e), be included in computing the income of that person for the year.

• Marginal note:Forgiveness of shareholder debt

  (1.2) For the purpose of subsection 15(1), the value of the benefit where an obligation issued by a debtor is settled or extinguished at any time shall be deemed to be the forgiven amount at that time in respect of the obligation.

• Marginal note:Forgiven amount

  (1.21) For the purpose of subsection 15(1.2), the forgiven amount at any time in respect of an obligation issued by a debtor has the meaning that would be assigned by subsection 80(1) if

  • (a) the obligation were a commercial obligation (within the meaning assigned by subsection 80(1)) issued by the debtor;

  • (b) no amount included in computing income (otherwise than because of paragraph 6(1)(a)) because of the obligation being settled or extinguished were taken into account;

  • (c) the definition forgiven amount in subsection 80(1) were read without reference to paragraphs (f) and (h) of the description B in that definition; and

  • (d) section 80 were read without reference to paragraphs (2)(b) and (q) of that section.

• Marginal note:Cost of property or service

  (1.3) To the extent that the cost to a person of purchasing a property or service or an amount payable by a person for the purpose of leasing property is taken into account in determining an amount required under this section to be included in computing a taxpayer’s income for a taxation year, that cost or amount payable, as the case may be, shall include any tax that was payable by the person in respect of the property or service or that would have been so payable if the person were not exempt from the payment of that tax because of the nature of the person or the use to which the property or service is to be put.

• Marginal note:Interpretation — subsection (1)

  (1.4) For the purposes of this subsection and subsection (1),

  • (a) a contemplated shareholder of a corporation is

    • (i) a person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, or

    • (ii) a member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation;

  • (b) a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership;

  • (c) a benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person — if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm’s length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be;

  • (d) for the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm’s length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested; and

  • (e) if a non-resident corporation (in this paragraph referred to as the “original corporation”) governed by the laws of a foreign jurisdiction is divided under those laws into two or more non-resident corporations and, as a consequence of the division, a shareholder of the original corporation acquires at any time one or more shares of another corporation (in this paragraph referred to as the “new corporation”), the original corporation is deemed at that time to have conferred a benefit on the shareholder equal to the value at that time of the shares of the new corporation acquired by the shareholder except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies to the acquisition of the shares.

• Marginal note:Shareholder debt

  (2) Where a person (other than a corporation resident in Canada) or a partnership (other than a partnership each member of which is a corporation resident in Canada) is

  • (a) a shareholder of a particular corporation,

  • (b) connected with a shareholder of a particular corporation, or

  • (c) a member of a partnership, or a beneficiary of a trust, that is a shareholder of a particular corporation

  and the person or partnership has in a taxation year received a loan from or become indebted to (otherwise than by way of a pertinent loan or indebtedness) the particular corporation, any other corporation related to the particular corporation or a partnership of which the particular corporation or a corporation related to the particular corporation is a member, the amount of the loan or indebtedness is included in computing the income for the year of the person or partnership.

• Marginal note:Meaning of connected

  (2.1) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is

  • (a) a foreign affiliate of the particular corporation; or

  • (b) a foreign affiliate of a person resident in Canada with which the particular corporation does not deal at arm’s length.

• Marginal note:Pertinent loan or indebtedness

  (2.11) For the purposes of subsection (2) and subject to subsection 17.1(3), pertinent loan or indebtedness means a loan received, or an indebtedness incurred, at any time, by a non-resident corporation (in this subsection referred to as the “subject corporation”), or by a partnership of which the subject corporation is, at that time, a member, that is an amount owing to a corporation resident in Canada (in this subsection and subsections (2.12) and (2.14) referred to as the “CRIC”) or to a qualifying Canadian partnership in respect of the CRIC and in respect of which amount owing all of the following apply:

  • (a) subsection (2) would, in the absence of this subsection, apply to the amount owing;

  • (b) the amount becomes owing after March 28, 2012;

  • (c) at that time, the CRIC is controlled by a non-resident corporation that

    • (i) is the subject corporation, or

    • (ii) does not deal at arm’s length with the subject corporation; and

  • (d) either

    • (i) in the case of an amount owing to the CRIC, the CRIC and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for the taxation year that includes that time, or

    • (ii) in the case of an amount owing to the qualifying Canadian partnership, all the members of the qualifying Canadian partnership and a non-resident corporation that controls the CRIC jointly elect in writing under this subparagraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC for its taxation year in which ends the fiscal period of the qualifying Canadian partnership that includes that time.

• Marginal note:Late-filed elections

  (2.12) Where an election referred to in paragraph (2.11)(d) was not made on or before the day on or before which the election was required by that paragraph to be made, the election is deemed to have been made on that day if the election is made on or before the day that is three years after that day and the penalty in respect of the election is paid by the CRIC when the election is made.

• Marginal note:Penalty for late-filed election

  (2.13) For the purposes of subsection (2.12), the penalty in respect of an election referred to in that subsection is the amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period commencing with the day on or before which the election is required by paragraph (2.11)(d) to be made and ending on the day the election is made.

• Marginal note:Partnerships

  (2.14) For the purposes of this subsection, subsection (2.11) and section 17.1,

  • (a) a qualifying Canadian partnership, at any time in respect of a CRIC, means a partnership each member of which is, at that time, the CRIC or another corporation resident in Canada to which the CRIC is, at that time, related; and

  • (b) a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership.

• Marginal note:Mergers

  (2.15) For the purposes of subsections (2.11) and (2.14),

  • (a) if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; and

  • (b) if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.

• Marginal note:When s. 15(2) not to apply — non-resident persons

  (2.2) Subsection 15(2) does not apply to indebtedness between non-resident persons.

• Marginal note:When s. 15(2) not to apply — ordinary lending business

  (2.3) Subsection 15(2) does not apply to a debt that arose in the ordinary course of the creditor’s business or a loan made in the ordinary course of the lender’s ordinary business of lending money where, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the debt or loan within a reasonable time.

• Marginal note:When s. 15(2) not to apply — certain employees

  (2.4) Subsection 15(2) does not apply to a loan made or a debt that arose

  • (a) in respect of an individual who is an employee of the lender or creditor but not a specified employee of the lender or creditor,

  • (b) in respect of an individual who is an employee of the lender or creditor or who is the spouse or common-law partner of an employee of the lender or creditor to enable or assist the individual to acquire a dwelling or a share of the capital stock of a cooperative housing corporation acquired for the sole purpose of acquiring the right to inhabit a dwelling owned by the corporation, where the dwelling is for the individual’s habitation,

  • (c) where the lender or creditor is a particular corporation, in respect of an employee of the particular corporation or of another corporation that is related to the particular corporation, to enable or assist the employee to acquire from the particular corporation, or from another corporation related to the particular corporation, previously unissued fully paid shares of the capital stock of the particular corporation or the related corporation, as the case may be, to be held by the employee for the employee’s own benefit, or

  • (d) in respect of an employee of the lender or creditor to enable or assist the employee to acquire a motor vehicle to be used by the employee in the performance of the duties of the employee’s office or employment,

  where

  • (e) it is reasonable to conclude that the employee or the employee’s spouse or common-law partner received the loan, or became indebted, because of the employee’s employment and not because of any person’s share-holdings, and

  • (f) at the time the loan was made or the debt was incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time.

• Marginal note:When s. 15(2) not to apply — certain trusts

  (2.5) Subsection 15(2) does not apply to a loan made or a debt that arose in respect of a trust where

  • (a) the lender or creditor is a private corporation;

  • (b) the corporation is the settlor and sole beneficiary of the trust;

  • (c) the sole purpose of the trust is to facilitate the purchase and sale of the shares of the corporation, or of another corporation related to the corporation, for an amount equal to their fair market value at the time of the purchase or sale, as the case may be, from or to the employees of the corporation or of the related corporation (other than employees who are specified employees of the corporation or of another corporation related to the corporation), as the case may be; and

  • (d) at the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within a reasonable time.

• Marginal note:When s. 15(2) not to apply — repayment within one year

  (2.6) Subsection 15(2) does not apply to a loan or an indebtedness repaid within one year after the end of the taxation year of the lender or creditor in which the loan was made or the indebtedness 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.

• Marginal note:Employee of partnership

  (2.7) For the purpose of this section, an individual who is an employee of a partnership is deemed to be a specified employee of the partnership where the individual is a specified shareholder of one or more corporations that, in total, are entitled, directly or indirectly, to a share of any income or loss of the partnership, which share is not less than 10% of the income or loss.

• Marginal note:Interest or dividend on income bond or debenture

  (3) An amount paid as interest or a dividend by a corporation resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been paid by the corporation and received by the taxpayer as a dividend on a share of the capital stock of the corporation, unless the corporation is entitled to deduct the amount so paid in computing its income.

• Marginal note:Idem, where corporation not resident

  (4) An amount paid as interest or a dividend by a corporation not resident in Canada to a taxpayer in respect of an income bond or income debenture shall be deemed to have been received by the taxpayer as a dividend on a share of the capital stock of the corporation unless the amount so paid was, under the laws of the country in which the corporation was resident, deductible in computing the amount for the year on which the corporation was liable to pay income or profits tax imposed by the government of that country.

• Marginal note:Automobile benefit

  (5) For the purposes of subsection 15(1), the value of the benefit to be included in computing a shareholder’s income for a taxation year with respect to an automobile made available to the shareholder, or a person related to the shareholder, by a corporation shall (except where an amount is determined under subparagraph 6(1)(e)(i) in respect of the automobile in computing the shareholder’s income for the year) be computed on the assumption that subsections 6(1), 6(1.1), 6(2) and 6(7) apply, with such modifications as the circumstances require, and as though the references therein to “the employer of the taxpayer”, “the taxpayer’s employer” and “the employer” were read as “the corporation”.

• Marginal note:Application of ss. (1), (2) and (5)

  (7) For greater certainty, subsections 15(1), (2) and (5) are applicable in computing, for the purposes of this Part, the income of a shareholder or of a person or partnership whether or not the corporation, or the lender or creditor, as the case may be, was resident or carried on business in Canada.

• (8) [Repealed, 1998, c. 19, s. 75(3)]

• Marginal note:Deemed benefit to shareholder by corporation

  (9) Where an amount in respect of a loan or debt is deemed by section 80.4 to be a benefit received by a person or partnership in a taxation year, the amount is deemed for the purpose of subsection 15(1) to be a benefit conferred in the year on a shareholder, unless subsection 6(9) or paragraph 12(1)(w) applies to the amount.