Loans – interest-free and low-interest

You may have to include in income any benefit arising from an interest-free or low-interest loan received, or debt incurred, by a person because of an office, employment, or shareholding.

If a person is both an employee and a shareholder, it is a question of fact whether a particular indebtedness arose because of shareholdings or because of an office or employment. For more information, see archived Interpretation Bulletin IT-119R, Debts of Shareholders and Certain Persons Connected with Shareholders. See also “Loans received because of employment” or “Loans received because of shareholdings”.

The benefit is generally calculated as the amount of interest that the person would have paid on the loan or debt for the year at the prescribed rates, minus the amount of interest that they paid on the loan in the year or no later than 30 days after the end of the year.

Special rules apply to certain loans or debt and to home-relocation loans. For more information, see Exceptions and Home-relocation loans.

Forms and publications

• Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment