Shareholders of a business can legally take out funds from their business through various means in Canada. These include dividends, salary, returns of capital, shareholder loan Canada, and much more. Of course, it is crucial to understand how you can take out these funds and if they have to be repaid.
So, if you wish to learn and understand more about shareholder loans, you are in the right place. Here is what you must know.
Does Shareholder Loan In Canada Have To Be Repaid?
Yes, if you want to avoid any tax problems with the CRA, then you will have to repay the shareholder loan Canada. That is because if you repay the shareholder loan within one year, you will not have to pay tax personally on the funds. Keep in mind that you are not allowed to repay the loan balance at the end of the year and then borrow it again after a while.
That is because if you take another loan, CRA will consider this as a series of loans, which is why you might have to pay double taxation. So, be sure to repay the loan permanently by the year-end to avoid any tax problems.
When Do You Repay The Shareholder Loan In Canada?
According to the CRA guidelines, you have to repay the shareholder loan to the company within the coming fiscal year after the loan was given to you. Of course, the fiscal year of each company can vary. However, if your company’s fiscal year-end is December 31st, 2022, and you have taken out a loan in November 2022, then you will have to repay it by December 31st, 2023.
If you don’t repay the loan you borrowed, then it will be included in your personal income in the fiscal year that you took the loan. Of course, if you have repaid the loan, you can’t take out another loan soon. If you do, it will be counted as a series of loans, and CRA has other guidelines in place for that.
What Are The Shareholder Loan Repayment Methods In Canada?
You can easily repay the shareholder loan Canada in various ways. For example, an easy way to repay the loan is to transfer the cash from your personal account to your company’s account. On the other hand, you can also write a cheque (or other methods of payment) for the repayment of the loan.
The primary aim is to put the funds back into the company, which is why you can select any method as long as it fulfills this aim. So, be sure to pay on time and use the right methods.
That was everything you needed to know at a high level about repaying the shareholder loan Canada. If you want more information about repayment or anything else, please feel free to get in touch with WTC Chartered Professional Accountant today. They will provide you with extensive knowledge of shareholder loans to help you make an informed decision about the loan and its repayments.