If you’re a shareholder of a Canadian corporation and you receive a benefit or advantage of any kind from that corporation that has a money value, then you are required to include the value of that benefit or advantage in your personal income on your tax return. It’s what is called a “shareholder benefit” .

If you don’t include it in your income, then you are likely going to get audited by the Canada Revenue Agency (the “CRA”) at some point and you are going to be assessed with what the CRA says is the value of that benefit that you received, PLUS interest and penalties.

A benefit or advantage is widely defined in the Income Tax Act. It could be anything from using your corporately owned vehicle for personal use or living in a condominium that is owned by the corporation and not paying the fair market value rent.

This will also result in double taxation because the corporation cannot deduct the value of the benefit from its income.

There are a number of exceptions to this shareholder benefit rule but they are complicated and fact specific.

If you find yourself in this situation and you have not been declaring the value of the benefit or advantage on your personal income tax return, it is a good idea to contact a tax professional BEFORE the CRA contacts you.

To find out more click here