Section 80.4

Subsection 80.4(1) - Loans


Attorney General of Canada v. Hoefele, 95 DTC 5602, [1996] 1 CTC 131 (FCA)

new mortgage debt of relocated employees

Employees of Petro-Canada who were required to relocate from Calgary to Toronto had a declining percentage of their increased interest costs (resulting from an increase in their outstanding mortgages of no more that 55%) subsidized by Petro-Canada provided they took out their new mortgage with Confederation Life.

Linden J.A. noted (at p. 5608) that the phrases "because of" or "as a consequence of" in s. 80.4(1) required "a strong causal connection" and went on to find that because the employees (who already had Calgary homes) obtained their new form of mortgage financing largely independently of employer involvement, it was reasonable to consider that the new mortgage debt was incurred "in order to obtain ownership of a house, not ... 'as a consequence of'... employment".

Locations of other summaries Wordcount
Tax Topics - General Concepts - Tax Avoidance form matters 82
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) interest rate subsidy did not increase net worth 102

See Also

Wolf v. MNR, 92 DTC 1858, [1992] 2 CTC 2231 (TCC)

The taxpayer held all the shares of Holdco and preference shares of the subsidiary of Holdco ("Ottawa"). Amounts advanced by Ottawa to the taxpayer were not set off by operation of law against amounts owing by Holdco to the taxpayer, with the result that the taxpayer was subject to imputed interest under s. 80.4(1). In dealing with the submission that this result might have been avoided by adjusting entries made by the accountant for Ottawa, Rip J. stated (p. 1861):

"Any adjustment of debt or loan in the books of account at the end of a financial period does not make disappear the existence of a debt or loan for the time during which it was outstanding, that is, from the date of the advance to the date of adjustment."

Fingold v. MNR, 92 DTC 2011, [1992] 2 CTC 2393 (TCC)

The taxpayers were unsuccessful in their submission that amounts paid to them without corporate formality by the corporation and which were recorded by the corporation's accountant in their respective loan accounts constituted advances made in contemplation of a distribution of share capital, rather than loans. "Civil intent in the controlling minds of a corporation in a corporate action would take place does not consummate that action" (p. 2017).

Administrative Policy

26 April 2016 Internal T.I. 2015-0623571I7 - one-time salary transition payment

employee advance not a “loan”

After stating that

A loan is generally defined as delivery by one party, and receipt by another party, of a sum of money upon agreement, express or implied, to repay with or without interest.

CRA indicated that it considered that an advance to an employee is current s. 5 income to him or her even if the advance is required to be repaid if the future services are not performed. Accordingly, a “transitional payment” made to employees, as a result to switching the payroll system to an arrears system, would be currently taxable rather than treated as a loan subject to s. 80.4(1) even if the employees were required to repay any overpayment on termination of employment.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) advance to employee is current s. 5 income 239
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n) deduction for repayment of transitional advance 163

6 September 2013 External T.I. 2012-0463501E5 - Reduced Interest Rate Credit Cards

The correspondent asked about the tax treatment of an employee of a financial institution who receives a credit card bearing interest on credit balances at interest rates below those charged to non-employee cardholders, but above both the prescribed rate in Reg. 4301(c) and the bank's usual rates for commercial loans. (No reference was made to the credit balances being interest-free until the due date.)

CRA considered that, assuming the advances under the cards were received as a consequence of the individuals' employment (which would be deemed by s. 80.4(1.1) to be the case if the terms, e.g., the interest rate, would have been different but for the employment), s. 6(1)(a) would not apply as the employment benefit was computed by s. 80.4(1) to be nil based on the low prescribed rate.

The words "in respect of" in s. 6(1)(a) are broader than the words "because of or as a consequence of" in s. 80.4(1). If s. 80.4(1) did not apply, the s. 6(1)(a) benefit "would generally be calculated using the interest rate differential between credit cards issued to employees and those provided to the general public (i.e. the FMV interest rate)."

13 June 2012 Internal T.I. 2012-0448961I7 F - Paiements en trop faits par un employeur

grant of extended period for employee to repay overpayment was not a s. 80.4 loan

An employee was on extended sick leave but nonetheless received remuneration from the payroll service, which was not informed of the leave. On the employee's return to employment a number of years later, the error was discovered, and it was agreed that the overpayments would be repaid over a period that straddled two calendar years through deduction from the employee's post-return remuneration. CRA stated (TaxInterpretations translation):

[T]he fact that the employee reimburses the overpayments gradually does not constitute a non-interest bearing loan. Accordingly, the employer should not calculate a taxable benefit for imputed interest.

Words and Phrases
Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n) salary mistakenly paid after expiry of sick leave period and then repaid, treated as clerical error rather than s. 8(1)(n) adjustment 288

2 March 2012 Internal T.I. 2011-0422811I7 - Loan received in capacity as an employee

The individual director of a private charitable foundation had submitted that a personal holding company had received a large loan from the foundation by virtue of his employment as director, so that he was exempted from tax under s. 189. In rejecting this submission, the Directorate indicated that the loan amount appeared to be in excess of what would likely be lent to other directors by virtue of their office, and that it was unlikely that the importance of his services as director would justify the provision of loans in this amount.

13 January 1993 T.I. 922191 (November 1993 Access Letter, p. 500, ¶C76-077)

Where a loan is received by an employee of a corporation who owns all its shares, RC will consider that the loan was not contracted qua employee, except under exceptional circumstances.

13 January 1992 T.I. (Tax Window, No. 15, p. 20, ¶1695)

Although the s. 80.4 benefit associated with a joint loan generally is to be reported on a 50-50 basis, the basis of apportionment may differ from equality if the circumstances so warrant.

4 November 1991 Memorandum (Tax Window, No. 13, p. 11, ¶1585)

Where an employer goes bankrupt, benefits will continue to accrue to employees or former employees under s. 80.4 until the loan or debt in question has been paid or settled.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(15) 47

28 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 21, ¶1110)

If the provisions of a housing loan relating to interest and amortization period are renegotiated, the five-year period will commence anew. On the other hand, a prepayment of the loan or a change in the underlying security will not result in a new loan. 90 C.R. - Q5: S.80.4(1) will continue to apply after employment ceases; and a retired employee who receives a low interest loan from his former employer pursuant to an agreement entered into while he was employed will be considered to have received that loan by virtue of his employment.

IT-421R "Benefits to Individuals, Corporations and Shareholders from Loans or Debt"


Frankovic, "Interest Subsidies and Interest-Free Home Relocation Loans - No Taxable Benefits", Tax Topics, No. 1336, 16 October 1997, p. 1.

Dunbar, "Revenue Canada Establishes Policy on Loan-Related Benefits", Taxation of Executive Compensation and Retirement, June 1991, p. 451.

"Guidelines Are Established to Determine if a Loan is Made by Virtue of Employment", Taxation of Executive Compensation and Retirement, March 1990, p. 249.

"Low Interest Foreign Currency Loans May Trigger Taxable Benefit if a Downside Protection is Afforded by Employer", Taxation of Executive Compensation and Retirement, March 1990, p. 250.

Dewling, "Bridging Loan to Custodian Under Retirement Compensation Arrangement Is Not Subject to Interest Benefit Provisions", Taxation of Executive Compensation and Retirement, December 1989/January 1990

An interest-free bridging loan made by an employer to the trustee for a retirement compensation arrangement in order to help finance payments to the employees before receipt of the refunds, is not subject to the deemed interest provisions according to a 22 August 89 Technical Interpretation.

Subsection 80.4(1.1) - Interpretation

Administrative Policy

24 February 2000 External T.I. 1999-0004805 - housing loans

In a situation involving an employer-requested move, the mere fact that the employee's move qualifies as an eligible relocation (as defined in s. 248(1)) is not a sufficient basis to conclude that a third party loan to finance a house price differential would not have been received but for the employee's employment. S.80.4(1.1) "clarifies that the intended use of funds that are advanced to a taxpayer is not relevant in determining whether the loan is received because of an individual's employment. Subsection 80.4(1.1) treats a loan or debt as having been received or incurred because of an office or employment if it is reasonable to conclude that the loan or debt would not have been received or incurred, or its terms would have been different, but for the individual's employment".

Subsection 80.4(2) - Idem [Interpretation]


Vine Estate v. The Queen, 89 DTC 5528, [1990] 1 CTC 18 (FCTD)

Appropriations made by the individual shareholder of a company could be considered to be a loan or debt incurred by the individual to the company, and therefore were subject to s. 80.4.

Administrative Policy

5 May 2021 IFA Roundtable, Q.7

a non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer generated double tax (FAPI and Pt. XIII tax)

A wholly-owned foreign subsidiary (FS) of CanCo uses funds generated from its operations to make a non-interest bearing loan to a foreign borrower (FB), which is wholly owned by the foreign parent (FP) of CanCo. The loan is repaid within 2 years so that the upstream loan rules in s. 90(6) do not apply.

CRA stated its “long-standing view” that s. 247(2) can generally apply to transactions between a foreign affiliate and another non-resident in computing the FA’s FAPI. Here, it would apply s. 247(2) to impute interest income to FS and, thus, FAPI to CanCo.

CRA went on to find that this application of s. 247(2) to generate imputed interest to FS did not preclude imputing a s. 80.4(2) benefit to FB. In its view, the s. 80.4(2) benefit would be deemed by s. 15(9) to be a benefit conferred on “a” shareholder (FB), with s. 214(3)(a) deeming this benefit to be paid “to the taxpayer [FB] as a dividend from a corporation resident in Canada.” Thus, in addition to generating FAPI, the interest-free benefit would be subject Part XIII tax, which FS would be required to withhold and remit. As in 2015-0622751I7 , there is no mention of Oceanspan or principles of territoriality.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 214 - Subsection 214(3) - Paragraph 214(3)(a) non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer generates a deemed dividend to the sister under ss. 80.4(2) and 214(3)(a) – plus FAPI to CFA 348
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2) - Paragraph 247(2)(a) a non-interest-bearing loan from a CFA to a NR sister of the Canadian taxpayer would generate imputed interest and FAPI to CFA, plus s. 80.4(2) application to sister 199

16 August 2017 Internal T.I. 2015-0622751I7 - Part XIII Tax on Benefit to Non-resident

extra-territorial application of s. 80.4(2)

A foreign subsidiary of Canco (Opco) in turn wholly-owned a non-resident “Finco,” which made an interest-free loan to a non-resident sister of Canco (Foreign Sub), that was repaid within two years. As the loan was not exempted under the inter-foreign affiliate exemption in s. 80.4(8), the deemed interest-free benefit imputed under s. 80.4(2) was, in turn, deemed by s. 15(9) to be a benefit conferred on “a” shareholder, which CRA interpreted as being Foreign Sub. S. 214(3)(a) then deemed this benefit to be paid “to the taxpayer as a dividend from a corporation resident in Canada.” CRA considered Foreign Sub to be the “taxpayer” and effectively treated Finco as the deemed corporation resident in Canada, so that Finco was liable under s. 215(1) for failure to “withhold” and remit Part XIII tax on the imputed benefit.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(9) s. 15(9) applies to interest-free loan between two foreign affiliates 285
Tax Topics - Income Tax Act - Section 160 - Subsection 160(1) use of s. 160 to collect s. 15(9) liability of indirect FA on dividends paid to Canco 275
Tax Topics - Income Tax Act - Section 215 - Subsection 215(1) CFA liable for failure to "withhold" and remit Pt XIII tax on interest-free benefit on loan to NR sister of its Cdn grandparent 124
Tax Topics - Income Tax Act - Section 227.1 - Subsection 227.1(1) s. 227.1 liability can extend to NR directors of a CFA 176
Tax Topics - Income Tax Act - Section 214 - Subsection 214(3) - Paragraph 214(3)(a) benefit from interest free loan by CFA to Canco sister deemed to be a dividend subject to Pt XIII tax 168

15 February 1994 External T.I. 9330465 - MORTGAGE INTEREST SUBSIDIES

Where mortgage interest subsidies are provided by an employer to employee/shareholders in their capacity of shareholders in respect of loans received by them from third parties, s. 80.4(2) will not apply because the loans were received from an unaffiliated corporation. Accordingly, the subsidy will be included in each individual's income under s. 15(1), and the employer will not be entitled to deduct the amount of the subsidy in computing its income.

5 February 1993 T.I. (Tax Window, No. 28, p. 12, ¶2407)

S.80.4(2) does not apply to an interest-free loan made by a corporation to its parent company or a corporation connected to its parent where both corporations are resident in Canada.

October 1992 Central Region Rulings Directorate Tax Seminar, Q. H (May 1993 Access Letter, p. 230)

RC is not aware of any situations where the application of s. 80.4 to loans between non-residents should be considered to produce an inappropriate result.

84 C.R. - Q.84

Trade accounts receivable from a non-resident parent which arose in the ordinary course of business which are subject to payment terms appropriate to the particular industry and which are in fact paid on such terms, are neither loans received nor debts incurred by virtue of the shareholding.

Subsection 80.4(3) - Where ss. (1) and (2) do not apply


Marchand v. Canada, 97 DTC 5272 (FCA)

S.80.4(3) did not permit the market rate of interest on a portion of the taxpayer's loan from his employer to be blended with the rates paid by him on other portions of the loan subject to a different rate of interest, so as to reduce the benefit under s. 80.4(1).

Administrative Policy

19 December 2001 Internal T.I. 2001-0109417 - TAXABLE BENEFITS

Where employees of Company A receive housing loans from the subsidiary of Company A at full interest rates, and Company A pays some of the employees a monthly interest-rate subsidy, the subsidy will not be subject to the application of s. 80.4(1) (because the interest rate is not lower than the arm's-length rate. The subsidy instead will be included in income under s. 6(1)(a) (whose scope is confirmed by s. 6(23)).

Locations of other summaries Wordcount
Tax Topics - General Concepts - Effective Date corporate revival has retroactive effect 42
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Disposition 42

Paragraph 80.4(3)(b)

See Also

Quigley v. The Queen, 96 DTC 1057, [1996] 1 CTC 2378 (TCC)

"included" means reported/assessed

The taxpayer argued that no imputed interest was required to be included in his income under s. 80.4(2) respecting shareholder advances because, under s. 80.4(3)(b), the amount of those advances had previously been required to be included in his income for a statute-barred year (although no such inclusion had been reported by him or assessed by the Minister). In rejecting this submission, Bowman TCJ stated (at pp. 1060-1061):

Just because subsection 15(2) provides that an amount "shall be included" in computing income, it does not follow that is "was included". Whether something was or was not included is purely a question of fact. Whether an amount is "required to be included" – words used, for example in subsection 104(12), or subsection 144(7) – is a question of law. The distinction between the two phrases is recognized throughout the Act. A good example of this is found in paragraph 20(1)(j), which permits a deduction when a shareholder's loan that was previously included in income under subsection 15(2) is repaid. Since 1983 the paragraph has read in part, as follows:

Such part of a loan or indebtedness repaid by the taxpayer in the year as was by virtue of subsection 15(2) included in computing his income for a preceding taxation year.

Prior to 1983 the relevant portion of the phrase read "such part of any loan repaid by the tax payer as was by subsection 15(2) required to be included… ."

Words and Phrases

Administrative Policy

6 April 2018 External T.I. 2018-0738871E5 F - Shareholder

previous s. 80.4(2) inclusion is reversed when loan is included under s. 15(2)

A shareholder (Taxpayer A) who received a loan from a corporation in 2017, did not repay the loan but wished to correct the situation at the beginning of 2019. CRA stated:

Taxpayer A could ask the CRA to correct the taxpayer’s income tax return for 2017 to include in the taxpayer’s income the amount of the loan or debt under subsection 15(2). Moreover, if Taxpayer A had included an amount in the taxpayer’s income by virtue of subsection 80.4(2), that amount would be backed out from the income of Taxpayer A, as subsection 15(2) takes precedence over section 80.4 under paragraph 80.4(3)(b).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.6) s. 15(2) held in suspense until time period passes/s. 80.4(2) inclusion until s. 15(2) inclusion reverses such inclusion 181

7 June 2011 Internal T.I. 2011-0397921I7 F - Financement inter-sociétés

s. 80.4 would not apply to a s. 15(2) loan if it is not repaid

Canco makes a loan to a partnership that is wholly-owned by an indirect U.S. parent of Canco (the general partner) and another non-resident partner within the group and whose business it is to make loans to group entities. That loan was subsequently repaid. How do ss. 15(2) and 80.4(2) interact? CRA stated:

[P]aragraph 80.4(3)(b) provides that subsection 80.4(2) does not apply if the loan or debt is included in the debtor's income under another provision of Part I … . That would be the case if the loan or debt had already been included in the taxpayer's income under subsection 15(2). However, an assessment under subsection 15(2) is not precluded even if the taxpayer has voluntarily declared a benefit under section 80.4, as subsection 15(2) has priority over section 80.4, as stated in paragraph 10 of … IT-421R2 … .

In this case, if it should be the case that you include the loan in the taxpayer's income by virtue of subsection 15(2), then section 80.4 would not apply unless the loan is subject to repayment by virtue of subsection 227(6.1).

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2.1) notwithstanding Gillette, a connected “person” may include a partnership 172
Tax Topics - Income Tax Act - Section 227 - Subsection 227(6.1) refund of withholding tax on repayment of loan 193

Subsection 80.4(4) - Interest on loans for home purchase or relocation

Administrative Policy

4 April 1995 External T.I. 9432435 - LOW INTEREST LOANS

Where a loan has been advanced in instalments, s. 80.4(4) will apply to each advance.