When Your Corporation Owns the Home You Live In

Can my corporation buy a house or condo for me to live in?

Usually, but check ownership and location before buying. Until January 1, 2027, the federal residential purchase ban can cover a privately held Canadian corporation if a non-Canadian directly or indirectly owns 10% or more of its equity value or votes, or controls it in fact. It applies to homes in census metropolitan areas and census agglomerations; exceptions include purchases for development. A breach can bring a fine of up to $10,000, a court-ordered sale and liability for participating officers or directors. If the company can buy, making its home available to you because you own shares can create a taxable shareholder benefit under section 15 of the Income Tax Act. The CRA specifically lists personal use of a corporation's house as a possible benefit.

Decide who will own, occupy and pay for the property before an offer or transfer is signed. A corporation also has its own financing, records, property taxes and eventual sale. Paying for a home with retained earnings does not remove the tax consequences of your personal use. If you are considering taking pay and buying personally instead, see Salary or dividends.

What shareholder benefit arises if I live there without paying enough rent?

Your taxable benefit is generally the value of the home's use, less what you pay the corporation for that use. The CRA audit manual usually starts with rent for a comparable property. The benefit is measured for the time the property was available to you; if the corporation bought it mainly for your personal use, days when you chose not to stay there do not necessarily reduce that period.

For a Canadian-resident shareholder, the benefit belongs on the personal return for the year it arose. The corporation generally reports it on a T4A without payroll withholding and cannot deduct it as a business expense; you handle income tax and any CPP contributions when filing (CRA: Shareholder benefits). For a non-resident shareholder, a benefit received because of share ownership is generally deemed a dividend subject to Part XIII tax. The corporation must remit the tax even without a cash payment and is liable if it fails to withhold. Employee housing follows different rules; whether you received it because of your job or your shares is a factual question.

Keep comparable rental listings or an independent rental opinion, the lease, payment records, occupancy dates and records showing why the corporation bought the property. Paying utilities or property tax is not the same as establishing the value of the housing benefit (CRA audit manual).

Does paying market rent always prevent a shareholder benefit?

No. Paying comparable market rent is important evidence, but the CRA says comparable rent may be inadequate when it does not provide a reasonable return on the property's cost or value. This can matter for an expensive home bought chiefly for the shareholder's use.

The CRA may instead examine what an unrelated tenant would have had to pay to induce the corporation to buy and hold that particular property. Its audit method considers a return on the property's cost or value, operating costs, possible appreciation, shareholder advances and the arrangement's history. That is a valuation, not a fixed rate or an automatic extra charge. A genuine lease on terms an unrelated tenant would accept, with actual rent paid, helps establish the facts but does not settle the valuation by itself (CRA audit manual).

What if my child uses the condo or my family uses a corporate cottage?

Family use can also create a shareholder benefit. If your child uses a company condo because you own shares, the benefit may be included in your income even if the child owns no shares. Section 15 generally treats a benefit to a non-arm's-length or affiliated individual as conferred on the shareholder, except to the extent its value is included in that individual's or another person's income.

A child living in a company condo and a family using a company cottage need the same review of who had the right to use it, who paid, and why the company acquired it. For a cottage bought mainly for family use, the CRA looks at the period it was available, not only the nights someone stayed. Indirect ownership through another corporation does not by itself remove the issue; the CRA describes an example where an indirect shareholder's free use of a corporate cottage was taxable under another benefit rule (CRA audit manual).

Can the corporation deduct mortgage interest, property costs and depreciation?

The corporation cannot assume that a family home produces deductible costs. Section 18 limits expenses to those incurred to earn business or property income, and section 20 ties interest deductions to an income earning use of the borrowed money. The CRA says a property acquired exclusively for shareholder use cannot enter a depreciation class, so the company cannot claim capital cost allowance on it (CRA audit manual).

Keep the loan agreement, proof of how borrowed money was used, invoices, rent receipts and a record of each type of use. A corporation that actually holds a property to rent to unrelated tenants raises a different question; see Holding and investment corporations.

Rent the corporation earns is generally taxable property income, not income eligible for the small business deduction. A Canadian-controlled private corporation's net investment income and taxable capital gains may also attract refundable tax and reduce a later small business limit. See How corporations are taxed.

Can I claim the principal residence exemption when the corporation owns the home?

Generally, no. Living in a corporation-owned home does not make it a home you own for the principal residence exemption. The Income Tax Act's principal residence definition requires ownership by the taxpayer and provides designation rules for an individual or qualifying personal trust, not an ordinary corporation. Shares in an ordinary corporation are not ownership of its house. If the corporation is only a bare trustee and you hold the rights to use and direct the sale of the home, CRA may treat you as its beneficial owner. A share acquired solely for the right to live in a co-operative housing unit can also qualify.

The corporation also cannot designate the house as your principal residence when it sells. If you own a home personally, the exemption for your own sale has separate occupancy, designation and reporting rules; see Principal residence exemption.

Can I sell my home to my corporation and keep the principal residence exemption?

Yes, for your gain up to the sale if the home qualifies and you designate the eligible years. The corporation's later gain is not covered. Selling your home to your corporation is a disposition even if you keep living in it. Establish fair market value and report the sale and designation on Schedule 3 and Form T2091(IND). If you owned it only briefly, check the property-flipping rule and its exceptions before assuming the exemption applies.

An inflated price can create a shareholder benefit. A below-market sale to a corporation you do not deal with at arm's length can cause you to be treated as receiving fair market value proceeds under section 69. The two sides can therefore have different tax results if the price is wrong. Obtain a current appraisal and record the actual consideration, including any assumed mortgage, note or shares.

An eligible transfer to a taxable Canadian corporation may permit a joint section 85 election using Form T2057, if its conditions are met, including share consideration (Income Tax Act, section 85). You and an authorized corporate officer sign Part 5. The election is due by the earlier of the parties' income tax return deadlines for the transfer year; late filing can incur a penalty (Form T2057). An election changes the transfer's income tax cost and proceeds; it does not preserve your principal residence exemption for the corporation's future gain or settle land transfer tax and GST/HST. Compare the election with a fair market value sale before signing.

What land transfer tax and GST/HST questions must I check?

Check the property's province, municipality, seller status and history before the corporation buys or receives it. Land transfer tax is provincial or local, so there is no single Canadian charge. In Ontario, a transfer to a corporation for shares, or from a corporation to a shareholder, uses the property's fair market value as taxable consideration under the Ontario Ministry of Finance guidance. A contribution of land to a corporation with no consideration can have a nil tax base; that does not apply to a transfer back to its shareholder. A mortgage, note or shares can count as consideration. For Ontario residential property, also check the Non-Resident Speculation Tax: a Canadian-incorporated company can owe it if foreign-controlled. Other provinces and municipalities have their own rules.

GST/HST depends on the property and transaction, not just whether the buyer is a corporation. A new or substantially renovated home is generally subject to GST/HST; a sale of previously occupied housing by someone who is not a builder is generally exempt, subject to conditions such as prior input tax credits (CRA: GST/HST and home construction; CRA: Residential real property sales). Check whether the corporation is a builder, whether the sale is taxable, and who must remit. A corporation buying a new home cannot claim the GST/HST new housing rebate or first-time home buyers' rebate because its shareholder or family lives there. A long-term residential lease is generally exempt from GST/HST, and the landlord generally cannot recover purchase tax through input tax credits; a qualifying rental may have a separate rebate. If the corporation builds, substantially renovates or buys a home still under construction, it can be a builder. Self-supply may apply when it first gives someone possession to live there under a lease, licence or similar arrangement. See GST/HST on residential property for rebates and self-supply rules.

What tax arises when the corporation later sells or transfers the home to me?

On a sale to an unrelated buyer, the corporation must report its gain. Whether it is a capital gain or business income usually depends on the facts, including why it bought the property (CRA: Tax effects of buying real estate to sell for a profit). A capital gain is generally taxed as investment income. If the corporation sells or transfers the home to you less than 365 consecutive days after acquiring it, the flipping rule generally makes any gain business income and any loss nil, unless a listed event applies. It cannot use your principal residence exemption. If the company legitimately claimed capital cost allowance while earning income, recapture may also arise. Money paid out to you after the sale has a separate personal tax treatment, depending on how it is paid.

On a transfer to you, use a current appraisal and examine both sides. A sale below fair market value can give you a shareholder benefit, while section 69 can deem fair market value proceeds to the corporation. Ontario's land transfer tax rule specifically addresses transfers from a corporation to its shareholder (Ontario Ministry of Finance). GST/HST must be checked again using the property's status at the later transfer (CRA: Residential real property sales). A low transfer price does not safely unwind the arrangement.

Example

Illustrative amounts in Canadian dollars. A corporation buys a condo for C$800,000 mainly so its shareholder can live there. Comparable condos rent for C$3,000 a month. The shareholder pays the corporation C$2,000 a month and has the condo available all year. On the comparable-rent method, the difference is C$1,000 a month, or C$12,000 for the year. The corporation reports the benefit, and the shareholder includes it in income.

The C$12,000 is only a starting estimate. If comparable rent does not give a reasonable return on this particular condo, the CRA may value the benefit differently. The corporation must separately test its rent income and expense deductions. When it sells, its own gain is not sheltered by the shareholder's principal residence exemption.

Different for you?

• You want to buy personally using money paid from the corporation: compare salary and dividends.
• You own the home personally and want to know which years qualify: see Principal residence exemption.
• The property will be rented to unrelated tenants: see Holding and investment corporations.
• You need a new-home, rental or sale rebate review: see GST/HST on residential property.
• You will move out of your own home and rent it rather than sell it: see Turning a home into a rental.
• A corporation already owns the home, a family member uses it, or a transfer is planned: gather the deed, appraisal, financing, lease, payments, occupancy dates, cost records and past tax returns for corporate tax review. If it owned a home at the end of 2022, 2023, and 2024, check whether it owes a past Underused Housing Tax return; a late corporate return carries a minimum penalty of $2,000. The benefit valuation, deductions and taxes on both transfers depend on those records.