A taxable benefit is essentially something that you receive from your corporation, which is not cash, but which has a cash value to you. For example, if your corporation were to pay your rent or your mortgage. Or if your corporation were to pay for your family vacation. Or more commonly, if your corporation were to provide you with use of a rental property at the lake from time to time, or provide you with use of a vehicle, of pay for your gym membership, personal phone, club memberships, etc.
Taxable benefits are called “taxable” benefits because these benefits that one may receive from their corporation, are taxable and have to be declared on one’s personal tax return.
While a taxpayer can get away with using the corporation’s truck and tools from time to time for personal home repair work (who will ever know), it is not so easy to get away with living full-time in a home owned by your corporation, without paying rent to the corporation.
At the end of the day, taxable benefits (at least the ones which could be traced and found out) should be declared on one’s tax return. They are another way in which people pay themselves through their corporation. Since this is an area frequently abused, auditors are trained to look for taxable benefits which they can use to justify reassessments.
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