Canada Revenue Agency prescribed rate holds steady for Q1 2026
The Canada Revenue Agency prescribed rate for the first quarter of 2026 will remain at 3 per cent. The rate will be in effect from January 1st to March 31st, 2026.
This will mark the third consecutive quarter that the prescribed rate has held steady. As noted in our ongoing updates, the prescribed rate is “used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans.” Higher net-worth families and business owners often use low-interest loans as a tax-planning tool.
The prescribed rate had increased to a peak of 6 per cent after the pandemic, with interest rates on outstanding debts to the CRA reaching 10 per cent. The rate—based on the three-month average of Government of Canada Treasury bill yields—has since moderated.
Other CRA interest rates for Q1 2026 include the following:
- The rate on overdue taxes, CPP contributions and EI premiums: 7 per cent (unchanged from Q4 2025)
- The rate on non-corporate taxpayer overpayments: 5 per cent (unchanged from Q4 2025)
- The rate on corporate taxpayer overpayments: 3 per cent (unchanged from Q4 2025)
- The rate used to calculate taxable benefits for employees and shareholders for interest-free and low-interest loans: 3 per cent (unchanged from Q4 2025)
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 6.36 per cent (down from 6.69 per cent in Q4 2025)
Lower prescribed rates provide tax planning flexibility and can influence short-, medium- and long-term strategic planning decisions. They also ease pressure on taxpayers who have outstanding balances with the CRA. But as a general best practice, paying off debts to Ottawa in a timely fashion is always recommended. Doing so helps to avoid interest charges and non-compliance penalties, while mitigating avoidable corporate or personal financial risk.
Armando Iannuzzi, Co-Managing Partner
For tax planning assistance, or to discuss the prescribed rate’s impact on your financial situation, contact a member of our team.
