The Canada Revenue Agency prescribed rate will remain unchanged at 5 per cent for the fourth quarter of 2023 (for the period from October 1st through December 31st). After increasing steadily in the wake of the COVID-19 pandemic, the rate has remained static for several consecutive quarters. The prescribed rate is based on the three-month average of Government of Canada Treasury bill yields.
Used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans, the prescribed rate is also the interest rate applied to outstanding balances owed to the CRA and by the CRA to individuals and corporations.
Most other CRA interest rates for the fourth quarter of 2023 will also remain unchanged, including:
- The rate on overdue taxes, CPP contributions and EI premiums: 9 per cent
- The rate on non-corporate taxpayer overpayments: 7 per cent
- The rate on corporate taxpayer overpayments: 5 per cent
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 8.99 per cent (which increases from 8.44 per cent in the previous quarter)
As noted in earlier blogs, the interest on outstanding debts to the CRA can compound rapidly as the prescribed rate continues to hover at historically high levels. A best practice is to pay tax or other balances as quickly as possible to avoid both financial and compliance consequences.
In a higher interest rate environment, a significant outstanding balance to CRA represents an added corporate financial burden that’s usually best avoided.
Armando Iannuzzi, Co-Managing Partner
For tax planning assistance and to discuss the impact that the prescribed rate could have on your personal or corporate financial situation, contact a member of our team.