For the fourth consecutive quarter, the Canada Revenue Agency prescribed rate has increased by a percentage point.
The rate used to calculate taxable benefits for shareholders and employees from interest-free and low-interest loans is now 5 per cent—up from 4 per cent in the first quarter of the year—for the period ending June 30th, 2023. The prescribed rate also applies to amounts owed to the Canada Revenue Agency and by the CRA to individuals and corporations.
Other interest rates that have increased for the second quarter of 2023 include:
- The rate on overdue taxes, CPP contributions and EI premiums: 9 per cent
- The rate on corporate taxpayer overpayments: 5 per cent
- The rate on non-corporate taxpayer overpayments: 7 per cent
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 8.4 per cent
As noted in a previous blog, the prescribed rate—which hovered as low as 1 per cent during the COVID-19 pandemic—has an outsized impact on tax-debt servicing costs. Individuals and corporations that allow outstanding CRA balances to compound can quickly face an avoidable financial predicament that’s further exacerbated by the interest and penalties applicable to non-payment of outstanding taxes.
Clearing these debts as quickly as possible is always a financial best practice—especially in a high interest rate environment.
Armando Iannuzzi, Co-Managing Partner
For tax planning assistance and to discuss the impact that the latest increase to the prescribed rate could have on your personal or corporate financial situation, contact a member of our team.