The Canada Revenue Agency has announced that the prescribed rate for the third quarter of 2023 will hold steady for the first time in a year. The prescribed rate hovered at 1 per cent throughout most of the COVID-19 pandemic, then increased by a percentage point each quarter beginning in the third quarter of 2022.
The prescribed rate—which is used to calculate taxable benefits for shareholders and employees from interest-free and low-interest loans, along with amounts owed to the CRA and by the CRA to individuals and corporations—will remain at 5 per cent for the period from July 1st to September 30th, 2023.
Most other CRA interest rates for the third 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: 8.44 per cent (the only rate that will increase for the coming quarter, up from 8.4 per cent)
As we’ve reminded in past blogs, the prescribed rate has a significant impact on debt servicing costs when balances are owed to the CRA. At 5 per cent, interest on outstanding balances compounds quickly, which can result in an avoidable financial burden for individuals and corporations. Interest and penalties on outstanding tax debts only exacerbates the challenge.
Despite prescribed rate hikes stabilizing, the interest rate is still high by recent standards and reinforces the financial benefit (and compliance imperative) of paying tax debts in a timely manner.
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.