Prescribed rate to remain unchanged for Q4 2025
The Canada Revenue Agency has confirmed that the prescribed rate for the fourth quarter of 2025 will hold steady at 3 per cent. The rate will be in effect from October 1st, 2025 to December 31st, 2025.
In Q3 2025, the rate reached its lowest level since the fourth quarter of 2022, after increasing to a post-pandemic high of 6 per cent in that year. During that quarter, taxpayers owing debts to the CRA felt the financial pinch of interest rates on outstanding balances that climbed to 10 per cent. The prescribed rate is based on the three-month average of Government of Canada Treasury bill yields.
As explained in our regular updates, the prescribed rate is “used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans.” These low-interest loans are often used as a tax-planning tool among business-owning and higher net-worth families.
Other CRA interest rates for Q4 2025 include the following:
- The rate on overdue taxes, CPP contributions and EI premiums: 7 per cent (unchanged from Q3 2025)
- The rate on non-corporate taxpayer overpayments: 5 per cent (unchanged from Q3 2025)
- The rate on corporate taxpayer overpayments: 3 per cent (unchanged from Q3 2025)
- The rate used to calculate taxable benefits for employees and shareholders for interest-free and low-interest loans: 3 per cent (unchanged from Q3 2025)
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 6.69 per cent (up slightly from 6.62 per cent in Q3 2025)
A lower prescribed rate is always welcomed by taxpayers, especially those who owe money to the CRA. Decreased rates provide additional tax planning flexibility and can impact important strategic planning decisions over short-, medium- and longer-term horizons. With the Bank of Canada recently taking a wait-and-see approach in the face of ongoing economic uncertainty and signs that inflation could remain largely in check in the near term, the direction the Bank will take its policy rate is a question mark. The next rate decision is due later in September.
Whether the rate holds steady or not, the accounting advice is the same: avoid any outstanding tax balances owed to Ottawa and take steps to avoid interest or non-compliance penalties. These are entirely avoidable charges that can have a significant negative impact on your corporate or personal finances.
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.
