Q3 2026 Prescribed Interest Rates & Why They Matter
The CRA’s prescribed rates effective July 1 to September 30, 2026 are:
- 7% interest charged on overdue taxes, CPP contributions, and EI premiums.
- Refunds to corporate taxpayers: 3%, to non-corporate taxpayers: 5%.
- Employee/shareholder low-interest loans taxed at 3%; corporate debt or indebtedness: 6.30%. (canada.ca)
Compliance impact:
- Delaying payments or disputing assessments comes at a cost—at 7%, interest on overdue amounts compounds fast.
- Passive income, shareholder loans could be taxed if the interest falls below the prescribed rate.
Provincial Payroll Tax Updates
- British Columbia increased its lowest personal tax rate from 5.06% to 5.60% for 2026. Their “basic reduction” increased from $562 to $690. Payroll software now needs to apply prorated amounts for post-July 1 pay. (canada.ca)
- Newfoundland and Labrador updated its Basic Personal Amount (BPA) to $13,094, effective January 1, 2026. Employers must reflect this in source deductions. (canada.ca)
- Prince Edward Island introduced a new bracket above $200,000 taxable income at 20% for 2026, changing how high earners are taxed at source. (canada.ca)
Anti-Avoidance and RRSP/RRIF Rules (Existing / Ongoing)
Canada’s anti-avoidance rules impose special taxes on:
- Non-qualified or prohibited investments held within RRSPs or RRIFs.
- Advantages, including below-market loans or benefits, extensions of credit, debts.
- Procedures exist to request waivers or cancellations in certain cases. (canada.ca)
Practical compliance steps:
- Keep schedules and documentation for all RRSP/ RRIF investments; check if any investments could be non-qualified or prohibited.
- For shareholder or employee loans, ensure interest is at or above prescribed rate to avoid benefit inclusion.
Action Plan for Businesses & Tax Professionals
- Update payroll processing systems post-July 1, 2026 to reflect new provincial rates and amounts.
- Review any outstanding liabilities or slow-pay situations for individuals or corporations—interest could significantly increase tax owing.
- Audits should focus on share-holder/employee loan agreements and RRSP/ RRIF plan investment structures.
By staying ahead of these rates, businesses and individuals can mitigate unexpected tax hits and ensure all source deductions and credits are calculated correctly.