What Are Prescribed Interest Rates?
Prescribed interest rates are set quarterly by the CRA and affect:
- Interest charged on overdue taxes, CPP, and EI contributions;
- Interest paid on overpayments or refunds to individuals or corporations;
- Benefits calculation related to interest-free or low-interest loans from an employer or shareholder. (canada.ca)
Rates for July 1, 2026 to September 30, 2026
| Type | Interest Rate |
|---|---|
| Overdue taxes, CPP, EI | 7% annually (canada.ca) |
| Overpaid amounts (corporate) | 3% (canada.ca) |
| Overpaid amounts (non-corporate individuals) | 5% (canada.ca) |
| Taxable benefits from low/interest-free loans | 3% (canada.ca) |
| Corporate loans/indebtedness (pertinent loans) | 6.30% (canada.ca) |
Why These Matter
- If you owe CRA, this rate affects how much your debt grows.
- If CRA owes you, the rate determines how much additional refund you’ll get.
- For employers providing loans to employees, if the interest rate charged is below prescribed, you may have to include taxable benefits (using prescribed rate) in the employee’s income. Same for shareholders. |
Example Scenario
A corporation has an overpayment of $50,000 due in Q3 2026. The preset rate for corporate overpayments is 3%, so CRA owes $375 annually (or roughly $31.25 per month) in interest to the corporation. If the same overpayment were held by an individual taxpayer, the amount would be 5%, or approximately $2,500 annually.
Planning Tips
- Pay tax owing as soon as possible to avoid compounding at 7% on overdue amounts.
- When considering employer loans or shareholder advances, make sure terms align with or exceed the 3% prescribed rate to avoid tax-benefit adjustments. |
- If expecting an overpayment or refund, ensure your address and bank info are up to date with CRA to avoid delays that could reduce interest paid out.
Summary
Interest rates in tax change regularly. These prescribed rates for Q3 2026 show significant cost for delays, so it’s beneficial to stay on top of your filing and payments. Having accurate expectations helps avoid surprises when CRA applies these rates to your situation.