2.6 What are prescribed rates?
Harman Hayer
The prescribed rates are used to determine the interest on overdue taxes and penalties. The prescribed rate is also used to calculate interest on refunds (when the government owes you money) and to help calculate the amount of taxable benefits on items like interest-free or low-interest employee loans.
Which tax rates apply on late payments? What do the other prescribed rates apply to?
|
|
Late Tax | Refunds | Benefits | |
|---|---|---|---|---|
| 2022 Quarter |
[Reg. 4301(a)] |
[Reg. 4301(b)] |
[Reg. 4301(c)] |
|
|
|
|
Individuals | Corporations |
|
|
October – December |
7% |
5% |
3% |
3% |
|
July – September |
6% |
4% |
2% |
2% |
|
April – June |
5% |
3% |
1% |
1% |
|
January – March |
5% |
3% |
1% |
1% |
(prescribed rates are available in the FITAC under “Tax Rates and Tools”)
The “Late Tax” column indicates the prescribed rate of interest that the tax payer must pay on the overdue amounts owing to the CRA.
The “Refunds” column indicates the prescribed rate of interest that CRA must pay to on the overdue amounts owing to the tax payer.
The “Benefits” column shows the prescribed rate that is used when calculating relevant employee benefits (for example, employee loans).
Interactive Content
Author: Harman Hayer, March 2019
Interactive Content
Author: Siyuan Shen using the works of Harman Hayer, June 2019
References and Resources
- Income Tax Act, RSC 1985, c1, (5th Supp.) ss 4301(a), 4301(b), 4301(c)
- Article – “Prescribed Interest Rates” (Author: Government of Canada)
- Chartered Professional Accountants. (2022). The Chartered Professional Accountant Competency Map. Part 1: The CPA Competency Map: 6.4.1
“What are prescribed rates?” from Introductory Canadian Tax Copyright © 2021 by Harman Hayer is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.
