The Canada Revenue Agency will charge 7 per cent annual interest on overdue taxes from Oct. 1 to Dec. 31, 2026, and will pay 5 per cent on refunds owed to individuals and other non-corporate taxpayers, according to the agency’s fourth-quarter prescribed interest rate announcement.
The CRA sets the rates every quarter. For the October to December period, it also listed 3 per cent on corporate overpayments and 3 per cent on low-interest loans from employers or corporations to employees and shareholders, according to the CRA’s published rate table.
The same rates apply to GST/HST, excise taxes and other amounts owed to or by the agency, the CRA says.
The core “prescribed rate” used for family loans stays at 3 per cent, according to trade publication Advisor.ca. That is the sixth straight quarter at that level, and the lowest since the fourth quarter of 2022, the outlet reported. The CRA bases the rate on the average yield of three-month federal Treasury bills in the first month of the previous quarter, rounded up to the next full percentage point.
Corporate “pertinent loans” are set at 6.29 per cent, slightly down from 6.3 per cent, according to Advisor.ca.
What the 7 per cent means in real dollars
For most people, the number that matters is the one on the debit side. The overdue rate sits four percentage points above the prescribed rate, and the CRA compounds interest daily, which means a balance grows a little faster than a simple 7 per cent calculation suggests. As a rough illustration only, $5,000 left unpaid for a full year would accrue a bit more than $350 in interest, before any penalties.
That is well above what most high-interest savings accounts pay. Anyone who owes the CRA and has savings parked elsewhere may come out ahead by paying the tax bill first, because the interest they avoid is likely higher than the interest they earn. This is general information, not personal financial advice, and people with complex situations should talk to an accountant.
The flip side is smaller. The 5 per cent paid on refunds is lower than the 7 per cent charged on debts, a gap that has been built into the system for years. It means that overpaying tax through the year is a poor way to save, since the CRA pays less on your money than it charges when you owe.
Why the 3 per cent rate matters to families
The prescribed rate is also the benchmark for a well-known income-splitting strategy. According to Advisor.ca, a higher-earning spouse or partner can lend money to a lower-income family member or a family trust at the prescribed rate, and the investment income is then taxed in the lower earner’s hands. “The lower the prescribed rate, the greater the tax-planning opportunity,” the outlet wrote.
Because the loan interest rate is locked in when the loan is made, people who set one up at 3 per cent can keep that rate even if the prescribed rate rises later. Those loans have strict rules, including that interest must actually be paid by Jan. 30 each year, so professional advice is important before trying one.
What to watch next
The next quarterly announcement will cover January to March 2027. Because the CRA ties the rate to Treasury bill yields, any move in the Bank of Canada’s policy rate could eventually show up in it. The central bank’s next decision is scheduled for Oct. 28.
Anyone with an unpaid balance can check what they owe through their CRA My Account online, and can set up a payment arrangement if they cannot pay in full.
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Via Advisor.ca and the Canada Revenue Agency. Original sources: Advisor.ca and CRA.
