As the second quarter of 2022 comes to an end, the Canada Revenue Agency (CRA) has announced increases to its prescribed annual interest rates to address the soaring rates of inflation across Canada.
The CRA has added almost 1% to each of its set prescribed rates:
| 2022 Second Quarter Prescribed Rate | 2022 Third Quarter Prescribed Rate | |
| Prescribed rate to be paid by one party to another in order to avoid a "deemed benefit" | 1% | 2% |
| The interest rate charged by the CRA on overdue taxes, Canada Pension Plan contributions, and employment insurance premiums | 5% | 6% |
| The interest rate to be paid to the CRA on corporate taxpayer overpayments | 1% | 2% |
| The interest rate to be paid to the CRA on non-corporate taxpayer overpayments | 3% | 4% |
| The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans | 1% | 2% |
| The interest rate for corporate taxpayers' pertinent loans or indebtedness | 4.38% | 5.2% |
These rates will be in effect from July 1, 2022 to September 30, 2022.
Notably, the prescribed rate set by the CRA for family income-splitting loans (i.e. the prescribed rate to be paid by one party to another in order to avoid a "deemed benefit") will double from the current rate of 1% to 2%. The prescribed rate for family income-splitting loans previously remained at 1% since the third quarter of 2020. This increase will affect the tax savings family members can achieve through the use of family income-splitting loans, which remains one of the last permitted uses for a family to take advantage of the lower marginal tax rate of a spouse or minor child through the use of a trust. Read our Interest Rate for Family Income-Splitting Loans to Double Next Quarter blog to learn more.
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