Prescribed Interest Rate to Double in July

Walter Harder

The prescribed interest rate is set quarterly based on the average return rate for three-month treasury bills for the first month of the previous quarter, raised to the next highest whole percentage point.  For April, the average return rate for three-month treasury bills topped 1% so the prescribed rate is set to 2% for the July to September timeframe.

The prescribed rate is the minimum rate that must be charged (and paid) on a spousal investment loan to ensure that attribution rules do not apply to the income on the borrowed funds.  It’s also the minimum rate that must be charged on an employee or shareholder loan to ensure that no taxable benefit arises.

CRA will pay interest to individual taxpayers at two percentage points higher than the prescribed rate so refund interest will be paid at 4% starting July 1.  If the taxpayer owes money, CRA charges the prescribed rate plus four percent so interest charged on outstanding balances will increase to 6% starting July 1.

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