Canada Revenue Agency prescribed rate drops to 4 per cent for Q1 2025
The Canada Revenue Agency prescribed rate will decrease to 4 per cent for the first quarter of 2025—the period from January 1st to March 31st , 2025—down from 5 per cent in Q4 2024.
The rate held steady for two straight quarters this year after climbing steadily in the wake of the COVID-19 pandemic as interest rates rose. The prescribed rate peaked at 6 per cent earlier in 2024, while the interest charged on debts to the CRA surged to 10 per cent. The prescribed rate is based on the three-month average of Government of Canada Treasury bill yields.
As noted in past blogs, the prescribed rate is “used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans.” The prescribed rate is the interest rate on any tax balances owed to the CRA or balances owed to individuals or corporations by the Agency.
Other CRA interest rates for Q1 2025 have also decreased from the previous quarter, including:
- The rate on overdue taxes, CPP contributions and EI premiums: 8 per cent (down from 9 per cent)
- The rate on non-corporate taxpayer overpayments: 6 per cent (down from 7 per cent)
- The rate on corporate taxpayer overpayments: 4 per cent (down from 5 per cent)
- The rate used to calculate taxable benefits for employees and shareholders for interest-free and low-interest loans: 4 per cent (down from 5 per cent)
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 7.78 (down from 8.53 per cent)
A moderating prescribed rate is a positive development for taxpayers and corporations. However, at 8 per cent, the interest rate on debts to the CRA remains substantial. Gone are the days of the 1 per cent rates charged on outstanding balances to the Agency that we saw between Q3 2020 and Q3 2022.
The tax advice remains the same: always prioritize the clearance of balances owed to the CRA to minimize the risk of compliance-related penalties and compounding debts.
Armando Iannuzzi, Co-Managing Partner
For tax planning assistance, or to discuss the prescribed rate’s impact on your personal or corporate financial situation, contact a member of our team.
