Prescribed rate holds steady for Q2 2025
The Canada Revenue Agency recently announced the prescribed rate for the second quarter of 2025—the period from April 1st, 2025 to June 30, 2025. The rate, which is based on the three-month average of Government of Canada Treasury bill yields, will remain unchanged at 4 per cent for the second straight quarter.
As outlined in our regular updates, 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. It is “used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans.”
The prescribed rate has largely stabilized after rising sharply in the wake of the COVID-19 pandemic, peaking at 6 per cent in 2024. The interest rate on debts owed to the CRA reached a high of 10 per cent.
Other CRA interest rates for Q2 2025 include the following:
- The rate on overdue taxes, CPP contributions and EI premiums: 8 per cent (unchanged from Q1 2025)
- The rate on non-corporate taxpayer overpayments: 6 per cent (unchanged from Q1 2025)
- 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 (unchanged from Q1 2025)
- The rate for corporate taxpayers’ pertinent loans or indebtedness: 7.08 (down from 7.78 per cent)
How the prescribed rate trends in the coming months will depend on a number of economic factors, many driven by the nascent Canada-U.S. trade war. The threat of tariffs, potential inflation and even the risk of a recession in 2025 will have a significant impact on Bank of Canada rate decisions and Treasury bill yields.
As always, our recommendation is to immediately pay all balances owed to the CRA. Doing so helps to mitigate the risk of incurring non-compliance penalties and debt interest.
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.
