Currently, the rate for penalties and interest on overdue income taxes is 5%. The prescribed rate for refunds of overpaid tax is 3% for non-corporate taxpayers (1% for corporate taxpayers), and the prescribed rate that applies to taxable benefits for employees and shareholders from interest-free and low-interest loans is 1%.
Prescribed rates for 2011 and 2012 are as follows:
As a result, taxpayers have at least until September 30, 2012 to lock in interest rates on family loans at 1% to secure future income splitting opportunities. The CRA prescribed interest rate will not rise until Q4 of 2012, at the earliest.
For more information, contact your KPMG adviser.