• Service: Tax, International Executive Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 11/7/2013

Canada - Interest rates on family loans, interest-free loans (2014) 

November 7:  The Canada Revenue Agency (CRA) announced that the prescribed income tax interest rates for taxable benefits, overpaid taxes, and underpaid taxes for the first quarter of 2014 (1 January – 31 March) will all decrease by 1% as of 1 January 2014.

Family, interest-free loans

Taxpayers who did not lock in interest rates on family loans at 1% before October 1, 2013 have another chance to do so beginning 1 January 2014.

  • Family loans entered into after 30 September 2013 and before 1 January 2014 are subject to the 2% prescribed rate.
  • The prescribed rate that applies to taxable benefits for employees and shareholders from interest-free and low-interest loans will decrease to 1% (from 2%).

Underpayments, overpayments of tax

Concerning tax remittances:

  • The rate for penalties and interest on overdue income taxes will decrease to 5% (from 6%).
  • The prescribed rate for refunds of overpaid tax will decrease to 3% (from 4%) for non-corporate taxpayers and 1% (from 2%) for corporate taxpayers.

Read a November 2013 report prepared by the KPMG member firm in Canada: CRA Prescribed Rate Drops Back Down to 1% for Q1 of 2014

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