The Canada Revenue Agency (CRA) sets quarterly interest rates that apply to taxes, overpayments, and prescribed loans.
These rates directly affect individuals, families, and businesses across Canada, especially those dealing with tax debt, refunds, or income-splitting strategies.
What Are CRA Interest Rates?
CRA interest rates are official figures used to calculate interest on overdue taxes, overpayments, and certain types of loans.
The rates are updated every quarter based on the average yield of three-month Treasury bills.
Read More On CRA Taxes & Rates
They apply in five main ways:
- Interest on overdue taxes, CPP, and EI contributions: Charged when individuals or businesses owe money to the CRA.
- Interest on overpayments (refunds): Paid by the CRA when you’ve paid more tax than required.
- Prescribed interest rate: Used for family or inter-company loans under the Income Tax Act. It determines how much interest must be charged to avoid attribution of income.
- Corporate indebtedness rate: Used for certain international and corporate loan arrangements.
- Refund interest rates for corporations and individuals: Differ based on taxpayer type, with non-corporate taxpayers generally receiving higher rates.
CRA Interest Rates by Quarter in 2025
The CRA updates these rates every three months.
Below are the official and reported rates for each quarter of 2025, according to the Government of Canada and major financial publications such as Investment Executive and KRP LLP.
| Quarter (2025) | Overdue Taxes (Individuals & Corporations) | Overpayments – Non-Corporate | Overpayments – Corporate | Prescribed Rate (Loans) |
| Q1 (Jan–Mar) | 8% | 6% | 4% | 4% |
| Q2 (Apr–Jun) | 8% | 6% | 4% | 4% |
| Q3 (Jul–Sep) | 7% | 5% | 3% | 3% |
| Q4 (Oct–Dec) | 7% (projected) | 5% | 3% | 3% |
The prescribed rate dropped from 4% to 3% starting July 1, 2025, reflecting the Bank of Canada’s gradual interest rate easing.
While this decrease benefits taxpayers who use prescribed rate loans, the 7% overdue tax interest still remains higher than pre-2022 levels.
Why These Changes Matter
1. Impact on Tax Debt and Late Payments
If you owe taxes, the CRA applies the overdue interest rate daily, compounded every quarter. The small drop from 8% to 7% in Q3 means slightly lower interest costs on unpaid balances, but it’s still among the highest rates in recent years. Paying off balances before quarter-end can prevent compounding at new, higher rates.
2. Benefits for Refunds and Overpayments
When you overpay your taxes, the CRA compensates you using the applicable refund rate—6% for non-corporate taxpayers earlier in 2025, then 5% in Q3. This ensures you earn some interest on money the CRA holds, though the rate is always lower than what the CRA charges on overdue amounts.
3. Tax Planning with Prescribed Rate Loans
The prescribed rate is crucial for tax-saving strategies like spousal loans or family income splitting. For example, a higher-income spouse can lend money to a lower-income spouse at the CRA’s prescribed rate. The investment income generated from that loan is then taxed in the lower-income spouse’s hands instead of being attributed back to the lender.
The drop to 3% in July 2025 creates an opportunity to establish new prescribed rate loans at a lower interest rate. Once locked in, that 3% rate remains fixed for the lifetime of the loan—even if future rates rise.
4. Business and Corporate Implications
For corporations, the corporate indebtedness rate (about 6.6% in late 2025) affects loans between related companies or subsidiaries.
Businesses also use these rates to calculate interest on payroll remittances, GST/HST payments, and tax instalments.
How CRA Calculates These Rates
According to the Income Tax Regulations, CRA determines interest rates quarterly using the average yield of three-month Treasury bills for the first month of the previous quarter.
The rates are then rounded up to the nearest whole percentage.
This approach ensures CRA’s rates align with general market trends, though they tend to remain slightly higher to discourage tax deferral.
When Are These Rates Updated?
The CRA publishes updated interest rates about two weeks before the start of each quarter:
- January 1
- April 1
- July 1
- October 1
Each announcement appears on the official Government of Canada website under “Prescribed interest rates,” ensuring transparency and public access.
How to Use This Information
Taxpayers, financial advisors, and business owners can use CRA’s interest rate announcements to:
- Estimate costs for overdue payments or late filings
- Maximize tax refunds and plan for corporate overpayments
- Establish prescribed rate loans before rates rise
- Manage inter-company and family financial planning
Knowing when the rates change helps you make timely financial decisions, especially if you owe taxes or want to benefit from family income-splitting strategies.