CRA raises prescribed interest rate to 2%

It will now be more expensive to loan money to family members for investment purposes.

CRA has confirmed the prescribed annual interest rate will rise to 2%. The rate had been at its lowest, 1%, since April 2009.

Read: Lock in family loans before rates rise

If clients want to take advantage of the 1% rate, they can do so until Monday, September 30. The prescribed rate stays in place for the life of the loan. Make sure they draw up written agreements outlining repayment terms as well as the interest rate.

These latest rates will be in effect from October 1, 2013 to December 31, 2013. All Q4 interest rates have increased by 1% since last quarter, except for the one for corporate taxpayers pertaining to interest on loans and indebtedness.

Read: Help your clients save on tax

See the details below:

The interest rate charged on overdue taxes, Canada Pension Plan contributions, and Employment Insurance premiums will be 6%.
The interest rate to be paid on corporate taxpayers overpayments will be 2%.
The interest rate to be paid on non-corporate taxpayers overpayments will be 4%.
The interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 2%.
The interest rate used to calculate corporate taxpayers loans or indebtedness will be 5.02%.

Further, the interest rates on overdue and overpaid remittances are as follows: 6% for overdue remittances of GST, HST, air traveler’s security charges and excise taxes, among other items; 2% for overpaid remittances of all of those items for corporate taxpayers; and 4% for overpaid remittances for all of those items for non-corporate taxpayers.

For more information, visit www.cra.gc.ca/interestrates.

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