The Canada Revenue Agency has confirmed its prescribed interest rates for the fourth calendar quarter of 2026 — October 1 through December 31. The headline number, the base prescribed rate, is holding at 3% for a sixth consecutive quarter. That sounds like a non-event, and for most businesses it is: nothing is changing. But the prescribed rate quietly touches more of a corporation's tax position than any single line item on a return — it sets what the CRA charges on overdue tax, what it pays on refunds, and what it treats as the minimum acceptable interest on a loan between a corporation and its shareholder or a family member. Because these rates are set under the Income Tax Regulations and published administratively every quarter, none of this needs new legislation to take effect; it is already in force for Q4 2026 the moment the quarter starts, and it applies identically to every business in Canada regardless of province.
The rates themselves
CRA publishes several different rates each quarter, all derived from the same base prescribed rate but applied differently depending on who owes whom:
- Overdue taxes, CPP contributions, and EI premiums: 7%. This is the rate the CRA charges on unpaid corporate or personal tax balances, unremitted source deductions, and late CPP or EI amounts. It is always the base prescribed rate plus 4 percentage points, compounded daily, and it is the number that matters most if a corporation is carrying an unpaid balance into year-end.
- Refund interest paid to individual (non-corporate) taxpayers: 5%. The base rate plus 2 points — what the CRA pays when it owes an individual money on an overpayment or refund.
- Refund interest paid to corporate taxpayers: 3%. Corporations receive refund interest at the plain base rate, with no added premium — two full points less than what an individual earns on the same kind of overpayment.
- Taxable benefit rate for interest-free or low-interest loans, and the prescribed rate for family income-splitting loans: 3%. This is the rate used to calculate the deemed interest benefit on loans from a corporation to an employee or shareholder, and the minimum interest rate a loan to a spouse or family trust must carry to keep future income and gains attributed to the higher-income lender rather than the borrower.
- Corporate pertinent loans or indebtedness (PLOI): 6.29%, a small step down from 6.30% in Q3 2026. This narrower rate applies to certain cross-border loans between a Canadian corporation and a non-resident shareholder that fall under the PLOI rules rather than the standard shareholder-loan regime.
Source: Canada Revenue Agency — Interest rates for the fourth calendar quarter, 2026.
Why the base rate hasn't moved since mid-2025
The prescribed rate is not set by discretion each quarter — it is calculated directly from the average yield on Government of Canada 90-day Treasury bills over the first month of the preceding quarter, rounded up to the next whole percentage point, per the formula in the Income Tax Regulations. Short-term T-bill yields have sat comfortably below the 3% threshold through 2026 as the Bank of Canada's policy rate has held in the mid-2% range, so the rounded prescribed rate has stayed flat at 3% since Q3 2025 — this is the sixth quarter running without a change. A business that set up a family loan or reviewed shareholder-loan interest at any point in the last year and a half has effectively been working against the same 3% floor the whole time.
Where this actually shows up on a corporation's books
Three practical situations for owner-managed businesses:
A late corporate tax instalment or balance. At 7%, compounding daily, a balance owing that sits unpaid through Q4 costs meaningfully more than it would at the base rate — and CRA arrears interest is not deductible for tax purposes, unlike interest on most business borrowing. If cash flow is tight going into year-end, financing the shortfall through a line of credit is very often cheaper, after-tax, than letting a CRA balance run.
A shareholder loan that hasn't been repaid within the one-year window. Section 15(2) of the Income Tax Act includes an unrepaid shareholder loan in the shareholder's income unless it is repaid within one year of the corporation's taxation year-end in which it was made — and separately, section 80.4 imputes a taxable benefit on any period the loan sat outstanding without the borrower paying at least the prescribed rate in interest, and actually paying it by January 30 of the following year. With the taxable-benefit rate at 3% for Q4, any shareholder loan carrying no interest, or interest below 3%, continues generating that benefit through year-end exactly as it has all year. Our shareholder loan rules guide covers the mechanics of both provisions in detail.
A family income-splitting loan. With the prescribed rate flat at 3% since Q3 2025, a loan set up at any point in that window locks in that 3% rate for its full term under the CRA's long-standing administrative position — the rate in effect when the loan is made continues to apply for as long as the loan is outstanding, even after the quarterly rate later moves. That makes the current quarter a reasonable, low-cost point to establish or top up a family loan for income-splitting purposes, since the borrower only needs to actually pay that 3% by January 30 each year to avoid attribution.
A practical checklist for Q4 2026
- Confirm any outstanding CRA balance is prioritized. At 7% non-deductible arrears interest, an unpaid instalment or reassessment balance is one of the more expensive forms of financing available to a business right now.
- Check shareholder loan interest is actually being paid, not just accrued. The section 80.4 benefit turns on interest being paid by January 30, 2027 for the 2026 benefit year — a journal entry alone does not satisfy the requirement.
- Revisit any family loan set up before the rate last changed. If a loan was established while the prescribed rate was higher, restructuring it now to reflect the current 3% floor may reduce the interest the borrower needs to pay to avoid attribution on future loans.
- Corporations expecting a refund should not assume individual-rate treatment. At 3% versus 5%, a corporate refund earns two points less interest than the equivalent personal refund — worth knowing if refund interest is being budgeted into year-end cash flow.
Key takeaways
- The CRA's base prescribed interest rate holds at 3% for Q4 2026 (October 1 – December 31) — the sixth consecutive quarter without a change.
- Overdue tax, CPP, and EI arrears remain at 7%, non-deductible, and compound daily.
- Refund interest is 5% for individuals but only 3% for corporations — a gap worth knowing if a corporate refund is expected.
- The 3% rate also governs shareholder-loan taxable benefits and family income-splitting loans, unchanged since Q3 2025.
- These rates apply identically across Alberta, BC, Ontario, and every other province — they are set federally under the Income Tax Regulations, not by any provincial authority.
If your corporation is carrying a CRA balance, has an outstanding shareholder loan approaching its one-year repayment deadline, or you're weighing whether now is the right time to set up a family income-splitting loan, RN Canada's corporate and personal tax team works with owner-managed businesses across Alberta, BC, and Ontario on exactly this kind of quarter-by-quarter tax administration.