What interest does the CRA charge on a late payment, and what does it pay on a refund?

What the prescribed interest rates are

The Canada Revenue Agency (the CRA, the federal department that collects tax) resets its interest rates every calendar quarter, i.e. the three months starting January 1, April 1, July 1 and October 1, and four of them are the ones an owner meets. One is charged on money you owe the CRA, two are paid on money the CRA owes you, and the fourth prices the benefit of a cheap loan from your own corporation. The Income Tax Act calls each of them a prescribed rate, because a regulation prescribes how they are worked out. Each quarterly CRA page also carries a fifth income-tax rate, for a corporation’s pertinent loans or indebtedness, i.e. certain amounts a non-resident corporation owes a Canadian one under subsection 17.1(1), and this page leaves it out.

The CRA publishes each quarter’s rates on its prescribed interest rates page a few weeks before the quarter starts. The pages for Q1 2026 to Q4 2026 carry dates of November 19, 2025, February 24, 2026, May 26, 2026 and August 28, 2026, each between four and seven weeks ahead of its quarter. As of September 23, 2026, the latest quarter the CRA had published was Q4 2026, and the quarter after it isn’t stated on this page until the CRA publishes it, because a rate this page doesn’t carry isn’t a rate it will guess at.

Which rate applies to which balance

The rate charged on overdue amounts, 7% for July 1 to September 30, 2026, applies to income tax paid after your balance-due day, to instalments paid late or short, and, as the CRA’s own wording has it, to Canada Pension Plan contributions and employment insurance premiums remitted late. The same quarterly pages carry a second table for other taxes, and in every quarter this page carries its GST and HST rows show the same rate as income tax on overdue remittances, and the same two rates on overpaid ones.

The rate paid on overpayments depends on who is owed the money. A corporation waiting for a refund is paid the corporate rate, 3% for July 1 to September 30, 2026. An individual, which is what you are on your personal return, is paid the non-corporate rate, 5% for the same quarter. Both are lower than what the CRA charges, so a balance you’ve overpaid into the wrong account earns you less than the same balance left unpaid costs you.

The fourth rate, 3% for July 1 to September 30, 2026, is the one the shareholder-loan rules use. Where you, or someone connected with you, borrow from your corporation because you are a shareholder, subsection 80.4(2) of the Income Tax Act treats you as having received a taxable benefit equal to interest at the prescribed rate on the balance for the days it was outstanding, less any interest you actually paid the corporation no later than 30 days after the end of the year. Subsection 80.4(1) does the same for a loan you receive because of your employment. Neither applies to an amount already added to your income, which is what happens to a shareholder loan left unpaid too long.

How the CRA sets the rates each quarter

Section 4301 of the Income Tax Regulations sets all four from one base. The base is the average yield on three-month Government of Canada Treasury bills sold at auction in the first month of the previous quarter, rounded up to the next whole percentage point where it isn’t already whole. The rate charged on overdue amounts is that base plus four points. The rate paid to a corporation on an overpayment is the base with nothing added, and the rate paid to anyone else is the base plus two points. Every other place the Act refers to a prescribed rate, including the loan benefit, uses the base alone, with two exceptions this page doesn’t carry: a pertinent loan or indebtedness under subsection 17.1(1) takes the same Treasury bill average to two decimals, not rounded up, plus four points, and section 4302 prices the leasing election in paragraph 16.1(1)(d) off long-term Government of Canada bond yields instead.

The formula is why the four rates always sit four, zero, two and zero points above the same number, and why the CRA can publish a quarter’s rates a few weeks before it starts: the auctions that set them have already happened. Every quarter this page carries fits the pattern at the same base, 3%, giving 7%, 3%, 5% and 3%. Nothing on this page carries that formula forward to a quarter the CRA hasn’t published.

How the interest is worked out

Interest on tax paid late runs from the day after your balance-due day until the day the CRA receives the money, under subsection 161(1) of the Income Tax Act, and interest on a late or short instalment runs from the instalment’s own due date under subsection 161(2). Subsection 248(11) compounds both daily, along with the refund interest the CRA pays, which means each day’s interest is added to the balance and the next day’s interest is worked out on the larger amount.

The calculator above applies one 365th of the annual rate for each day and compounds it, which is what daily compounding at an annual rate means in arithmetic. Over a short stretch the compounding doesn’t add much, e.g. well under a dollar on the example below. What makes the charge large is the number of days, not the compounding, which is why a balance-due day missed by a few weeks costs a fraction of the annual rate and a balance carried for a year costs slightly more than the whole of it.

A worked example

The four rates for each published quarter

Read across for the quarter your balance sat in. The CRA published every row below; the row for Q3 2026 is the one in effect on September 23, 2026, and the quarter after Q4 2026 is not stated here until the CRA publishes it.