The Canada Revenue Agency's prescribed interest rate holds at 3% for the third quarter of 2026, running from July 1 through September 30. It is the fifth consecutive quarter at that level, matching the rate that first applied a year ago after two quarters at 4%. For advisors running income splitting strategies through prescribed rate loans, that stability is the story, not any single number.
The rate on overdue taxes, Canada Pension Plan contributions and Employment Insurance premiums stays at 7%, four points above the base prescribed rate as it always is. The rate the CRA pays on non-corporate taxpayer overpayments holds at 5%, and the rate on corporate overpayments holds at 3%. One figure moved. The rate that applies to pertinent loans or indebtedness between a Canadian-controlled private corporation and a non-resident shareholder rose to 6.3% from 6.2%, a technical adjustment that touches a narrower group of clients than the headline number does.
The Section 74.5 Math at 3%
A prescribed rate loan lets a higher income spouse, common-law partner, or parent lend money to a lower income family member, or to a family trust for minor children, at the prescribed rate in effect when the loan is made. The borrower invests the funds, the investment income is taxed in their hands at their lower bracket, and the borrower pays the lender interest at the locked in rate by January 30 of the following year. Miss that date and the attribution rules pull the investment income back onto the lender's return for that year and every year after.
The rate that matters is the one in effect on the day the loan documentation is signed, not the rate in any later quarter. A loan set up this quarter locks in 3% for its full life, even if the prescribed rate climbs in a future quarter. On a $500,000 loan, that is $15,000 in required annual interest, against whatever the invested funds actually earn. The spread between that interest cost and the family's after tax investment return, multiplied by the gap between the two spouses' marginal rates, is the entire value of the strategy.
Six CRA rate categories apply this quarter, and five of them carry over unchanged from the second quarter.
Five of six CRA rate categories are unchanged from the second quarter. The corporate pertinent loan or indebtedness rate, which applies to loans between a CCPC and a non-resident shareholder, is the only rate that moved.
What Actually Moved This Quarter
The pertinent loan or indebtedness rules, sometimes shortened to PLOI, apply when a Canadian-controlled private corporation extends a loan to, or holds indebtedness from, a non-resident shareholder or a foreign affiliate. Left unmanaged, that kind of loan can trigger a deemed dividend under the shareholder loan rules. A PLOI election avoids the deemed dividend, but it requires the corporation to include an imputed interest amount in its income calculated at this specific rate, now 6.3% instead of 6.2%. The businesses affected are typically Canadian-controlled private corporations with a non-resident parent, sibling company, or shareholder somewhere in the structure, a materially smaller population than the general base of clients using prescribed rate loans for domestic income splitting.
The Window Question
The prescribed rate is calculated from the average yield on three month Government of Canada Treasury bills during the first month of the prior quarter, rounded up. The Government of Canada five-year bond yield closed June 30 at 3.02%, within striking distance of the 3% prescribed rate itself, an unusually tight alignment between the family loan rate and the government's own borrowing cost. If short-term yields move higher through July on the back of this week's economic data, the calculation feeding the fourth quarter announcement in September would reflect it. Clients weighing whether to set up a new prescribed rate loan are weighing that against a rate that has now held for five straight quarters, longer than any stretch since the current rate setting regime settled into its current pattern after 2022's rapid increases.