The Canada Revenue Agency prescribed rate stays at 3 percent for the fourth quarter of 2026, effective October 1 through December 31. This is the sixth consecutive quarter at that level, the longest run of stability since the rate first fell to 3 percent in the third quarter of 2025. The rate the CRA charges on overdue tax, Canada Pension Plan contributions and employment insurance premiums stays at 7 percent, four percentage points above the prescribed rate as always.
How the Prescribed Rate Actually Gets Set
Section 4301 of the Income Tax Regulations ties the prescribed rate to the average yield on Government of Canada three month Treasury bills auctioned in the first month of the preceding quarter, rounded up to the next whole percentage point. The auction yields for three month bills were 2.29 percent on July 14 and 2.29 percent on July 28, so the average of 2.29 rounded up to 3 percent for the fourth quarter. This calculation runs independently of the Bank of Canada overnight rate, and the two have moved apart before, most visibly through 2022 and 2023 when short term bill yields moved faster than the policy rate cycle.
The CRA prescribed rate is recalculated each quarter from short term Treasury bill auctions and runs independently of the Bank of Canada overnight rate shown for comparison.
Six Quarters of Certainty for Income Splitting
For clients who hold appreciated non-registered assets or run a corporation, a prescribed rate loan lets a higher income spouse or parent lend money to a lower income family member or a family trust at the CRA rate, currently 3 percent, with the resulting investment income taxed in the lower income hands rather than attributed back to the lender. The strategy works as long as the interest is actually paid each year by January 30 and the loan carries the CRA rate locked in at inception, not the rate at any later date. A loan set up this quarter locks in 3 percent for its life even if the prescribed rate rises later.
Six straight quarters at the same rate gives advisors an unusually wide and predictable planning window. A client weighing whether to set up a prescribed rate loan this year against waiting for a possibly lower rate next year has had, in practice, no reason to wait since the third quarter of 2025.
The Corporate Side of the Same Announcement
The same CRA release sets the rate for corporate taxpayer overpayments at 3 percent, non-corporate taxpayer overpayments at 5 percent, and the pertinent loan or indebtedness rate for cross-border corporate lending at 6.29 percent, down marginally from 6.30 percent in the third quarter. For incorporated business owner clients with cross-border related party loans, that small downward move is worth flagging even though it did not change the headline prescribed rate.