Weekly Tax Tips
Pay Interest on Employee Loans Before January 30th
Date: 24 Dec 2010
If you had a low-interest loan from your employer during any part of the year, you’re deemed to have received a taxable employment benefit. This is calculated as interest at the Canada Revenue Agency’s (CRA’s) prescribed rate for the period during which the loan was outstanding. The amount of the benefit is reduced by any interest you actually paid on the loan. However, the interest must be paid within 30 days of the end of the calendar year.
Note that if you have received a loan by virtue of your shareholdings rather than employment, the amount of the loan will be included in your income, even where interest is charged at the prescribed rate. However, an exception to this rule applies if the loan is repaid by the end of the taxation year of the lender following the taxation year in which the loan was received, in which case the loan balance will not be included in your income.
This tax tip is a publication of BDO Canada LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. The information in this tax tip is current as of 24 Dec 2010.
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