Tax Tip - Pay interest on employee loans before January 30

January 03, 2019

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If you had a low-interest loan from your employer during any part of the 2018 calendar year, you’re deemed to have received a taxable employment benefit. This benefit is calculated as interest at the Canada Revenue Agency’s (CRA’s) prescribed rate for the period during which the loan was outstanding. (The CRA’s prescribed rate for the first quarter of 2018 was 1%. It was increased to 2% effective April 1, 2018, and remained at 2% for the balance of the year.) 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 in order to reduce the taxable benefit to be included in your income.

Note that if you have received a loan by virtue of your shareholdings, rather than your employment, different rules apply. Speak with a trusted BDO tax advisor today for personalized advice.

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 January 2, 2019.