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The current CRA interest rate used to calculate taxable benefits for employees and shareholders from interest-free and low-interest loans will be 1% for the second quarter of 2010. These rates are calculated quarterly according to applicable legislation. I'm wondering if anyone knows what this legislation is? Do you know what rate they are linked to? For instance if Bank of Canada raises rates in June by 0.25%, would that trigger an increase in this rate to 1.25%?
 

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If you really need to know, ask CRA. The Act has 2843 pages, and the Regulations 1340 pages, and I'm not sure the interest rate is prescribed in either one and not some other federal legislation.
 

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In the Regulations:



4301. Subject to section 4302, for the purposes of

(a) every provision of the Act that requires interest at a prescribed rate to be paid to the Receiver General, the prescribed rate in effect during any particular quarter is the total of

(i) the rate that is the simple arithmetic mean, expressed as a percentage per year and rounded to the next higher whole percentage where the mean is not a whole percentage, of all amounts each of which is the average equivalent yield, expressed as a percentage per year, of Government of Canada Treasury Bills that mature approximately three months after their date of issue and that are sold at auctions of Government of Canada Treasury Bills during the first month of the quarter preceding the particular quarter, and

(ii) 4 per cent;

(b) every provision of the Act that requires interest at a prescribed rate to be paid or applied on an amount payable by the Minister to a taxpayer, the prescribed rate in effect during any particular quarter is the total of

(i) the rate determined under subparagraph (a)(i) in respect of the particular quarter, and

(ii) 2 per cent; and

(c) every other provision of the Act in which reference is made to a prescribed rate of interest or to interest at a prescribed rate, the prescribed rate in effect during any particular quarter is the rate determined under subparagraph (a)(i) in respect of the particular quarter.
 
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