Canada: Rates of interest for tax underpayments and overpayments, pension plan contribution limits

Canada: Rates of interest, pension plan contributions

The KPMG member firm in Canada reported on the following tax developments.

  • No changes to interest rates for tax underpayments, overpayments: The Canada Revenue Agency (CRA) will not change the prescribed income tax interest rates for taxable benefits, overpaid taxes, and underpaid taxes for the first quarter of 2021. Read a November 2020 report [PDF 261 KB]

  • Prescribed interest rate for pertinent loan or indebtedness (PLOIs): The prescribed interest rate for the first quarter of 2021 (that is, the rate used to determine the deemed interest income inclusion from a pertinent loan or indebtedness (PLOI)) is estimated to decrease slightly to 4.10% (from 4.18%) for the period 1 January 2021 to 31 March 2021. This rate is generally the average yield of 90-day Canadian Treasury bills sold during the first month of the preceding quarter (rounded to two decimal places) plus 4%. Read a November 2020 report

  • Canada pension plan (CPP) contribution limits: The CRA announced that the maximum “pensionable earnings” under the CPP contribution limits for 2021 will increase to $61,600* (from $58,700). In addition, the employee and employer contribution rates for 2021 are set to increase to 5.45% (up from 5.25%) and the self-employed contribution rate will increase to 10.9% (from 10.5%). Read a November 2020 report [PDF 268 KB]

  • Pension contribution limits for 2021: The CRA announced the 2021 contribution limits for money purchase registered pension plans (RPP), registered retirement savings plans (RRSP) and deferred profit sharing plans (DPSP). Read a November 2020 report [PDF 273 KB]

*$=Canadian dollar

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