If, for example, a contracted loan was made to an employee at 2% on April 1, 2009. On that date, the CRA prescribed rate is 3% (or actually 1% because its an employee loan rate).

Since the loan contract rate is HIGHER than the CRA rate, there would be no benefit; correct? If the contract rate on the loan was 0.25% (for discussion purposes), then the benefit would be 0.75% on the outstanding loan amount (calculated as 1% CRA RATE less 0.25% LOAN RATE = 0.75% BENEFIT RATE).

With that said, if a loan was granted at a rate of 1%, since its the same as the 1% CRA RATE, then there would be no taxable benefits either?

Thanks again (sorry if I sound thick on this)

If I understand correctly, the current (as of Q2/2009) “prescribed rate” is 3%.

Would the “actual prescribed rate” be the interest rate of the actual employee loan (for example purposes, lets say 4% to keep numbers unique) or is it the 1% rate that CRA deems for “taxable benefits from employees and shareholders from interest-free and low-interest loans”?

Would the taxable benefit therefore be:

4% = original loan rate?
3% = prescribed rate per CRA?
1% = low interest rate for employees/shareholders
XX? = a calculated rate from above figures?

AND, if the original stated loan rate was say 0.5% (for discussion purposes), is the taxable benefit 0.5% (0.5% loan rate less 1% CRA rate)? or is it 2.5% (0.5% loan rate less 3% prescribed rate)

Thanks