CRA Interest on Unpaid Tax: Rates and Whether It Can Be Waived in Canada

If you owe the CRA money, the balance does not stay the same. Interest is added for as long as the amount is unpaid, and it can make a modest debt grow noticeably. Many people also hear that the CRA can waive interest and wonder whether that applies to them.

This article explains how the rate is set, what can justify relief, how to ask, and what happens if the answer is no. It is general information about federal tax in Canada. Your own balance and options are worth confirming with the CRA, a lawyer or an accountant.

This article covers Canadian federal tax law, which applies in every province.

How interest on unpaid tax works

Interest on unpaid tax runs at the prescribed rate on the unpaid amount for as long as it is outstanding. The prescribed rate on overdue income tax for 1 October to 31 December 2026 is 7%. Rates are set quarterly, so the figure changes from one quarter to the next.

Because the rate changes, the amount you owe on a given day depends on how long the balance has been open and which quarters it covers. Whether interest compounds, and how often, is best confirmed on your CRA statement of account or with the CRA directly, since the exact calculation depends on your account.

When the CRA can cancel or waive interest

Under its taxpayer relief provisions, the CRA may cancel or waive penalties and interest. It is discretionary, so relief is not automatic. The circumstances that may justify relief fall into three groups.

• Extraordinary circumstances beyond your control, such as flood, fire, serious illness or a death in the immediate family
• Actions of the CRA, such as processing delays, incorrect information or undue delay in an audit, objection or appeal
• Inability to pay or financial hardship

The CRA also looks at your compliance history, whether you knowingly left a balance outstanding, whether you exercised reasonable care, and whether you acted quickly to fix the delay or omission.

Time limits for asking

A request for penalty relief generally must be made within 10 years of the end of the calendar year of the tax year. Interest relief covers only interest accrued in the 10 calendar years before the year the request is made.

That means waiting can cost you. Older interest may fall outside the window even if your reasons were good.

How to apply, and what happens while you wait

Complete Form RC4288 or send a letter. If you are claiming inability to pay, individuals also submit Form RC376 or a written statement of finances. You can submit through My Account, My Business Account or Represent a Client, or mail it. Include all the circumstances you rely on, with supporting documents, in the first request.

Interest keeps accruing while a request is pending, so paying in full stops further charges. Interest is refunded if relief is later granted. If relief is granted for inability to pay, interest is cancelled only up to the decision date.

If the answer is no, and what to do next

A relief decision has no right of objection or appeal. You can ask for a second administrative review by a different official, or apply to the Federal Court for judicial review. The Court can only refer the matter back to the Minister. Time limits for going to court are short enough that they are worth confirming with a lawyer as soon as you receive a decision.

• Find your current balance and the tax years it relates to
• List the reasons for the delay and gather documents that prove them, such as medical letters or CRA correspondence
• Decide whether you can pay some or all of the balance now to limit further interest
• Submit one complete request rather than several partial ones
• Keep proof of what you sent and when
• If you receive a refusal, speak to a lawyer or accountant promptly, because an application to the Federal Court for judicial review must be made within 30 days of notice of the decision, although the Court may extend that period

Frequently asked questions