Does the CRA Charge Interest on Unpaid Tax in Canada, and Can It Be Waived?

You have filed your return, the notice of assessment shows a balance, and you cannot pay it all right now. Or you have been reassessed and the amount keeps growing. You want to know how interest is charged and whether any of it can be removed.

This article explains the basic rule on interest, how the current rate is set, what the CRA may cancel, and what to do while you wait. It is general information for Canada, not advice on your own file.

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

How CRA 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. In plain terms, the longer a balance sits, the more interest you owe on it.

The prescribed rate is not fixed. Rates are set quarterly, and the rate on overdue income tax for 1 October to 31 December 2026 is 7%. That figure applies only to that quarter and will change, so check the current quarter's rate when you work out what you owe.

How often the interest is compounded and how the exact dollar figure is calculated on your account is worth confirming with the CRA or an accountant, because it affects the total you will see on your statement.

Interest that can build up on a reassessment

An audit can end with no change, a reassessment owing more tax, or a refund. If you are reassessed and owe more tax, interest runs at the prescribed rate on the unpaid amount for as long as it is outstanding. The auditor can also estimate any amount owing before a notice is issued, which may help limit interest. How interest applies to your particular reassessment depends on your situation, so it is worth confirming with a lawyer or accountant.

Disputing an assessment does not stop interest. You can avoid paying personal tax amounts that are in dispute until an impartial review, but interest still accrues and undisputed amounts must be paid.

When the CRA may cancel or waive interest

Under the taxpayer relief provisions, the CRA may cancel or waive penalties and interest. 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.

Relief is not automatic. The CRA weighs 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 that accrued in the 10 calendar years before the year you make the request.

If you owe interest from many years ago, the look-back rule means waiting can cost you the chance to recover part of it.

What to do next

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

• Find your balance and the dates the amounts became due.
• Pay what you can, ideally the full amount, to limit ongoing interest.
• Write down the circumstances that caused the delay and collect supporting documents.
• Complete Form RC4288 or send a letter, including all circumstances in your first request.
• Consider speaking with a lawyer or accountant if the amounts are large or the reasons are complicated.

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 within 30 days of notice of the decision.

Frequently asked questions