CRA indicates that the capitalization of interest constituted its payment if there was a concurrent novation

CRA indicated that the capitalization of unpaid interest on a student loan would constitute the payment of such interest (so as to likely generate a credit under s. 118.62) if there was a concurrent novation of the loan by way of change of debt under the governing Quebec law – but that any such novated loan would be a new loan rather than qualifying as a loan made under the applicable Quebec post-secondary student assistance program. This latter comment likely signified that interest that accrued on any novated loan could not qualify for the credit when paid.

Neal Armstrong. Summaries of 29 September 2020 External T.I. 2018-0757501E5 F under s. 118.62 and General Concepts – Payment and Receipt.