How to calculate Prescribed Interest Rates for Leasing Rules

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https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses/leasing-costs/prescribed-interest-rates.html

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How to calculate prescribed interest rates for leasing rules

The information on Prescribed Interest Rates for Leasing Rules has been replaced with instructions on how to calculate this rate. Below, you will find the instructions on how to calculate both the current monthly rate and the historical interest rates.

The prescribed interest rate for leasing rules must be calculated on a monthly basis.

The rate is based on the average yield of the monthly series of Government of Canada marketable bonds over 10 years (section 4302 of the Income Tax Regulations). The rate for the upcoming month uses the average yield from the second preceding month plus "1."

The average yield from the second preceding month is available on the last Wednesday of the current month, and the Bank of Canada's online rate calculator is updated by the following Monday.

Leasing costs

You can calculate the rate for the upcoming month using the following steps:

  1. Go to the Bank of Canada's Canadian Bond Yields: 10-Year Lookup
  2. Under "Specific Date or Range," select "Quick Date," and select "5 months" from the dropdown option for monthly series
  3. Under "Search Criteria," go to the "Government of Canada marketable bonds, average yield" table. Select the "Monthly" column's bond issue in the "over 10 years" row
  4. Click "Submit" at the bottom of the page
  5. Make sure the date is correct when the average yield for the second preceding month appears
  6. Take the average yield and add "1" to determine the leasing rate for the upcoming month

Example


Valérie wants to calculate the November 2018 prescribed interest rate for leasing rules. She finds the average yield for September 2018 (the second preceding month), which is 2.43, and adds "1." The prescribed interest rate for leasing rules for November 2018 is 3.43.


Note


To view interest rates for the past year, under "View data for the past," select "1 year."

To view interest rates for a specific date or time period, under "Specific Date or Range," select "Start (or single date)" instead of "Quick Date," and enter the date(s).


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Date modified:
2023-06-21