Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Author/Section ChiefDistrict OfficeResearch FileTaxpayer's FileReturn to Specialty Rulings, Room 300 Met.
19(1)
I am replying to your letter of February 27, 1989, concerning your company's Employee Reduced Rate Loans Program.
The relevant provision in the Income Tax Act relating to low-interest or interest-free loans or indebtedness received by a person by virtue of an office or employment specifically requires that the prescribed rate of interest be used in calculating any benefit received by an employee. The Income Tax Act does not provide for this benefit to be calculated on the basis of any other national rate of interest such as the base rate for mortgages as established by the Province of Saskatchewan.
Accordingly, any such benefit received by an employee of your company in the circumstances described in your letter must be computed on the basis of the formula in the Income Tax Act using the relevant prescribed rate of interest set out in the Income Tax Regulations.
I trust the foregoing explains the applicable income tax legislation in this matter.
Yours sincerely,
Otto Jelinek
Duncan Jones/mor(957-2104)/YS 9072014April 10, 1989
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