Can't believe it's already the end of the year!
Many small business owners are busy working on their holiday sales while others are thinking about their strategy in 2020.
It's also the time when entrepreneurs have to check whether they've paid prescribed rate loans from family members. The deadline is January 30, 2020.
A significant number of entrepreneurs have received an investment loan from their spouses and other family members. If they charge interest at the prescribed interest rate, any net income they earn on these loans will be taxed in your hands, not your family lenders'.
The prescribed rate is set by the CRA and is around 2% at the moment.
Another group of people should also be aware of the prescribed interest rate are employees who get loans from their employers.
These employees may have a taxable benefit if the loan rate is lower than the prescribed rate. For example, if a $1,000 loan was charged 1% while the prescribed rate was 4%, there would be a taxable benefit of $30 (3% of $10,000, the difference between the two).
For more info on how to pay the interest on prescribed interest rate loans, please consult with a tax expert or check CRA website HERE
StoneBanc.com provides free advice on getting small business loans.