Highlights of Canada’s COVID-19 Economic Response Plan

Last updated October 14, 2020: Please note that tax policies are changing rapidly. We are updating this article as details are made available.

Now Including Ontario Programs: For your convenience, this article now includes Federal and Ontario programs. 

We have summarized the initiatives we believe to be most relevant to our clients. You can read about other items provided by the Ontario government on this link.

FOR BUSINESSES

A) Income Tax – Extension on filing and deferral on payment

• 2019 Balance Owing – Payment of income tax becoming due between March 18, 2020 and September 30, 2020 can be deferred until September 30, 2020.  No interest or penalties will accumulate on these amounts during this period.
• Instalments – Income tax instalments due between March 18, 2020 and September 30, 2020 can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.
• Tax filing due date – Corporate income tax filings due between March 18 to May 31, 2020 are now due June 1, 2020.
• Extension for practically all other income tax filings – Partnership returns, T3 trust returns, and NR4 returns have been extended to May 1. Practically all other income tax filings (e.g. T1135 and T1135 forms) that would normally be due between March 18 and June 29 have been are now due June 1. The extension does not apply to the filing of SRED returns.
• Objections – Any objections due between March 18 and June 29 have been extended until June 30, 2020.
• Audits – The Canada Revenue Agency (CRA) will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.
• Electronic signature – The CRA will allow tax preparers to accept EFILE authorization forms signed using an electronic signature.

B) Canada Emergency Wage Subsidy (CEWS) – 75% wage subsidy for qualifying businesses, not-for-profit organizations, and charities

October 9 Update – The government has extended CEWS until June 2021. The maximum baseline subsidiary will remain at 65% until December 19, 2020. The maximum was previously set to decline to 45% at an earlier date.

July 20 Update – The government completely redesigned CEWS (now referred to as CEWS 2.0) which applies for July 5 and onward. Please see our separate article on CEWS 2.0 here.

May 15 Update – The CEWS has been extended by 12 weeks to cover wages until August 29. The government also stated they will consult with stakeholders over the next month on potential adjustments to the CEWS including the 30% revenue decline threshold.

The following contains highlights of the CEWS while a more detailed explanation is available in our CEWS article here.

• 75% of wages paid starting March 15, up to a maximum of $58,700 per employee, will be eligible for the wage subsidy (up to a maximum of $847 per week per employee);
• The subsidy will apply to corporations, individuals, charities, NPOs, and partnerships consisting of the aforementioned (collectively “employers”).
• The employers will need to demonstrate that their revenue decreased by at least 15% for March or 30% for the following months.
• Once an employer qualifies for one period, they automatically qualify for the next period.
• Revenue can be calculated based on a cash or accrual basis for purposes of the CEWS but must exclude revenue from non-arm’s length persons (i.e. related parties);
• NPOs and charities can choose to either include or exclude revenue from government sources;
• The wage subsidy will be reduced by any amount the employer is eligible to receive under the 10% temporary wage subsidy (TWS) unless they elect to not receive the TWS.

The following chart summarizes the revenue decline test for the first three periods. The “claiming period” refers to the period that wages are in respect of (i.e. as opposed to when they are paid in cash terms).

How to apply

Employers can apply through CRA’s My Business Account  or through the CRA’s online application portal. Please visit the following page on the CRA’s website for more details. We strongly recommend employers register for direct deposit if you haven’t already.

Refund of employer CPP and EI

The government will provide a 100% refund of the employer portion of CPP and EI premiums for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.

C) Temporary Wage Subsidy (TWS) – 10% wage subsidy for qualifying small businesses, not-for-profit organizations and charities:

• The TWS is equal to 10% of remuneration paid (i.e. in cash terms) during the period of March 18 to June 19, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
• Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Businesses cannot reduce the remittance of Canada Pension Plan (CPP) or Employment Insurance (EI) premiums.
• An eligible employer for the TWS includes:

i.  Canadian controlled private corporations* (CCPCs);
ii. Individuals (other than trusts);
iii. Registered charities;
iv. Partnerships where all partners are one or more of the above; and
v. Non-profit organizations.

• Associated CCPCs are not required to share the $25,000 maximum subsidy per employer (I.e. each associated company that is a CCPC* can claim the maximum $25,000 subsidy).
• *The taxable capital, calculated on an associated group basis, of a CCPC in the prior year must be below $15 million to qualify for the wage subsidy.
• More information  is available here:  https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

D) Canada Emergency Rent Support (CERS) and Canada Emergency Commercial Rent Assistance (CECRA)

CERS – October 2020 to June 2021

• Provides rent and mortgage support until June 2021
• Rent subsidy supports businesses, charities, and non-profits that have suffered a revenue drop, by subsidizing a percentage of their expenses, on a sliding scale, up to a maximum of 65% of eligible expenses until December 19, 2020
• A top-up subsidy of 25% would apply to organizations temporarily shut down by a mandatory public health order issued by a qualifying public healthy authority, in addition to the 65% subsidy (i.e. for a combined 90% subsidy)
• Organizations can make claims retroactively for the period that began September 27 and ends October 24, 2020.

CECRA – April through September 2020

• Forgivable loans will be offered to qualifying commercial property owners to cover 50% of rent payments for the months of April through  September 2020 that are payable by eligible small business tenants (including charities and NPOs).
• Loan will be forgiven if property owner agrees to reduce the eligible small business tenants’ rent by at least 75% for the three months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place.
• Small business tenant will be required to pay remaining 25% of rent.
• Small business tenants are businesses (including NPOs and charities) paying less than $50,000 per month per location in rent, generate no more than $20 million in gross annual revenues on a consolidated basis, and have experienced at least a 70% drop in pre-COVID revenue.
• Applications open May 25 on the Canada Mortgage and Housing Corporation’s (CMHC) website
• More details on the CECRA are available on the CMHC’s website here.

E) GST/HST – Deferral on remittance

• Due date to file GST/HST returns has not been extended.
• The CRA will allow all businesses to defer, until the end of June 2020, any GST/HST payments or remittances that become owing on or after March 27, 2020, and before June 2020. This means that no interest will apply if your payments or remittances are made by the end of June 2020.
• Despite not extending filing due dates, the CRA has said they will not impose late filing penalties as long as a return is filed by June 30^th.

F) Ontario Employer Health Tax (EHT) and WSIB – Deferral on remittance

• Increased EHT exemption – The Employer Health Tax (EHT) exemption has increased from $490,000 to $1 million for 2020. The increase is retroactive to January 1, 2020. The exemption will return to its current level of $490,000 on January 1, 2021.
• Deferral for payment of most provincially administered taxes – Beginning April 1, 2020, the Ontario government is providing a five-month interest and penalty-free period for businesses to make payments for the majority of provincially administered taxes including the Employer Health Tax (EHT), Tobacco Tax, and Gas Tax.
• WSIB – Can defer reporting and remittance of Workplace Safety and Insurance Board (WSIB) premiums, starting in March 2020, until August 31, 2020. More details here: https://www.wsib.ca/en/financialrelief

G) Payroll remittance – No deferral

• No deferral on the remittance of payroll. Must still be filed on time or face penalties.

H) Canada Emergency Business Account (CEBA) – $40,000 Interest-free Loan (increased to $60,000)

• October 9 Update – An additional $20,000 interest-free loan is now available with half forgivable if repaid by December 31, 2022. Additional details still to come.
• Interest-free loans of $40,000 to small businesses and non-profit organizations to help cover operating costs during a period where revenue has been temporarily reduced.
• To qualify, these organizations will need to demonstrate they paid between $20,000 to $1.5 million in total payroll in 2019. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).
• October 9 Update – Deadline to apply for CEBA has been extended until December 31, 2020.
• May 19 Update – The Government released expanded eligibility criteria to allow applicants with payroll lower than $20,000 to qualify. These applications must have the following:

i.  a business operating account at a participating financial institution;
ii.  a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return; and
iii.  eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

How to Apply

• Small businesses and NPOs can apply using their bank’s online banking platform. Please read the terms and conditions provided by your bank. In order to enrol, you must have the authority to legally bind your organization to the terms of the loan agreement.
• To apply you will need a copy of your organization’s 2019 T4 Summary to confirm the total payroll paid in 2019 and to obtain your payroll account number with the Canada Revenue Agency.
• Enrollment requests will be reviewed by the Government of Canada and your bank. If you are eligible, the funds will appear in your business account within 5 business days of your submission.

I) EI Work Sharing Program

• Program to reduce hours of a group of employees and share available work amongst them
• Employees receive EI (up to certain limits) for the hours they aren’t working
• Need to apply 10 days in advance of it taking effect
• See more details on the EI working sharing program in our more detailed article here.

FOR INDIVIDUALS

A) Income Tax

• Tax Filing due date – 2019 Personal income tax returns due June 1, 2020 for individuals without self-employment income. Returns are due June 15, 2020 for individuals with self-employment income.
• 2019 Balance Owing – Payment of income tax becoming due between March 18, 2020 and September 30, 2020 (i.e. balance owing on 2019 return) can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.
• Instalments – Income tax instalments due between March 18, 2020 and September 30, 2020 can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.
• Electronic signature – The CRA will allow tax preparers to accept EFILE authorization forms signed using an electronic signature.

B) Canada Emergency Response Benefit (CERB) and other Recovery Benefits Replacing CERB

Update – See our article on the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), and the Canada Recovery Caregiving Benefit (CRCB) here. These benefits in combination with traditional Employment Insurance (EI) are now intended to be used in lieu of CERB. CERB ended on September 26, 2020. Information on CERB is included below for historical or informational purposes only:

CERB was a taxable benefit of $2,000 per month for persons that could not earn income due to COVID-19 and, generally speaking, would not qualify for EI.  A more detailed explanation of the CERB is available on this link. We have included a high-level summary below.

Eligibility

• Ceased working, whether employed or self-employed, for reasons related to COVID-19;
• 15 or older;
• Haven’t earned (or expect to not earn) employment income, self-employment income, or maternity benefits or EI benefits for at least 14 consecutive days; and
• Earned at least $5,000 of employment, self-employed income, or non-eligible dividends in 2019 or in the 12 month period prior to applying for the CERB.

It does not apply if someone quits their employment voluntarily.

April 15 Update – Expanded Eligibility

The government has expanded eligibility by:

• Allowing people to earn up to $1,000 per month (net-income for self-employed persons) while collecting the CERB.
• Extending the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work as a result of the COVID-19 outbreak.
• Extending the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job or return to work because of COVID-19.

June 16 Update – 8-week Extension and Attestation Form

• On June 16, 2020, Prime Minister Justin Trudeau announced that the Canada Emergency Response Benefit (CERB) will be extended by 8 weeks to 24 weeks (until October 3, 2020).
• For the new phase, CERB recipients will be required to sign an attestation, similar to requirements for employment insurance benefits, that they are actively looking for work and will take a job offer when their circumstances permit it. That attestation will be in place on July 5.

C) Income support for low-and-modest income families

• GST Credit – One-time special payment by early May 2020 through the GST credit. The payment will be double the maximum annual GST credit payment amounts for the 2019-20 benefit year. The average boost to income for those benefitting from this measure will be close to $400 for single individuals and close to $600 for couples.
• Canada Child Benefit (CCB) – Increase the maximum annual CCB payment amounts, only for the 2019-20 benefit year, by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment.

D) Support for Students – Canada Emergency Student Benefit (CESB) and Other Support

• CESB – Generally intended to help students that can’t find work
  • $1,250 a month benefit for the months of May to August
  • $2,000 a month benefit for students with disabilities or dependents for the months of May to August
  • Student must be enrolled in post-secondary education anytime between December 1, 2019 and August 31, 2020 or graduated from secondary school in 2020 and has applied for enrollment in a post-secondary program that is scheduled to begin before February 1, 2020 and plans to enrol if accepted.
  • Student must attest that they are looking for work (whether employed or unemployed) but are unable to find it.
• Canada Student Service Grant – Grants up to $5,000 towards fall tuition if students volunteer in a sector needing assistance on account of the COVID pandemic
• Student Loans – Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans. The Ontario government has announced similar changes for OSAP loans.

E) Support for Seniors

• RRIF withdrawals – Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings.
• One-time $300 payment for seniors eligible for Old Age Security (OAS)
• One-time $200 payment for seniors eligible for the Guaranteed Income Supplement (GIS)

FOR NPOs and CHARITIES (Not-for-Profit Organizations)

A) Tax filing extensions

• T3010 Charity returns otherwise due between March 18 and December 31 are now due December 31, 2020.
• T2 tax returns that were otherwise due between March 18 and May 31 are now due June 1.

B) Wage subsidy – NPOs and Charities – see details under Businesses

C) Canada Emergency Business Account – NPO only – see details under Businesses

TRUSTS

A) Income Tax for Trusts with December 31, 2019 year-end

• Tax Filing due date – May 1, 2020
• Balance Owing – Payment of income tax becoming due between March 18, 2020 and September 30, 2020 (i.e. balance owing on 2019 return) can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.
• Instalments – Income tax instalments due between March 18, 2020 and September 30, 2020 can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.

B) Trusts without a December 31, 2019 year-end

• Tax filing due date – For returns that would normally be due in April or May the due date has been extended to June 1.
• Balance Owing – Payment of income tax becoming due between March 18, 2020 and September 30, 2020 (i.e. balance owing on 2019 return) can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.
• Instalments – Income tax instalments due between March 18, 2020 and September 30, 2020 can be deferred until September 30, 2020. No interest or penalties will accumulate on these amounts during this period.

More Information

This article has summarized the items we believe to be most relevant to our clients. You can read about other items provided by the Ontario government here.

Note:

The Government of Canada announced its COVID-19 economic response plan on March 18, 2020.  The Government of Ontario’s action plan was announced on March 25, 2020.  Since both programs were released there have been many changes and updates. Tax policies are still changing rapidly. We are updating this general resource as details are made available. Still, we strongly recommend that you speak with your advisor about your unique situation before taking any action.

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