Resources

Highlights of Canada’s COVID-19 Economic Response Plan

Canada & Ontario COVID-19 Response Plans

Last updated APRIL 8, 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 August 31, 2020 can be deferred until August 31, 2020.  No interest or penalties will accumulate on these amounts during this period.
  • Instalments – Income tax instalments due between March 18, 2020 and August 31, 2020 can be deferred until August 31, 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 May 31 are now due June 1. The extension does not apply to the filing of SRED returns.
  • Objections – Any objections due March 18 or later 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 small businesses, not-for-profit organizations, and charities


April 8 Update – We are awaiting draft legislation on the 75% wage subsidy. We will update the contents below once the draft legislation is made available. The content below is based on the most recent announcements by the Minister of Finance and the Department of Finance on April 8.

  1. 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);
  2. The subsidy will apply to all Canadian corporations, individuals, charities, not-for-profit organizations, and partnerships consisting of the aforementioned (collectively “employers”);
  3. Employers must apply and then confirm eligibility each month through CRA’s website;
  4. The employer must experience at least a 15% decrease in revenue to qualify for the month of March;
  5. The employer must experience at least a 30% decrease in revenue to qualify for the months of April and May;
  6. The decrease in revenue will be determined by comparing the revenue of the applicable month in 2020 to the revenue of the same month in 2019 or by comparing to the average of January and February 2020 revenue;
  7. 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);
  8. NPOs and charities can choose to either include or exclude revenue from government sources;
  9. Will be in place for a 12-week period from March 15 to June 6, 2020;
  10. Wage subsidy will be reduced by any amount claimed under the 10% wage subsidy program (described below);
  11. The wage subsidy received will be considered taxable income to the employer; and
  12. Penalty of 25% of the subsidy and up to 5 years in jail will apply for anyone engaging in artificial transactions to attempt to claim the subsidy.

How to apply

Employers will be able to apply through CRA’s My Business Account and are strongly recommended to register for a CRA My Business account and for direct deposit now.

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) 10% wage subsidy for qualifying small businesses, not-for-profit organizations and charities:

Based on the information currently available, you will not receive the 10% subsidy if you qualify for the 75% subsidy. For businesses that don’t qualify for the 75% subsidy, they may still qualify for the 10% subsidy.

  • This is a temporary three-month wage subsidy that applies to employers who are:

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.

  • The subsidy is equal to 10% of remuneration paid 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.
  • 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 available as of March 20 is here:  https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

D) GST/HST – Deferral on remittance

  • Due date to file GST/HST returns has not been extended.
  • Due date for the remittance of GST/HST for the following periods has been extended to June 30 (without incurring interest or penalties):
    • Monthly filers – Remittance for amounts collected for the February, March and April 2020 reporting periods;
    • Quarterly filers – Remittance for amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
    • Annual filers – Annual filers whose GST/HST return or instalment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

E) 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

F) Payroll remittance – No deferral

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

G) Canada Emergency Business Account (CEBA) – $40,000 Interest-free Loan

  • Interest-free loans of up to $40,000 available 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 $50,000 to $1 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).

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.

H) 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 August 31, 2020 (i.e. balance owing on 2019 return) can be deferred until August 31, 2020. No interest or penalties will accumulate on these amounts during this period.
  • Instalments – Income tax instalments due between March 18, 2020 and August 31, 2020 can be deferred until August 31, 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) – Temporary Income Support for Workers, Parents, and Self-employed persons

 

The CERB is a taxable benefit of $2,000 per month for persons that can’t 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.

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) Other assistance

  • 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.
  • 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.

E) Assistance from Financial Institutions

  • Banks in Canada have confirmed to Minister of Finance their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments.
  • Canada’s large banks have confirmed that this support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products.

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, 2019
  • Balance Owing – Payment of income tax becoming due between March 18, 2020 and August 31, 2020 (i.e. balance owing on 2019 return) can be deferred until August 31, 2020. No interest or penalties will accumulate on these amounts during this period.
  • Instalments – Income tax instalments due between March 18, 2020 and August 31, 2020 can be deferred until August 31, 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 have been due between March 18 and April 30, the return will now be due May 1, 2020.
  • Balance Owing – Payment of income tax becoming due between March 18, 2020 and August 31, 2020 (i.e. balance owing on 2019 return) can be deferred until August 31, 2020. No interest or penalties will accumulate on these amounts during this period.
  • Instalments – Income tax instalments due between March 18, 2020 and August 31, 2020 can be deferred until August 31, 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.

Stay safe.

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Our Summary of Ontario's Response Plan

On March 25, 2020, the Ontario government released “Ontario’s Action Plan: Responding to COVID-19” containing a $17 billion response to the COVID-19 crisis. To save you time, Stern Cohen’s Tax Partner Adam Morke has summarized their response and provided the highlights below.

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