Update: Canada’s COVID-19 Economic Response Plan

The Federal Department of Finance announced Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses on March 18, 2020. Additional announcements have followed several times since that date: On March 27, 2020 and March 30, 2020, new measures and changes to recently announced measures were announced by the Federal Government.

We have identified the most significant measures, and their current status, below.

Temporary Payroll Subsidy (the “Canadian Emergency Wage Subsidy”)

On March 25, 2020 the Government announced a “Temporary Wage Subsidy” for employers. The subsidy is 10% of each employee’s salary and wages during a prescribed period from March 2020 to June 2020, with per employee and per employer caps on the subsidy (see our comments in our March 25, 2020 newsletter).

On March 27, 2020 the Government announced that the subsidy rate would be increased from 10% to 75% retroactive to March 15, 2020, but no additional details were released.  On March 30, 2020, Prime Minister Trudeau announced additional details about the program (now re-named the “Canadian Emergency Wage Subsidy”):

  • To qualify, the employer must have suffered a loss of revenue of 30% (no details are available yet on how this is measured);
  • The per-employee subsidy is 75% of the employee’s earnings up to a maximum of $58,700 in annual earnings, which is $1,129 weekly.
  • 75% of that earnings amount is $847 per week per employee who is employed in Canada during the relevant time period;
  • There no cap on the total subsidy, and no restrictions on which size of business qualifies;
  • There is no cap on the number of employees;
  • Non-profit organizations, corporations, and partnerships are all eligible;
  • The subsidy is backdated to March 15, 2020 and last three months (mid-March to mid-June 2020).

We expect the Government to release more details in writing on March 31, 2020 and we will advise once these details are released.

Deferral of Sales Tax Remittance and Customs Duty Payments

Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances and customs duty payments are deferred to June 30, 2020.  GST/HST remittances can be delayed until June 30, 2020 as follows.

  • Monthly filers can defer remittance of amounts collected for the February, March, and April 2020 reporting periods;
  • Quarterly filers can defer remittance of amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
  • Annual filers, whose GST/HST return or instalment are due in March, April, or May 2020, in respect of the filer’s current fiscal year, can defer these payments.

There is no deferral of the deadline to file GST/HST returns, only the remittance deadline has been deferred.

Tax Filing Deadline Extensions

The tax filing deadlines for individuals and for trusts have been extended by one month:

  • Personal income tax returns normally due on April 30 will now be due on June 1, 2020.
  • Trusts with a December 31, 2019 year end have the filing due date extended from March 30, 2020 to May 1, 2020.

In addition to the income tax filing and payment deadline extensions, unless otherwise noted, administrative income tax actions required of taxpayers by the CRA that are due on or after March 18, 2020 and  before June 1, 2020, are deferred until June 1, 2020. These administrative income tax actions include income tax information returns, income tax elections, designations, and responses to information requests from CRA. This includes filings that would have been due March 31, 2020 if an extension was not granted.

There are three specific returns for which the deadline is only extended to May 1, 2020. This is because these returns contain information that individuals will need to complete their personal income tax return before the June 1, 2020 deadline for personal income tax returns. The three returns which are now due May 1, 2020 are:

  • T3 trust income tax and information return
  • T5013 Partnership Information Return
  • NR4 Summary, Return of Amounts Paid or Credited to Non-Residents of Canada

Other returns that are due after June 1, 2020, such as corporate income tax returns for the year ended December 31, 2020 which are due June 30, 2020, are not affected as their due date falls after June 1, 2020.

Payroll source deduction payments and all related activities are excluded from these deferrals and must continue to be remitted in a timely manner.

Income Tax Payment Due Date Extensions

Tax payment deadlines for many amounts of income tax owing have been delayed until August 31, 2020:

  • Payment of any income tax amounts by any taxpayer that become owing on or after March 18, 2020 and before September 2020 can be delayed until August 31, 2020 without interest charges or penalties. This includes:
    • Payment of the balance of income tax owing for the 2019 tax year (normally due April 30, 2020)
    • Payment of the 2020 tax year quarterly tax instalment due June 15, 2020
  • This excludes amounts that were already owing before March 18, 2020. For example, if you have unpaid taxes owing from your 2018 tax year, the tax payment deadline has not been extended.
  • Note: there are no changes to the deadlines to remit payroll source deductions for employers

Note: You should consider deferring the payment of any income tax remittance that becomes owing on or after March 18, 2020. This includes:

  • Personal income tax owing for the 2019 year (usually due April 30, 2020)
  • Trust or estate income tax returns for December 31, 2019 (normally due March 30, 2020)
  • Personal and trust income tax instalments for the 2020 tax year payable on June 15, 2020
  • Corporation income tax payments for final balances due on March 31, 2020. This includes
    • December 31, 2019 year end final balances payable for income eligible for the small business deduction, and
    • Balances due for all corporation income tax for taxation years ending on or after January 31, 2020.
  • Corporation income tax instalments for the 2020 tax year payable on:
    • March 31, 2020,
    • April 30, 2020,
    • May 31, 2020,
    • June 30, 2020, and
    • July 31, 2020.

Important: All of these amounts will become due on August 31, 2020 under the current measures. However, by deferring payment until August 31, 2020 you can preserve cash for critical expenditures between now and the end of August.

Electronic Authorization of Tax Return Electronic Filing

Effective immediately the Canada Revenue Agency will recognize electronic signatures as having met the signature requirements of the Income Tax Act, as a temporary administrative measure. This provision applies to authorization Form T183 for personal income tax returns and Form T183CORP for corporation income tax returns.

Note: D&H Group LLP has recently started using Adobe DocuSign. This allows us to securely email you copies of your tax returns and other important documents and allows you to electronically sign and automatically transmit the signed authorization to efile to us.

This will promote the health and safety of our clients and our people by limiting unnecessary physical interaction for signatures and document exchanges.

Canada Revenue Agency Audit Interactions Curtailed

The Canada Revenue Agency 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.

Canada Emergency Business Account

A new Canada Emergency Business Account will be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC).

This $25 billion program will allow financial institutions to provide interest-free loans of up to $40,000 to small businesses and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced due to the economic effects of COVID-19.

Small businesses and not-for-profits should contact their financial institution to apply for these loans.

To qualify, an organization will need to demonstrate it 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).

New Loan Guarantee for Small and Medium Enterprises

EDC will guarantee new operating credit and cash flow term loans that financial institutions extend to small and medium-sized enterprises (SMEs) up to $6.25 million.

The program cap for this new loan program is $20 billion.

New Co-Lending Program for Small and Medium Enterprises

A new Co-Lending Program will bring the Business Development Bank of Canada (BDC) together with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts up to $6.25 million. BDC’s portion of this program is up to $5 million maximum per loan. Eligible financial institutions will conduct the underwriting and manage the interface with their customers. The potential for lending for this program is $20 billion.