COVID-19 Tax Changes and Benefits for Employers and Businesses

Tax and Payment Deadlines

For corporations which otherwise would have had to file their tax returns after March 18 and before June 1, 2020, the filing date has been extended to June 1, 2020. Payment deadlines have also been extended to September 1, 2020, for Part 1 tax which was due after March 18 and before September 1, 2020.

Payroll remittance deadlines are remaining unchanged.

Partnership information return (T5013) deadlines have been extended to May 1, 2020. The filing date for other information returns, which would otherwise be due after March 18, 2020 and before June 2020 have been extended to June 1, 2020.

Trusts with a year-end date of December 31, 2019 have had their deadlines extended to May 1, 2020. Trusts that would have had a filing due date in April or May now have their deadlines extended to June 1, 2020.

GST/HST payments deadlines for companies and self-employed individuals, which were normally between March 27, 2020 and May 31, 2020, have now been extended until the end of June 2020. For customs duties and GST on imported goods, the new deadline will be the end of June and the deferred amounts include amounts due for March, April, and May.

Subsidies

There are two main wage subsidies that the government is offering business to help companies avoid layoffs during the COVID-19 pandemic the Temporary Wage Subsidy and the Emergency Wage Subsidy.

The Emergency Wage Subsidy could cover 75% of salaries for up to three months; organizations which do not qualify for the Emergency Wage Subsidy, they may qualify for the 10% wage subsidy through the Temporary Wage Subsidy.

For employers who are eligible for both subsidies, the amount received from the 10% subsidy for a period would reduce the amount available under the Emergency Wage Subsidy

Emergency Wage Subsidy

Eligibility

This subsidy is available for individuals, corporations, partnerships, non-profit organizations, and registered charities who have employees. Public bodies are not eligible for this subsidy (i.e. schools, hospitals).

An employer is eligible for this subsidy if it has seen a drop of 30% of its monthly revenue for March, April, or May when compared to the same month in 2019. This should be calculated using its normal accounting method, excluding income from extraordinary items, non-arm’s length sales, and amounts on account of capital.

On April 8, 2020, Prime Minister Trudeau announced that the drop of monthly revenues requirement has been changed from 30% to 15% for March 2020, since most companies only saw the effects of COVID-19 part-way through the month. He also announced the option of using January or February 2020 as a reference point, since start-ups may have low or no sales in prior years.

For not-for-profits and charities, there is the option to either include or exclude government funding for the calculation of the decrease of revenues.

How it works

An employer can claim a subsidy of 75% of the pre-crisis remuneration for an eligible employee, up to a maximum of $847 per week. The employer would be expected to make its best effort to pay the balance of the employee’s salary for this period.

This subsidy is currently available for March 15 to June 6, 2020. There is no overall limit on the total subsidy amount an employer can claim.

Employers should keep records demonstrating how their revenue amount was calculated, and that the remuneration was properly paid to employees. If incorrect or fraudulent claims are made, there will be penalties and the employer will have to repay the subsidy amount.

If an employer has already applied for the Temporary Wage Subsidy and has received benefits under that program, the amount claimed through the Emergency Wage Subsidy should be reduced correspondingly.

An employer may not claim the Emergency Wage Subsidy for an employee that has been laid off or furloughed and is claiming the Canadian Emergency Response Benefit.

How to apply

An employer who would like to apply for the Emergency Wage Subsidy should do so through the CRA My Business Account.

Further details can be found here.

Temporary Wage Subsidy

Eligibility

Eligible employers include individuals, partnerships, non-profit organizations, registered charities, and Canadian-controlled private corporations which are eligible for the small business deduction.

As well, the employer must have a business number and payroll account as of March 18, 2020, and pay salaries or other remuneration to an eligible employee.

To be an eligible employee, you must be employed in Canada.

How it works

The subsidy is equal to 10% of the remuneration paid between March 18 and June 19, 2020, up to a maximum of $1,375 per employee or $25,000 per employer.

The CRA does not calculate the subsidy automatically; it must be calculated manually. This subsidy does not need to be applied for; instead, when you calculate your payroll tax liability, reduce the remittance of federal, provincial, or territorial income tax by the amount of the subsidy.

If the payroll remittances are less than the calculated subsidy, you can reduce future amounts due, even if those payments fall outside the period to which this subsidy applies.

The employer should keep records of the total remuneration paid during the applicable period, the income tax that was deducted, and the number of eligible employees. The subsidy is taxable income and must be reported in the year the remittance reduction occurred.

 

Loans and Credit Available

Business Credit Availability Program

Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) will be working with financial institutions to provide direct lending and other types of financial support to businesses during the COVID-19 crisis.

Eligibility for this program will be determined by its credit-worthiness and the viability of its business model. The funds for this program can be accessed through the entity’s financial institution, and the financial institution will contact the EDC and BDC to determine what funds are available.

Canada Emergency Business Account

This program will be rolled out in mid-April, and access to the program will be through Canadian banking institutions. Interest-free loans of up to $40,000 will be available to help cover operating expenses for companies with reduced revenue due to COVID-19.

Small businesses and not-for-profits can qualify if they paid between $50,000 and $1 million in payroll in 2019.

COVID-19 Tax Changes and Benefits for Canadian Taxpayers

Deadlines

The due date for filing individual tax returns has been extended by just over a month, from April 30, 2020 to June 1, 2020. The deadline for payment of tax has been extended to September 1, 2020. However, the CRA suggests filing early to ensure that you receive any benefits and credits you may be entitled to in a timely fashion.

If you are self-employed, your filing deadline remains unchanged – June 15, 2020. However, your payment deadline will be extended to September 1, 2020.

The deadline for non-residents filing a form NR4 has also been extended to May 1, 2020. The payment deadlines for NR4 related payments remains unchanged.

You may still receive Notices of Assessment with the payment date listed as April 30, 2020. This is a software error that can be disregarded.

Benefits and Support

Canada Emergency Response Benefit (CERB)

This benefit is temporary income support for people who are out of work (whether as an employee or proprietor) for reasons related to COVID-19. The maximum benefit is $2,000 every four weeks, for up to 16 weeks. You can apply at Canada.ca by clicking here.

This benefit applies who workers who reside in Canada and are at least 15 years old, if you:

  • Stopped working due to COVID-19; or
  • Are eligible for Employment Insurance for unemployment or illness purposes.

You must also have had:

  • At least $5,000 of income in 2019 for the past 12 months; and
  • Expect to be without employment or self-employment income for at least 14 consecutive days in the first four weeks.

The income that counts towards the $5,000 required to be eligible includes:

  • Employment income;
  • Self-employment income;
  • Maternity and parental benefits under Employment Insurance; and
  • Parental benefits under Quebec Parental Insurance Plan.

Please note that the $2,000 benefit applies for a four week period, and if your situation of unemployment continues past four weeks, you must reapply to continue receiving the benefit. You may currently re-apply for up to four periods (16 weeks total).

It is currently estimated that you should receive your benefit within 3 business days of application, if you sign up for direct deposit. If you do not have direct deposit set up,  you should receive your benefit within 10 business days.

Employment Insurance

Individuals who are quarantined due to COVID-19 can apply for Employment Insurance sickness benefits. The one-week waiting period will be waived for new claimants who are quarantined, and they will not have to provide a medical certificate. Additionally, if you are not able to apply immediately because you are quarantined, you can apply later and have your claim backdated.

For more information regarding Employment Insurance applications, please visit the EI website here.

GST/HST Credit Payments

There will be a one-time payment of your GST/HST amount on April 9, 2020, which should be double your maximum annual benefit. If you have filed a 2018 tax return and are normally eligible for the GST/HST Credit, you should receive this automatically.

If you have already received part of your GST/HST credit amount for the year, the remainder of your credit plus the new amount you are entitled to should be paid out in the one April payment.

You do not have to file your 2019 return to be entitled to this payment; however, your 2018 net income is the basis for this credit and it must be filed for you to be eligible.

To determine if you are entitled to a GST/HST Credit Payment, you can use the Child and Family Benefit Calculator – however the additional payments for COVID-19 support are not reflected in this calculator. You can double this amount to determine the total benefit you should receive.

Canada Child Benefit Payments (CCB)

The maximum CCB payment for the year has been increased by $300 per child. This amount will be included in your May monthly payment.

Registered Retirement Income Funds (RRIF)

Due to the volatility in the stock market and the impact that may have on retirement savings, the government has decreased the minimum RRIF withdrawal by 25% for the year.

This change will apply to those receiving payments from a defined contribution registered pension plan (RPP), as well as a pooled registered pension plan (PRPP).

Individuals who have already withdrawn more than the updated minimum amount will not be permitted to re-contribute to their RRIPs in order to meet the reduced minimum.

Benefits reviews

If your benefits are currently under review by the CRA and you are required to send in supporting documentation, you can wait to submit the documents. Benefits reviews are currently on hold and you will receive a new letter when the CRA resumes these operations.

Free Tax Clinics

Tax clinics are run each year by the Community Volunteer Income Tax Program to help individuals with modest income prepare their tax returns. Many clinics have been postponed due to the measures put in place for social distancing. For example, Toronto Public Libraries have cancelled all events, including the Tax Preparation Assistance programs, through to the end of April.

There may still be some clinics being run on a “drop-off and pick-up” or appointment basis. Unfortunately, the CVITP program is not set up to handle tax returns digitally. Once social distancing measures have been scaled back, there will be an attempt to re-schedule the tax clinics that are currently postponed.

To determine if you are eligible for free tax assistance, please visit the CRA website here. To see if there are any clinics which are still running in your area, please check here.

Drop Boxes and Walk-in Services

All CRA drop boxes have been closed, except for those located at the Jonquiere, Sudbury, and Winnipeg tax offices. The CRA is unable to ensure that your documents will be properly received and filed if they are left at any other drop boxes during this time.

There will be no walk-in services offered at the counters of any of the tax centres or CRA offices during this time.

The CRA is encouraging taxpayers to file their tax returns online using Netfile or a tax professional. Alternatively, you may mail your documents to the appropriate tax centre.