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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s