COVID-19: Canadian tax-relief

25 May 2020

Originally published March 29, 2020.

Last updated June 1, 2020.

This bulletin summarizes certain enacted amendments and further announcements made by the Federal Government, as well as announcements by some provinces. We expect to continue to see additional detail on these measures over the coming days.

Federal Tax Measures

The Canada Emergency Wage Subsidy

On April 11, 2020, the legislation implementing the Federal Government's new Canada Emergency Wage Subsidy ("CEWS") was enacted. The CEWS is a $73 billion subsidy intended to support the well-being of workers, maintain employment relationships and reduce claims on the employment insurance regime. The CEWS applies at a rate of 75 per cent of the first $58,700 normally earned by employees - representing a benefit of up to $847 per week, per employee and $10,164 in total. The program is in place for a 12-week period, from March 15 to June 6, 2020. Read our detailed analysis here and the answer to some of the most frequently asked questions here.

Other Provisions

The Federal Government passed the Act respecting certain measures in response to COVID -19, which provides for various elements of the Federal tax relief measures. It is estimated that the system will be in place by the week of April 6 and that the first payments will be made ten (10) days later.

These measures include:

  1. GST/HST Credit: a one-time special payment of the Goods and Services Tax (GST) credit of $290 for individuals and $580 per couple and $153 per child, payable in May 2020.

  2. CCTB: increasing the maximum Canada Child Tax Benefit (CCTB) benefits for the year 2020 by $300 per child.

  3. Wage Subsidy: a reduction from the obligation to remit income tax withheld from their employees' remuneration during the period between March 18, 2020 and June 19, 2020 for:

    • employers who are individuals,

    • Canadian-controlled private corporations (CCPCs) with taxable capital employed in Canada of less than $15M, and

    • partnerships all the members of which are individuals, charities or CCPCs, non-profit organizations and other tax exempt entities or registered charities.

      The Federal Government initially announced a subsidy equal to 10% of remuneration paid during this period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. On March 27, 2020, it was announced that the subsidy would be increased to 75% of remuneration. The regulations are to follow. Additional detail is expected over the coming days, including the revised monetary caps. Details regarding the initial announcement can be found here.

  4. CERB: the Canada Emergency Response Benefit (CERB) is an emergency benefit of an amount to be determined (an amount of $2,000 was previously announced) per four week-period (up to a maximum of 16 weeks) for employees and self-employed persons who cease to be employed or to perform work for reasons related to VIDOC-19. The qualifying period begins on March 15, 2020 and ends on October 3, 2020. This amount will be subject to income tax.
  5. RRIF Withdrawals: a reduction for 2020 of the minimum amount required to be withdrawn from a registered retirement income fund (RRIF) by 25%. A similar reduction applies to individuals receiving benefits under defined contribution registered pension plans.

Income Tax Deferrals

Income Tax Filing Deferrals

In the ordinary course, individuals typically must file a tax return for the year by April 30 of the following year and self-employed individuals must file by June 15. Trusts with a December 31 year-end must file by March 31 of the following year, while corporations must file a corporate tax return within six months after the corporation's taxation year-end.

The Federal and Québec Governments have announced the following deferrals to these dates:

  • For individuals, late-filing penalties and interest will not be charged if returns are filed and necessary payments are made before September 1, 2020. However, June 1 is preferred for individuals and June 15 for those who are self-employed to ensure that benefit entitlements may be accurately calculated and paid on a timely basis.
  • For trusts,deadlines have become staggered. For trusts with a calendar year end, the extended deadline was May 1, 2020. For trusts required to file on March 31, or in April or May 2020, the filing deadline is extended to June 1. The deadlines for trust returns that would otherwise be due in June, July or August, have been extended to September 1, 2020.

The Québec Government has also announced that partnerships that had until March 31, 2020 to file the 2019 Partnership Information Return (TP-600-V) will have until May 1, 2020, see details here.

For charities whose T3010, Registered Charity Information Return, is due between March 18th and December 31st, the filing deadline has been extended to December 31st.

For corporations whose 2019 corporate income tax return is due between March 18th and June 1, 2020, the filing deadline has been extended to June 1, 2020 by the Federal, Québec and Alberta governments. Each jurisdiction has also confirmed that deadlines for corporate tax returns that would otherwise be due in June, July or August 2020 are extended to September 1.

Income Tax Payment Deferrals

Federal Government

The Federal Government has announced that all taxpayers will be permitted to defer the payment of income tax, without incurring interest or penalties.

For individuals (including those who are self-employed), the deadline to pay any income tax balance for 2019 is extended from April 30 to September 1, 2020.

For businesses, the deadline for amounts that become owing or due from March 18 to September 1, 2020 has been extended to September 1, 2020. This includes balances of income tax owing from the 2019 taxation year, as well as income tax instalment payments that become due as of March 18, 2020 and before September, 2020.

For trusts that have an income tax balance or instalment due before September 1, 2020, the deadline for making payment is extended to September 1, 2020.

Québec Government

The Québec Government has extended the 2019 tax payment deadline for individuals and those who are self employed to September 1, 2020, and will extend the deadline to pay the June 15, 2020 tax installment to September 1, 2020. For corporations, the deadline to pay tax installments and to pay any tax owing that becomes due as of March 17, 2020 and before August 31, 2020 has been extended to September 1 (limitations are noted for certain tax amounts for financial institutions and insurers).

Alberta Government

Alberta businesses with corporate income tax balances that become owing on or after March 19, 2020 or instalment payments coming due between March 18, 2020 and August 31, 2020, can defer making these payments until August 31, 2020.

It is noteworthy that the foregoing announcements did not include any tax relief in the form of tax rate reductions or increases to the basic personal exemption. Further, the instalment base for calculating the payments of tax on an installment basis has not changed, and is thus based on the prior year's income, despite an anticipated reduction in economic activity and incomes during 2020.

GST/HST, Customs, QST and PST

  1. GST/HST and QST: the Federal Government announced a deferral of Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances to June 30, 2020, which can be accessed here.

    This measure will extend to June 30, 2020, the deadline by which:

    • monthly filers have to remit amounts collected for the February, March and April 2020 reporting periods.
    • quarterly filers have to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period.
    • 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.
    This measure is intended to provide up to $30 billion in cash flow or liquidity assistance for Canadian businesses and self-employed individuals over the next three months.

    The Québec Government has also announced that it will defer the filing of Québec Sales Tax (QST) returns and amounts owing to June 30, 2020 for amounts in the period between March 27 and June 1, 2020.

    The Federal announcement did not include a deferral of the filing due-date for GST/HST returns. The CRA has indicated that the deadline to file returns remains unchanged. However, the CRA will not impose penalties where a return is filed late provided that it is filed by June 30th.
  2. Customs Duties: imported goods by businesses are generally subject to the GST at a rate of 5 per cent, as well as applicable customs duties. Payments owing for customs duties and the GST on imports are typically due before the first day of the month following the month in which the Statements of Accounts are issued. the Federal Government announced that payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020.
  3. Excise Taxes: The CRA has advised that excise taxes and duties must be remitted by their usual due dates. However, taxpayers having difficulty making timely payment can request that interest on outstanding amounts be waived, with decisions to be made on a case by case basis.
  4. BC PST: The British Columbia Government has announced an immediate extension of filing deadlines to September 30, 2020 for provincial sales tax (PST), as well as for the Province's employer health, carbon, motor fuel and tobacco taxes. In addition, the previously proposed requirement for certain additional sellers outside of British Columbia to register for the PST have been postponed until further notice, as have previously announced increases to the provincial carbon tax.
  5. Saskatchewan PST: the Saskatchewan Government has announced the availability of immediate relief from penalty and interest charges on unremitted Saskatchewan PST, whether or not PST returns have been filed. The announcement indicates that businesses that are unable to file their PST returns may submit a request for three (3) months of relief from penalty and interest charges on the return(s) affected. Saskatchewan further announced the suspension of audit and compliance activities.
  6. Manitoba RST: the Manitoba Government has announced an extension of the April May and June filing deadlines for Manitoba retail sales tax and for the Provincial payroll tax for businesses with monthly remittances of not more than $10,000.  Manitoba previously advised it would work with businesses with remittances above the cap on flexible payment options.

Ontario Tax Relief

  1. Employer Health Tax: temporary increase to the EHT exemption from $490,000 to $1 million for 2020, intended to result in elimination of EHT for more than 90% of private-sector employers.

  2. Deferral of Payment of Provincially-Administered Taxes: For the five months commencing April 1, 2020, Ontario will not apply any penalty or interest on any late-filed returns or incomplete or late payments under provincially-administered taxes such as the Employer Health Tax, Tobacco Tax and Gas Tax. There is no relief provided for land transfer taxes. This measure is intended to provide $1.9 billion in financial relief.

  3. Regional Opportunities Investment Tax Credit: Ontario is proposing a 10% refundable corporate income tax credit for investments in regions of the province where employment growth has been significantly below the provincial average; the credit would be available to eligible businesses that construct, renovate or acquire qualifying commercial and industrial buildings in designated regions, producing savings up to $45,000 in the year.

  4. Deferral of WSIB Premiums: the Workplace Safety and Insurance Board (WSIB) will allow employers to defer payment of premiums for six months, until August 31, 2020, without penalty or interest.

Québec Tax Relief

CAPME, a $100 million program, offers direct financial support to help businesses promote training and the implementation of HR management practices, to optimize the operation of businesses and reduce the impact that the economic downturn could have on businesses. The program allows businesses to receive subsidies to cover the costs associated with training their employees and thus facilitate job retention. To be eligible for the assistance offered by the CAPME, the enterprise's usual activities must have been affected by the COVID-19 pandemic, whether through a suspension, decrease, increase or diversification of activity.

At a press conference, the Minister of Labour specified that eligible training could include digital skills related to telework, good practices related to health issues, organizational communication and improving expertise. The complete list of eligible training is available here (only available in French for now).

Under CAPME, the following expenses are eligible for reimbursement:

  • The wages of workers in training - capped to $25 per hour (excluding payroll taxes)
  • Professional fees for consultants or trainers (maximum of $150 per hour)
  • Indirect costs for trainers (travel, meals, accommodation, etc.)*
  • Indirect costs for workers in training (travel, meals, accommodation, etc.)*
  • Development, adaptation and purchase of teaching and learning materials*
  • Equipment and supplies needed to carry out the activities*
  • Development and adaptation of training content*
  • The transfer from face-to-face training to on-line training*
  • Registration fees or other costs related to the use of a platform*
  • If applicable, costs related to management and administrative activities (bank charges, equipment, supplies needed to carry out the activities, etc.) engaged by the delegated organization, up to 10% of eligible costs.

*At actual cost

In order to avoid double compensation, the reimbursement of salaries will be reduced in line with the wage subsidies paid by the federal government. For example, the CAPME will provide a 25% wage subsidy for employees in training if the company receives the Canada Emergency Wage Subsidy, which provides eligible employers with a wage subsidy of 75% of wages. Similarly, the CAPME subsidy will cover 90% of wages if the company receives the temporary wage subsidy of 10%.

According to the information available, for business training projects, reimbursement will be limited to 100% of expenses of $100,000 or less and 50% for expenses between $100,000 and $500,000.

The eligible period for the CAPME will be retroactive to March 15, 2020 and will remain in effect until September 30, 2020 (or until the program envelope is exhausted).

Collection Actions

While the Canada Revenue Agency (CRA) has promised relief from collection actions, the guidance is somewhat vague: collection activities on new debts are to be suspended until the CRA advises otherwise, and the CRA promises flexible payment arrangements. Without specifying a date, the term "new debts" is elusive. Further, given the payment deferrals set out above, and the cessation of CRA audit and appeals activities described below, it is difficult to envision what "new debts" might otherwise become enforceable in the near term. Additionally, banks and employers are temporarily relieved from complying or remitting with respect to existing requirements to pay.

Tax Disputes

Canada Revenue Agency Audits, Appeals and Collections

The CRA has indicated that it is resuming its audit work and adapting its practices to take into account both health and economic impacts arising from COVID-19. The CRA is prioritizing actions which would be beneficial to taxpayers, and also wherever taxpayers have indicated there is some urgency to advancing their audit work. The CRA is focusing on higher dollar audits first, audits that are already close to completion, and those with a particular strategic importance to Canada, the provinces/territories or a tax treaty partner.

The CRA is developing policies and procedures to adapt taxpayer/registrant interactions in connection with COVID-19. For example, the CRA is finally allowing taxpayers to forward information by e-mail. Further changes will involve the CRA offering additional time and preliminary consultation regarding CRA information requests. Requirements for Information (RFIs) issued before March 16 and due after that date will be reviewed and taxpayers and third parties (including financial institutions), may be contacted if the CRA still requires the requested information.

Notices of objection are being held in abeyance by the CRA, other than objections concerning entitlements to benefits and credits which are considered a "critical service" that should not be delayed. For any notice of objection due on or after March 18, the filing deadline is extended until June 30. It is not unreasonable to expect that CRA officers will show flexibility with respect to requests for documents and information in connection with pending appeals matters. Collection activities associated with matters under appeal are also being suspended for the time being.

While relief is being provided for filings and remittances, and from penalties and interest, there are other potential problems to which the government has not spoken. For example, there are some provisions in fiscal statutes that provide for hard deadlines, such as extensions for late-filing notices of objection. Where the deadline for filing an objection has expired, a taxpayer may seek an extension of time, but the application must be made within one year after the expiration of the time otherwise limited for filing the objection. Failing to seek an extension within that one year timeframe is fatal to the late-filed objection. It does not take an active imagination to picture a situation where an otherwise discoverable failure to file is not surfaced during the current pandemic crisis. Unless the CRA were to agree that the scope of ss. 220(2.1) (waiver of filing documents) is sufficiently wide as to encompass objections, taxpayers could be irrevocably prejudiced if they discover too late that they missed their time to seek an extension, as a result of the chaos caused by the pandemic. However, some timing questions can be resolved by recently released draft legislation titled Draft Legislative Proposals Regarding Time Limits and Other Periods in Circumstances Due to COVID-19 ("Draft Time Limit Proposals"). The Draft Time Limit Proposals will give the Minister of Finance broad jurisdiction to extend certain limitation periods under Excise Tax Act ("ETA") and the Income Tax Act ("ITA"), with retroactive effect to March 13, 2020. The normal reassessment periods can be extended, as can related exceptions to the normal reassessment period under ss. 152(4) of the ITA. For ETA purposes, the period for assessing rebates can be extended. For ITA purposes, the rigid timing requirements for SR&ED filings can also be extended.

The Courts

The progress of tax litigation matters is also stalled for the time being. Tax Court hearings have been cancelled up to July 17. Depending how the situation unfolds, appeals may be scheduled as of July 20. The Chief Justice will advise the community further on or before June 15.

The computation of time under the Tax Court's rules and pursuant to any Court order or direction made before March 16 is suspended. This suspension will continue until the day that is 60 days after the Court and its offices reopen, which is, of course, indeterminate at this time (for further details, please see our recent article). According to the Tax Court's April 17 notice, the Court would generally look favorably on applications for extensions of time for filing replies to notices of appeal, and encourages parties to consent to such extensions. However, other statutory deadlines over which the Tax Court does not have jurisdiction remain in place (for example, filing a notice of appeal), although the Draft Time Limit Proposals address this problem. The Tax Court has also announced that for the period while the Court is closed and for 60 days thereafter it will treat new notices of appeal as including an application for an extension of time, although that guidance will likely be unnecessary if the aforementioned draft legislation is enacted. When the Court registry serves notices of appeal, Crown counsel will confirm whether the appeal was (1) filed on time (2) late-filed, but an extension is acceptable or (3) late-filed and the application for further time will be contested. Given the uncertainty around what the Crown might do with a late-filed appeal, the best approach (as always) is to file on time if at all possible.

Filings may be made using the Tax Court's online portal. However, documents filed with the Tax Court will not be processed until the Court's offices reopen. The Tax Court asked that unless a statutory deadline must be met, parties should wait until its offices reopen to file other documents. Under the circumstances, the Court indicated that it will be as flexible as reasonably possible in dealing with all requests, which will be evaluated on a case-by-case basis.

The Federal Court of Canada has implemented a suspension period up to at least May 29, including the adjournment of hearings: all hearings scheduled up to June 28 are adjourned sine die and scheduled hearings will not resume until June 29 at the earliest. However, it appears that some matters will proceed sooner and "virtually" pursuant to a protocol set out in Rovi Guides, Inc. v. Videotron Ltd. on May 21, 2020. The latest practice direction and order also includes details regarding the recalculation of timelines (subject to certain caveats). As is the case with the Tax Court, deadlines established under statutes that are not specifically under the authority of the Federal Court continue to apply unless government has taken steps to change those statutory deadlines (and, in this regard, take note of the Draft Time Limit Proposals discussed above). The Federal Court of Appeal had adjourned hearings to June 15, and has announced a plan for some matters to proceed in writing or by teleconference or video. Further details concerning the Courts are set out in the practice notes on each of their websites, and taxpayers and their advisors should check those websites for updates, since the Courts' management of their affairs may rapidly change.

The Federal Charities Directorate has also suspended its operations including the call center, registration, and audit activities.

Additional details regarding the administrative measures announced by the CRA can be found here.

The provinces have made various announcements regarding the temporary cessation of audit and other activities.

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