CANADA'S TAX RELIEF MEASURES FOR COVID-19 PANDEMIC - A SNAPSHOT

The situation regarding COVID-19 is changing rapidly, this post is current as of March 25, 2020.

 

On March 18, 2020, the federal government announced a number of measures in response to the COVID-19 pandemic including a wage subsidy and various tax relief measures.  The proposed measures were included in a Notice of Ways and Means Motion tabled by the Minister of Finance earlier this morning (March 25) and advanced in the House of Commons as Bill C-13, COVID-19 Emergency Response Act.  At around 5:50 am this morning, the government reached a consensus and the legislation was passed by the House of Commons. It will now proceed to the Senate for approval. Here is a brief overview of the wage subsidy and some of the tax relief measures.

 

THREE MONTH TEMPORARY WAGE SUBSIDY

The federal government announced a temporary wage subsidy for employers for three months. Eligible employers can benefit immediately by reducing remittances of federal, provincial or territorial income tax by the amount of the subsidy.  This measure applies only to remittances made to the CRA.  

An eligible employer is a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC), which has an existing business number and payroll program account with the CRA on March 18, 2020; and pays salary, wages, bonuses, or other remuneration to an employee.  CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

The subsidy is equal to 10% of remuneration paid between March 18, 2020 and June 20, 2020 up to a maximum subsidy of $1,375 per employee and $25,000 per employer.  Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer. For more information, please go to CRA's website at  https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html.

 

TAX RELIEF MEASURES

Extension of Filing and Payment Deadlines

The federal government also announced the deferral of deadlines for filing returns as follows: 

  1. Defer the deadline to file personal income tax returns from April 30, 2020 until June 1, 2020.
  2. Defer the filing due date for trusts with a December 31, 2019 year-end from March 31, 2020 to May 1, 2020. 
  3. Defer the filing deadline for Form T3010, Registered Charity Information Return due on or after March 18, 2020 to December 31, 2020.

The Canada Revenue Agency ("CRA") will also allow all taxpayers to defer, until August 31, 2020, the payment of any income tax amounts owing or or after March 18, 2020 and before September 2020.  This relief would apply to tax balances due as well as installments, under Part I of the Income Tax Act (Canada). No interest penalties will apply on these amounts during this period.  The CRA recently published a web page to provide more information about the tax relief measures at https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html.

Not all tax filing and payment obligations have been deferred.  For instance, the government has not mentioned relief for GST/HST, payroll remittances, Part XIII withholding taxes, and Part IV or VI.1 taxes. Apparently, there may be misinformation about source deductions. The CRA has confirmed that source deduction remittances are not covered by published tax relief provisions.

 

Suspension of CRA Collection Activities

The CRA will spend collection activities on new debts until further notice.  Flexible payment arrangements will be available.  The CRA collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship.

 

Suspension of CRA Audit Activities

The CRA will not contact any small or medium (SME) businesses to initate any post assessment GST/HST or Income Tax audits for the next four weeks. For most businesses, the CRA will suspend audit interaction with taxpayers and representatives.  Interactions with taxpayers will continue for those cases where legal deadlines for reassessing tax returns are approaching or cases involving high risk GST/HST refund claims, which require contact before the payment of such refunds.

 

CRA Objections & Appeals

The CRA has identified objections relating to a Canadian's entitlement to benefits and credits as a critical service. Accordingly, the CRA will continue to advance objections relating to such benefits and credits.  Objections relating to other tax matters filed by individuals and businesses will be held in abeyance.  No collection action will be taken with respect to these objections.  As for appeals to the Tax Court of Canada, the Court has ordered the extension of all timelines prescribed by its Rules while it closes for business until March 30, 2020.