Tax Measures Under Canada’s COVID-19 Economic Response Plan
Reader Alert: On September 24th, 2020, the Speech from the Throne announced many tax and related initiatives including the extension of the Canada Emergency Wage Subsidy (the “CEWS”) program to the summer of 2021.
Reader Alert: On July 17, 2020, the Government of Canada released details, as well as draft legislation, in respect of a redesigned Canada Emergency Wage Subsidy (the “CEWS”) program. The legislative proposals, in the form of Bill C-20, An Act respecting further COVID-19 measures (“Bill C-20”), received Royal Assent. Bill C-20 can be found here, and the backgrounder and news release relating to the legislative proposals released on July 17, 2020 can be found here and here. In addition, a more detailed commentary from our Firm on Bill C-20 can be found here.
Reader Alert: On May 15, 2020, the Government of Canada announced that the CEWS will be extended by an additional 12 weeks to August 29, 2020, and that regulatory changes have been made to extend eligibility of the CEWS to additional categories of employers. The Government also announced its intention to propose legislative changes intended to bridge gaps in respect of seasonal employees and employees returning from extended leave, accommodate certain amalgamations and wind-ups, and better align the tax treatment of trusts and corporations for CEWS purposes. The press release and backgrounder can be found here, and additional commentary from our Firm on the announcement can be found here.
Reader Alert: on April 11, 2020, the Government of Canada passed Bill C-14, enacting the CEWS, a 75% employer wage subsidy. More detailed tax commentary on CEWS can be found here and a more comprehensive summary of this measure can be found here.
Since March 18, 2020, the Government of Canada announced a series of tax and economic measures under Canada’s COVID-19 Economic Response Plan (the “ResponsePlan”) to support the Canadian economy during the COVID-19 global pandemic. The Response Plan is designed to help stabilize the Canadian economy, and includes measures to assist both individuals and businesses through direct transfers, tax deferrals, and measures to ensure businesses continue to have access to credit.
On March 25, 2020, the Government of Canada passed Bill C-13, An Act respecting certain measures in response to COVID-19 (“Bill C-13”) to implement the Response Plan measures.
The original Response Plan has since been supplemented by measures announced on March 20, 2020 (“Additional Measures to Support Continued Lending to Canadian Consumers and Businesses”), and on March 27, 2020 (“Additional Support for Canadian Businesses from the Economic Impact of COVID-19”).
On April 11, 2020, Bill C-14, A second Act respecting certain measures in response to COVID-19, which enacts the CEWS, received royal assent. The CEWS will be non-cumulative with the existing 10% wage subsidy.
This summary explains the above measures as well as sales tax measures for goods and services tax/harmonized sales tax (“GST/HST”) and provincial sales tax (“PST”) registrants who are directly impacted by COVID-19.
Federal Tax Measures for Canadian Businesses
10% wage subsidy
The Response Plan contains measures to help businesses retain their workers. Framework legislation enacted as part of Bill C-13 created a federal payroll deduction rebate for remuneration an eligible employer pays between March 18, 2020, and June 19, 2020. Eligible employers are individuals, non-profit organizations, registered charities, Canadian-controlled private corporations (“CCPCs”) having a business limit in the last taxation year greater than nil (i.e. eligible for the small business deduction), and partnerships whose members are comprised solely of the foregoing persons. In addition, an eligible employer must:
- have an existing business number and payroll program account with the Canada Revenue Agency (the “CRA”) as of March 18, 2020; and
- pay salary, wages, bonuses, or other remuneration to at least one individual employed in Canada during the applicable period.
The new regulations released by the Government of Canada on May 15, 2020, in connection with this 10% wage subsidy provide that the prescribed rate at which the amount of the rebate is to be calculated represents by default 10% of remuneration paid by eligible employers to eligible employees during the applicable period, but eligible employers may elect a lower percentage. Under the new regulations, the maximum “prescribed amounts” are $1,375 per eligible employee and $25,000 per eligible employer. This is consistent with previous statements made by the Government. Assistance received under the wage subsidy reduces the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
The Department of Finance has further indicated that associated CCPCs would not be required to share the maximum subsidy of $25,000 per employer. Additionally, since the subsidy operates by allowing an eligible employer to reduce their payroll remittances, the Department of Finance suggested that if the amount of the subsidy exceeded an eligible employer’s payroll remittances for the applicable period, the employer would be allowed to continue to reduce remittances beyond June 20, 2020, or request the unclaimed amount be paid out to the eligible employer or credited against the eligible employer’s 2021 payroll remittances.
Further tax commentary on the 10% wage subsidy can be found here.
75% wage subsidy (“CEWS”)
Tax commentary on the CEWS can be found here, here and here, including commentary on the administrative guidance issued by the CRA in respect of the CEWS on April 21, 2020.
Proposed Relief for Registered Pension Plans
To provide relief to employers who sponsor registered pension plans or salary deferred leave plans, the Department of Finance released draft regulations on July 2, 2020, which:
- Add temporary stop-the-clock rules to the conditions applicable to salary deferral leave plans from March 15, 2020 – April 30, 2021;
- Remove restrictions that prohibit a registered pension plan from borrowing money;
- Permit retroactive contributions to a money purchase account to replace contributions that were not made in 2020, and to ensure that retroactive contributions plus regular contributions in 2021 do not exceed the maximum contribution limit (the pension adjustment limit) for 2021.;
- Setting aside the 36-month employment condition in the definition “eligible period of reduced pay” for the purpose of using prescribed compensation to determine benefit or contribution levels. As well, the requirement that the reduction in pay must be generally commensurate with the reduction in work hours.
The announcement did not specify when the draft regulations would come into effect.
Flexibility for Businesses in Respect of Paying and Filing Taxes
The Response Plan contains measures that will allow businesses to defer until September 1, 2020, the payment of any income tax that becomes owing between March 18, 2020, and August 31, 2020. Interest and penalties will not be applicable to these unpaid tax balances during this period. This measure will apply to both monthly instalments and year-end tax balances due under Part I of the Income Tax Act (Canada) (the “ITA”).
Generally, corporations (other than certain CCPCs) must pay income taxes owing under Parts I, VI, VI.1, and XIII.1 of the ITA on a monthly basis by the last day of each month. A corporation must also pay the remainder of any Part I taxes within 2 months (or in the case of certain CCPCs, 3 months) after its fiscal year-end. Under this measure, both of these payment deadlines are deferred until September 1, 2020, but only in respect of taxes levied under Part I of the ITA.
The deadlines to file certain categories of tax and information returns have been extended:
- corporations may defer filing T2 returns otherwise due in June, July or August 2020, to September 1, 2020;
- trusts having a taxation year ending on December 31, 2019, could defer filing T3 returns until May 1, 2020. The deadlines for trust returns that would otherwise be due in June, July or August in 2020, have been extended to September 1, 2020;
- partnerships and their members could defer filing T5013 returns until May 1, 2020; and
- the deadline to file NR4 information returns was extended to May 1, 2020.
- the filing of information returns under Part XVIII and Part XIX of the Income Tax Act may be deferred until September 1, 2020. No interest or penalty will be assessed during this period. In addition, no penalty will apply for failure to obtain a self-certification on financial accounts opened before January 1, 2021.
Additionally, unless otherwise noted by the CRA, administrative income tax actions required of taxpayers by the CRA due after March 18, 2020 can be deferred until June 1, 2020. Such actions include the filing of:
- designations; and
- responses to information requests.
This extension does not apply to prescribed forms, receipts or documents, or prescribed information, that must be filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11) or paragraph (m) of the definition “investment tax credit” in subsection 127(9) of the ITA. As well, payroll deductions and related activities (except those relating to the reduction of remittances in respect of the temporary wage subsidy) must continue to be performed on time.
Taxpayers who are unable to file a return or make a payment by the new deadlines due to COVID-19 may request that any penalties or interest charged to their account be cancelled.
Canadian Emergency Business Account (“CEBA”)
This federal program provides financing to businesses for their expenses that cannot be avoided or deferred as they take steps to navigate a period of shutdown. The federal government provides interest-free loans of up to $40,000 to small businesses and not-for-profits. Repaying the balance of the loan on or before December 31, 2020, will result in loan forgiveness of 25%. The program was expanded on December 4, 2020, by allowing qualifying businesses to access an additional interest-free $20,000 loan. Half of this additional amount would be forgivable if the loan is repaid by December 31, 2022. Eligible businesses may apply until March 31, 2021, to this program through their financial institution.
The CRA confirmed that the part of the loan that is forgivable is included in the income of the year in which the loan is received by virtue of paragraph 12(1)(x) of the ITA. However, as CEBA funds are to be used to pay for non-deferrable operating expenses of the business including payroll, rent, utilities, insurance, property tax, and regularly scheduled debt service, the recipient can elect to reduce the amount of outlay or expense under subsection 12(2.2) as opposed to reporting the amount as an income inclusion.
Canada Emergency Rent Subsidy(“CERS”)
On November 2, 2020, the Government introduced Bill C-9 which received royal assent on November 19, 2020. It implements new, targeted support to help certain businesses. Despite its name, it is not just a rent subsidy as it also supports businesses that own the real property used in their business’ ordinary activities (provided that the use of this property is not primarily to earn rental income). The business supports provide direct and rent, mortgage interest, insurance costs, and property tax support to tenants and property owners until June 2021 for qualifying organizations affected by COVID-19. The new rent subsidy supports businesses, charities, and non-profits that have suffered a revenue drop by providing support up to a maximum of 65% of eligible expenses until December 19, 2020. In its November 30, 2020, economic update, the government is proposing to extend the current subsidy rates until March 13, 2021. Qualifying rent expenses are capped at $75,000 for a single eligible entity, and are capped at $300,000 for a corporate entity occupying more than one space. The new legislation allows for retroactive claims for the period that began September 27 and ended October 24, 2020. Furthermore, the government introduced in Bill C-14 a provision which considers rent payable as an eligible expense for the purpose of this subsidy.
The new CERS operates similarly to the CEWS, whereby the subsidy amount is considered an overpayment of tax by the business. This results in a reduction of tax payable for the company or triggers a tax refund.
Furthermore, the new Lockdown Support, which provides an additional 25% through the CERS for qualifying organizations that are subject to a lockdown and must shut their doors or significantly limit their activities under a public health order issued under the laws of Canada, a province or territory (including orders made by a municipality or regional health authority under one of those laws). Combined, this would mean that certain businesses subject to a lockdown could receive rent support of up to 90 per cent.
The CRA launched the online CERS tools, guidance and application portal on November 23, 2020. First payments were expected to be generated as early as December 1, 2020.
Curtailment of Audit and Reassessment Activity
The CRA has issued the following relief measures:
- Reassessment: The normal reassessment period described in subsection 152(3.1) of the ITA and the assessment period described in section 298 of the Excise Tax Act (“ETA”) are extended pursuant to the Time Limits and Other Periods Act (COVID-19). Certain time limits that would otherwise expire between March 13, 2020, and December 30, 2020, and time limits which would otherwise expire between May 20, 2020, and December 30, 2020, are extended by six months or until December 31, 2020, whichever comes first. The Ministerial order regarding the extension of ITA provisions can be found here and the Ministerial order regarding the extension of ETA provisions can be found here. 
- Collections: Starting in September, collections officers will begin contacting individuals and businesses with a balance owing to discuss and re-evaluate their financial situation. The officer may request payment of the debt, or offer a payment arrangement where possible.
- Audits: The CRA has expressed that it is resuming a full range of audit work and is adapting its practices to reflect the health and economic impacts of COVID-19. Specifically, the CRA is prioritizing actions that are beneficial to the taxpayer or where taxpayers have indicated there is an urgency to advancing the CRA’s audit. The CRA has also indicated that it is focusing on higher dollar audits first, audits close to completion, and those with a strategic importance to the Government of Canada, provinces and territories, or Canada’s tax treaty partners. In addition, efforts to combat suspected fraud and other criminal activity are advancing. Beginning in September, the CRA’s business audits will focus on complex and aggressive tax planning arrangements using partnerships and trusts by sophisticated and high income earners. Audits in the real estate sector aim to combat offensive non-compliance prevalent in Vancouver and Toronto areas. Starting in October, medium business audits will resume, except for audits in the GST/HST Special Audits Program, which includes non-profit organization and charities, and MUSH sectors (Municipalities, Universities, Schools and Hospitals).
- Objections: The CRA has indicated that any objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service which will continue to be delivered during COVID-19 times of hardship and therefore, there should be no delays associated with the processing of these objections. For any other objections filed by individuals and businesses related to other tax matters, the CRA is currently holding these accounts in abeyance. The deadline to make any objection requests due March 18, 2020, or later will be extended until June 30, 2020.
- Appeals: The Tax Court of Canada (“TCC”) reopened for the transaction of business on July 6, 2020, with the exception of the Hamilton office. Sittings will resume in certain major centres on July, 20, 2020, (see list of cities here), and conference calls may resume earlier. The TCC issued new health and safety guidelines for attending in-person hearings. Hearings scheduled up to December 31, 2020, in cities that are not on the list will be adjourned and rescheduled to dates beyond 2020. The Registry will contact affected parties directly. Parties may have the option of moving their hearing to one of the centres on the list. Where possible, the court will conduct online or teleconference proceedings for case management conferences, status hearings, pre-trial conferences, motions without witnesses, and applications without witnesses. To help alleviate the backlog caused by the Court’s closure a fast-track settlement conference process will be temporarily available. The fast-track settlement conference process will not require parties to have made a written offer of settlement. It is expected that fast-track settlement conferences will be scheduled within 90 days of the parties applying by way of a joint written request with the Court. If the parties fail to settle, the appeal will be put back in the scheduling queue at the same stage as it was prior to the fast-track settlement conference being held. All motion days are suspended for the time being, but parties may also request for their motion to be considered in writing by consent of both parties. Also, the period beginning March 16, 2020, and ending on September 13, 2020, will be excluded from the computation of time under the TCC’s rules, response deadlines to the Registry, and from any Order or Direction of the Court. Parties should add 173 days to the timetable issued by the court before March 16, 2020, by consulting the chart provided by the TCC here. For more information, see the TCC’s Notice to the Public and the Profession, dated June 17, 2020, July 6, 2020, July 8, 2020, and August 14, 2020.
- Appeals to the CPP/EI Appeals Division: The CRA’s dispute resolution and taxpayer relief programs are resuming operations in respect of decisions made by the CRA on pensionability issues under the Canada Pension Plan (“CPP”), and insurability issues under the Employment Insurance Act (“EI Act”). Taxpayers who filed objections or CPP/EI appeals to the Minister, or who applied for relief of penalties and interest, are currently being contacted. CPP/EI rulings will be activated.
- Requirement to pay (“RTP”): Banks, employers and other third parties do not need to comply or remit on existing RTPs until further notice.
- Requests for information (“RFI”): Taxpayers who have received a request for information issued prior to March 16, 2020 and due after that date will be contacted where the CRA continues to require the information in the RFI.
- Transfer pricing documentation: Requests for contemporaneous documents issued before April 1, 2020, with a deadline of March 18, 2020, or later, are deemed to be canceled. These requests will be re-issued at a later date and the requested documents must be submitted within three months of the re-issued request.
- Scientific research and experimental development (“SR&ED”): New reviews or audits are not being undertaken at this time. Ongoing exams and audits will be finalized as soon as possible to help companies get their credits faster. In general, the CRA does not communicate with small and medium-sized businesses to review SR&ED claims. Taxpayers being audited can contact their auditor by phone or online through My Business Account if they want or need the review of their SR&ED claim to proceed. Applications approved during the current period may be subject to review or audit at a later date to confirm eligibility. The CRA gives priority to objections related to critical programs, which include SR&ED claims. The SR&ED reporting deadlines on or after March 13, 2020, are extended as follows:
- Corporations: deadlines are extended by six months or to December 31, 2020, whichever comes first.
- Individuals who operate a sole proprietorship: deadlines are extended by six months to December 15, 2020, for those with a December 31, 2018, tax year-end and who had a SR&ED reporting deadline of June 15, 2020.
- Trusts: deadlines are extended by six months or to December 31, 2020, whichever comes first.
- Film and media tax credits: The Canadian film or video production tax credit program will not undertake any new audits. Ongoing audits will be completed as soon as possible to help businesses receive their credits faster. Applications approved during the current period may be subject to review or audit later.
Once the crisis has subsided, there will be a significant backlog for the CRA to deal with, and considerable delays for the foreseeable future.
As of June 1, 2020, the CRA has opened up its National Leads Program to information about fraud in COVID-19 federal aid programs, including the Canada Emergency Response Benefit (“CERB”), CESB, and CEWS (each of which is defined infra).
Federal Tax Measures for Canadians
Temporary Income Support for Individuals
The Government of Canada has introduced temporary measures to help Canadians as Canada’s economy restarts. On October 2, 2020, Bill C-4, An Act relating to certain measures in response to COVID-19, received royal assent and was enacted into law the following recovery benefits:
- A simplified EI program took effect September 27, 2020, and includes a temporary minimum of 120 hours of work in the past 52 weeks required to qualify. There will be a minimum benefit rate of $500 per week and at least 26 weeks of regular benefits.
- A new Canada Recovery Benefit (“CRB”) is available since September 27, 2020, for one year, and provide a benefit amount of $1000 for a 2-week period, for up to 13 periods (26 weeks). The benefit is for workers who are not eligible for EI, mainly the self-employed and including those working in the “gig” economy, who are currently not working for reasons related to COVID-19, or had a reduction of at least 50% in average weekly income compared to the previous year due to COVID-19. Recipients can earn employment and self-employment income while receiving the CRB. However, recipients will have to reimburse $0.50 of the benefit for every dollar of net income they earn above $38,000 during the calendar year at the same time their personal tax return is due.
- A new Canada Recovery Sickness Benefit (“CRSB”) is available since September 27, 2020, for one year, and provide a benefit amount of $500 per week, for up to two weeks. The benefit is for workers who are unable to work at least 50% of their scheduled work week because they are sick or must self-isolate due to COVID-19.
- A new Canada Recovery Caregiving Benefit (“CRCB”) is available since September 27, 2020, for one year, and provide a benefit amount of $500 per week for up to 26 weeks per household. The benefit is for workers who are unable to work at least 50% of their scheduled work week because they are caring for a child under the age of 12 or for a family member because schools, day-cares or care facilities are closed due to COVID-19 or because the child or family member is sick and/or required to quarantine.
Amounts received under all three benefits program are taxable and a 10% withholding tax will be applied at source. T4A slips will be issued by the CRA to reflect the total COVID-19 benefits received and the amounts withheld at source.
The Response Plan initially contained a CERB to support workers who have lost income due to the COVID-19 pandemic. The CERB replaced the previously announced Emergency Care Benefit and Emergency Support Benefit. The CERB was available from March 15, 2020 until September 26, 2020. The last date to apply is December 2, 2020.
The CERB provided $2,000 over a four-week period for up to 28 weeks, which is accessible online through CRA’s My Account or over the phone by automated service starting April 6, 2020. Canadians will begin to receive CERB payments by direct deposit or by cheque within 10 days of submitting an application. Payments are retroactive to the individual’s eligibility date. The CERB is a taxable benefit and must be reported in the 2020 income tax return.
Eligibility criteria for the CERB are as follows:
- Canadian resident with a social insurance number (workers who are not Canadian citizens or permanent residents – including temporary foreign workers and international students – may be eligible to receive the Benefit if they meet the other eligibility requirements.).
- At least 15 years old.
- Eligible for EI regular or sickness benefits or stopped working due to COVID-19, for example:
- Let go or hours reduced to zero.
- Quarantined or sick with COVID-19 or taking care of others who are sick or quarantined.
- Taking care of dependents whose care facility is closed due to COVID-19.
- Income of at least $5,000 in 2019 or in the 12 months prior to the date of application.
- Did not receive more than $1,000 in combined employment and/or self-employment income for 14 or more consecutive days in the initial four-week benefit period. For subsequent claims, the applicant cannot have earned more than $1,000 in income for the entire four-week benefit period of the new claim.
- If allowed by the province or territory, workers can receive provincial or territorial support payments in addition to the CERB.
The income of at least $5,000 can be from income earned outside of Canada and can come from any or a combination of the following sources:
- Employment and self-employment.
- Workers who are not eligible for EI can include maternity and parental benefits under the EI program and/or similar benefits paid in Quebec under the Quebec Parental Insurance Plan.
- Non-eligible dividends (generally, those paid out of corporate income taxed at the small business rate).
Workers cannot receive both EI and CERB for the same period. Workers already receiving EI regular benefits will continue to receive these benefits until the end of the benefit period. Workers who qualify for EI and who have lost their job can continue to apply for EI. Workers should also continue to apply for other EI benefits, including maternity, parental, caregiving, fishing and worksharing. Claims by workers who became eligible for EI regular or sickness benefits on March 15, 2020 or later, will be automatically processed through the CERB. Starting April 6, 2020, a single portal assists workers with both CERB and EI applications and guide workers to the appropriate benefit. Workers who were eligible for EI retain their eligibility to receive EI once they stop receiving the CERB, and the period during which they received the CERB does not impact EI entitlement.
On April 15, 2020, the federal government extended the scope of the CERB to seasonal workers who have exhausted their right to regular EI benefits, and who are unable to undertake their regular seasonal work due to the pandemic. Workers who have recently exhausted their regular EI benefits and are unable to find employment or return to work due to the pandemic also now have access to the CERB. In addition, artists may receive royalty payments for copyrighted works produced before March 1, 2020, while collecting the CERB. These modifications are retroactive to March 15, 2020.
In guidance published on April 21, 2020, the CRA stated that where an employer rehires an individual who received or continues to receive the CERB during an eligibility period that overlaps with any period during which the employer claims the CEWS in respect of the rehired individual, such individual may have to repay some or all of the CERB.
The Government of Canada is working with provinces and territories through a new transfer to share the cost of a temporary wage boost for low-income essential workers (those earning less than $2,500 per month). Essential workers are those that the provinces and territories have deemed essential in fighting COVID-19, including front-line hospitals and nursing home workers, food suppliers, or essential retail service providers. Quebec and British Columbia have already implemented direct wage support for such low-income essential workers.
For post-secondary students and recent graduates who are not eligible for the CERB or EI, but who are unable to find full-time employment or work due to COVID-19, the government introduced the Canada Emergency Student Benefit (“CESB”). The CESB provides $1,250 per month for eligible students from May to August 2020, and $2,000 per month for students with dependents and those with permanent disabilities. The CRA stated that all applications for the CESB must be submitted before September 30, 2020. The CESB is administered by the CRA.
Canada’s First Ministers announced a Federal/Provincial/Territorial Safe Restart Agreement that will establish a temporary income support program to provide workers with up to ten days of paid sick leave related to COVID-19.
CRA announced new T4 reporting requirements for the 2020 taxation year. These additional reporting requirements will apply to all employers, and will be used to validate payments under the CEWS, the CERB, and CESB. Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.
Longer-Term Income Support for Workers
The maximum duration of the Work-Sharing program, which provides EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers, is extended from 38 weeks to 76 weeks. In addition, eligibility requirements have been eased and the application process has been streamlined.
Income Support for Individuals
The Response Plan contains measures to boost assistance to low- and modest-income families through $7.5 billion of additional payments which will be made under existing benefit programs as follows:
- A one-time special payment of a GST/HST credit was paid on April 9, doubling the maximum GST/HST credit for qualifying households for the 2019-2020 benefit year.
- The Canada Child Benefit (“CCB”) will be increased in July for the 2020-2021 benefit year. The maximum monthly benefit will increase to $6,765 per child under the age of six and to $5,708 per child aged 6 to 17. This is in addition to the one-time additional $300 per child qualified CCB recipients received with their May 2020 payment as part of the Government’s response to COVID-19.
Beginning in October, the CRA will conduct benefits validation reviews. Individuals that have not filed their 2019 tax returns should do so as soon as possible to avoid any future interruptions to CCB and/or GST/HST credit payments. Once 2019 tax returns are filed and assessed, such payments will be reinstated.
In recognition of the volatility in stock market conditions, the Response Plan also includes a measure to reduce required minimum withdrawals from Registered Retirement Income Funds (“RRIFs”) by 25% for 2020, to provide flexibility to annuitants who might otherwise be forced to liquidate investments to meet minimum RRIF withdrawal requirements. The Response Plan also notes that similar rules will apply to individuals who are receiving variable benefit payments under defined contribution registered pension plans.
While the Response Plan contemplates expanding the tools that the Canada Mortgage and Housing Corporation (the “CMHC”) and other mortgage insurers offer to lenders to increase flexibility for homeowners to defer mortgage payments on CMHC-insured mortgage loans, there is no suggestion that the Government of Canada intends to introduce measures to defer repayments of amounts withdrawn from registered retirement savings plans under the homebuyers’ plan.
During the week of July 6, 2020, seniors eligible for the Old Age Security (“OAS”) pension received a one-time, tax-free payment of $300 plus an additional $200 for seniors eligible for the Guaranteed Income Supplement. Guaranteed Income Supplement (“GIS”) and Allowance payments are temporarily extended for seniors whose 2019 income information has not been assessed. Seniors are encouraged to submit their 2019 income information as soon as possible and no later than October 1, 2020 to avoid an interruption in benefits.
The Government of Canada provides a one-time, tax-free, non-reportable payment of $600 to help Canadians with disabilities who are holders of a valid Disability Tax Credit certificate, and are beneficiaries as at July 1, 2020 of any of the following: Canada Pension Plan Disability; Quebec Pension Plan Disability Pension; or Disability supports provided by Veterans Affairs Canada. Those who are eligible but never applied for the Disability Tax Credit, or holds a certificate that expired in 2019, must apply by September 25, 2020. Seniors with disabilities, who were eligible for the one-time seniors payment announced on May 12, 2020 (above), will also be eligible for the one-time payment to persons with disabilities. Those eligible for both payments will receive a total amount of $600 broken into 2 payments: (i) an additional $300 for seniors who received the $300 one-time OAS pension payment; and (ii) an additional $100 for seniors who received the $500 one-time payment for both the OAS pension and the GIS or the Allowance.
On December 2, 2020, the government introduced Bill C-14 which includes measures that would:
- introduce a temporary and immediate support for low- and middle-income families who are entitled to the Canada Child Benefit, totaling up to $1,200 in 2021 for each child under the age of six;
- ease the financial burden of student debt for up to 1.4 million Canadians by eliminating the interest on repayment of the federal portion of the Canada Student Loans and Canada Apprentice Loans for one year (2021-2022);
Flexibility for Taxpayers
The CRA deferred the filing due date for 2019 tax returns as follows:
- for corporations:
- June 1, 2020, for T2 returns with a filing deadline after March 18, 2020, and before May 31, 2020, and
- September 1, 2020, for T2 returns with a filing deadline between May 31 and August 31, 2020;
- for individuals (other than trusts): June 1, 2020 (from April 30, 2020);
- for trusts:
- May 1, 2020 (from March 31, 2020) for those having a taxation year ending on December 31, 2019,
- June 1, 2020, for those with a filing due date after March 30, 2020, and before May 31, 2020, and
- September 1, 2020, for returns that would otherwise have a filing due date between May 31 and August 31, 2020;
- for non-residents:
- May 1, 2020, for NR4 information returns under Part XIII;
- September 1, 2020, non-resident individuals electing under section 216(4) who would otherwise have a filing deadline on May 31, or in June, July, or August 2020; and for on-resident taxpayers electing under section 217 who would otherwise have a filing deadline of June 30, 2020;
- June 1, 2020, for non-resident corporations electing under section 216(4) that would otherwise have a filing deadline after March 18 and before May 31, 2020; and
- for information returns, elections, designations and information requests:
- September 1, 2020, for 2019 information returns under Part XVIII and Part XIX of the Income Tax Act; information returns, elections, designations and information requests that would have been due on May 31, or in June, July, or August 2020; and T5013 Partnership Information Return (“T5013 Return”) for partnerships that normally have a filing deadline on May 31, or in June, July, or August 2020.
- June 1, 2020, for T5013 Returns for partnerships that normally have a filing deadline after March 31 and before May 31, 2020; and other information returns, elections, designations and information requests that would have been due after March 18 and before May 31, 2020;
- May 1, 2020, for T5013 Returns for partnerships that normally have a March 31 filing deadline; and the 2019 NR4, Statement of Amounts Paid or Credited to Non-Residents of Canada information return.
The CRA has indicated that no late-filing penalties will be applied to personal, corporate, and trust income tax returns filed on or before September 30, 2020. However, the CRA encourages individuals, corporations, and trusts to file their tax returns as soon as possible.
Any income tax that becomes owing by the taxpayers between March 18, 2020, and September 29, 2020, under Part I of the ITA will be deferred until September 30, 2020. Penalties and interest will not be charged if payments are made by September 30, 2020.
Interest on existing tax debts related to income tax returns from April 1, 2020, to September 30, 2020 will be waived. Penalties and interest assessed on the taxpayer’s account prior to this period will not be cancelled.
Taxpayers who are unable to file their 2019 income tax return on time will continue to receive the GST/HST credit and/or the CCB until the end of September 2020. If the 2019 tax return is not assessed, payment amounts will be based on information from 2018 tax returns.
Taxpayers who are unable to file a return or make a payment by the deadlines as a result of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met. For more information about taxpayer relief and how to make a request to the CRA to have interest and/or penalties cancelled, please go to Canada.ca/taxpayer-relief.
To reduce the administrative burdens and the necessity for taxpayers to meet with tax preparers in person, the CRA will recognize electronic signatures as having met the signature requirements of the ITA on a temporary basis. This will allow certain authorization forms (T183 Information Return for Electronic Filing of an Individual’s Income Tax and Benefit Return, or T183CORP Information Return for Corporations Filing Electronically), which normally require signed originals, to be signed electronically.
Free tax clinics will be held virtually on an interim basis to assist those who depend on this service while respecting physical distance guidelines. Clinics will have greater flexibility to receive and authenticate documents in various ways, including using video communication.
To avoid taxpayers having to declare bankruptcy, the CRA proposes a solution to assist taxpayers and Licensed Insolvency Trustees (“LITs”) in circumstances where the CRA is a creditor and the debtor is experiencing financial hardship. CRA is waiving the default pursuant to section 62.1 of the Bankruptcy and Insolvency Act (“BIA”), and is granting a deferral of payments to the estate up to September 1, 2020. This includes any amounts subject to section 60(1.1) of the BIA as per CRA’s existing Administrative Agreement policy with LITs for proposals that are tabled under Part I of the BIA. For consumer proposals under the BIA, the CRA is accepting an amended proposal deferring payments up to September 1, 2020.
New measures for consumer proposals have been introduced in all provinces. As a result of these orders, debtors who have submitted consumer proposals will be able to “skip” three additional payments between March 13, 2020, and December 31, 2020, without defaulting on their proposal.
Taxpayers may deduct home office expenses under certain conditions. Additional information regarding this deduction can be found here.
The CRA has indicated (and again here) that, pending a review by the Department of Finance Canada, the CRA will not require an employer to terminate an individual’s deferred salary leave plan in the event that the individual defers their leave of absence beyond the six-year maximum deferral period. The CRA has noted that this administrative position will apply regardless of the reason for deferring the leave.