Apr 19, 2021
As you may know, we have supported a request to the CRA to extend the April 30 deadline to June 15. But if the deadline is NOT extended, here are some practical tips to reduce the burden of a COVID tax season.
The Canadian federal government has announced, in addition to extensions to some filing and payment deadlines, a number of measures to financially help Canadian individuals and businesses survive the economic impact of the COVID-19 pandemic. In addition to the extended filing and payment deadlines noted in the table below several programs were created to support individuals, businesses and specific sectors.
Important changes to Canadian tax-filing and payment deadlines
|Individuals||The Deadline to file income tax and benefit returns has been deferred until June 1, 2020.
The deadline to pay any balance due for 2019 has been extended from April 30, 2020 to September 1, 2020. This means individuals will not be assessed any penalties or interest if their balance due is paid by September 1, 2020.
|Self-employed individuals and their spouses or common law partner||For self-employed individuals, or those who have spouses or common law partners that are self-employed, the deadline to pay any balance due for your individual income tax and benefit return has been extended from April 30, 2020 to September 1, 2020. The tax return filing deadline remains at June 15, 2020.|
|Corporations||The deadline of businesses to pay any income tax amounts that become owing or due after March 18, 2020 and before September 1, 2020 has been extended to September 1, 2020. This means businesses will not be assessed any penalties or interest if their balance due is paid before September 1, 2020.|
|Trusts||For trusts with a taxation year end of December 31, 2019, the filing due date of March 31, 2020, was deferred to May 1, 2020.
Furthermore, all trusts that have an upcoming income tax balance due date or an income tax instalment payment due date before September 1, 2020, have had their payment due date effectively extended to September 1. 2020.
Penalty and interest implications for upcoming trust tax obligations not covered by the relief described above will be considered by the Canada Revenue Agency (the “C.R.A.”) on a case-by-case basis.
|Charities||For all charities with an annual Registered Charity Information Return due between March 18, 2020 and December 31, 2020, the filing deadline has been extended to December 31, 2020.|
Limited Wage Subsidy (“L.W.S.”)
The government created a limited 10% wage subsidy of up to $1,375 per eligible employee and an aggregate maximum of $25,000 per employer. Members of an associated group of companies each have their own $25,000 limit. This modest amount is not paid in cash. Rather, it is delivered in the form of a reduction in the remittance of employee source deductions required to be paid to the C.R.A.
The Canada Emergency Wage Subsidy (“C.E.W.S.”)
In general, the C.E.W.S. will reimburse eligible employers 75% of the amount of remuneration paid to eligible employees (to a maximum benefit of $847 per week) for up to 12 weeks, retroactive to March 15, 2020, through August, 2020. The government can extend the subsidy period up to September 31, 2020.
The C.E.W.S. also provides a 100% refund of certain employer-paid contributions to Employment Insurance, Canada Pension Plan, Québec Pension Plan, and Québec Parental Insurance Plan.
Eligible entities are:
Public bodies such as municipalities, local governments, Crown corporations, wholly owned municipal corporations, public educational institutions and hospitals do not qualify for the C.E.W.S.
If a business is an eligible entity it must determine if it qualifies for the C.E.W.S. A business will qualify if:
The following table outlines each claiming period, the month in which a decline in revenue would be required compared to the reference month and the amount revenues must have decreased, in order to qualify for the subsidy.
|Payroll Period||Required reduction in revenue||Reference periods
for revenue comparisons
|Period 1||March 15 –
|15%||March 2020 over:
|Period 2||April 12 –
|30%||April 2020 over:
Be eligible for Period 1
|Period 3||May 10 –
|30%||May 2020 over:
Be eligible for Period 2
The first method used is the one that must be used for all subsequent claims. Given that applications can be made up until September 30, 2020, companies that can weather the storm may want to wait so they can determine what eligibility method is best for them.
To provide greater certainty to employers, once an employer is found eligible for the C.E.W.S. for a specific claiming period, the employer automatically qualifies for following periods.
Employers are able to apply through the C.R.A.’s “My Business Account” portal if they have registered previously for this service or a web-based application. Signing up for direct deposit should expedite the receipt of funds once an application is approved.
If it is determined that an employer did not meet the eligibility requirements, repayment of the amounts received under the program will be required.
Applicants that engage in artificial transactions to reduce revenue for the purpose of claiming the C.E.W.S. must repay the subsidy and are subject to a civil penalty equal to 25% of the value of the subsidy claimed. In egregious cases, an applicant may face criminal fines of up to 200% of the subsidy and imprisonment of up to five years.
The government discloses each applicant’s identity on its website.
The C.E.W.S. is reduced by any amount received under the L.W.S.
The Canada Emergency Business Account (“C.E.B.A.”)
This program provides interest-free loans of up to $40,000 to small businesses and not-for-profits that had a payroll in 2019 of between $20,000 and $1,500,000. If 75% of the loan balance is repaid before December 31, 2022, the remaining 25% of the principal will be forgiven.
The Canada Emergency Commercial Rent Assistance Program (“C.E.C.R.A.”)
At the time of writing, legislation for this program had not been released. The proposed program will see the Federal and Provincial governments provide owners of commercial real property (incorporated or not) with a forgivable loan of 50% of an eligible small business’s rent for April, May and June 2020.
The loan will be forgiven if the commercial property owner enters into a rent reduction agreement with its eligible small business tenants, agreeing to reduce the gross rent payable by at least 75% during the rent reduction period and to not evict the eligible small business tenant while the agreement remains in place.
Eligible small businesses are businesses, including non-profit and charitable organizations, that:
Landlords must also qualify. To be eligible the property owner must meet the following conditions:
The C.E.C.R.A. in its proposed form has not been passed and is controversial as it is a program to help small businesses but cannot compel their landlords to apply.
The Business Credit Availability Program (B.C.A.P.)
The following initiatives are covered by the B.C.A.P.:
The Large Employer Emergency Financing Facility (“L.E.E.F.F.”)
The L.E.E.F.F. will be available to for-profit businesses (other than those in the financial sector) as well as not-for-profit businesses, such as airports, with annual revenues generally in the order of $300 million or higher
Eligible applicants must be seeking financing of about $60 million or more, have significant operations or workforce in Canada, and not be involved in active insolvency proceedings.
Other Programs for Businesses
Other business programs will fund 100% of the minimum wage for certain summer jobs for students, provide funding for innovative early-stage companies, support and support businesses in Northern Territories as well as small and medium sized indigenous businesses and financial institutions.
The Canada Emergency Response Benefit (“C.E.R.B.”)
The C.E.R.B. provides short term financial assistance to workers who have lost their jobs or who have stopped working because of COVID-19. The C.E.R.B. provides $500 per week, for any 16 weeks from March 15, 2020 to October 3, 2020.
The C.E.R.B. is available to workers who:
The C.E.R.B. temporarily replaces any employment insurance (“EI”) payments for which an employee is eligible. The EI benefits are not lost and will start where they left off after C.E.R.B. entitlement ends. Individuals must reapply for the C.E.R.B. every 4 weeks and attest to meeting the requirements.
As of May 13, 2020 7.83 million people had applied for the C.E.R.B. and benefits of $30.48 billion had been paid
The Canada Emergency Student Benefit (“C.E.S.B.”)
The C.E.S.B. is designed to assist students (especially post-secondary students) and recent graduates whose abilities to continue their studies, secure and retain summer employment, pay their bills, or pay tuition costs are adversely impacted by the COVID-19 pandemic.
The C.E.S.B. amount is $312.50 per week in general for eligible students and $500 per week for eligible students with dependents or permanent disabilities and is payable in four-week installments of $1,250 or $2,000 respectively.
To be eligible for the C.E.S.B., the applicant must be a student who is a Canadian citizen, permanent resident, or an individual registered as an Indian under the Indian Act. For this purpose, a student is an individual who meets any of the following conditions:
In addition, the applicant, for reasons related to COVID-19, must be (i) unable to work, (ii) seeking work and unable to find it, or (iii) working but being paid less than a specified amount during the four-week period for which applicant applies for the C.E.S.B. The applicant cannot receive income from employment or self-employment of more than the yet to be announced specified amount, EI benefits, allowances or the C.E.R.B. during the four-week period for which the applicant applies for the C.E.S.B.
The C.R.A. has suspended collection activities on new debts and is willing to provide more flexible payment arrangements. Pre-existing debts will be addressed on a case-by-case basis.
The C.R.A. has reduced its efforts to contact S.M.E.s to initiate any income tax audits or post assessment GST/HST audits until further notice. The C.R.A. also intends to limit its interactions with taxpayers to high risk and exceptional cases. Other audits have been temporarily suspended.
The deadline for tax objections has extended for objections that are due between March 18, 2020 and June 29, 2020, to June 30, 2020. Objections filed by taxpayers regarding benefits and credits will continue to be processed, however, the C.R.A. is holding other objections in abeyance and will not attempt to collect the related tax balances.
The Tax Court of Canada has extended all its normal deadlines.
 The original program was scheduled to end on in May 2020 but has been extended through August 2020.
 On May 15, 2020 the government announced that it will adjust these criteria to allow more businesses to qualify but no details have been provided
 Employers must select an approach when first applying for the C.E.W.S. and use that approach for the entire duration of the program
 The original program was scheduled to end after Period 3 but has been extended through August 2020. Revised eligibility criteria have been promised but details have not yet been released.
 Commercial Real Property is defined as commercial properties with small business tenants. Commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their small business tenants.
 These criteria are under review
 Small businesses can compare revenues in April, May and June of 2020 to that of the same period in 2019 to measure revenue losses. They can also use an average of their revenues earned in January and February of 2020.
 Regulations have not yet been issued.
 Yet been announced