On March 18, 2020, the Canadian government announced a new set of economic measures in a response plan to support the Canadian economy during the COVID-19 global pandemic. It is designed to help stabilize the Canadian economy, which includes measures to assist both individuals and businesses through direct transfers, tax deferrals, and measures to ensure businesses continue to have access to credit. It is expected to provide up to $27 billion in direct support to workers, families and businesses and $55 billion to meet short-term liquidity needs through measures such as tax deferrals.
While specific legislative proposals in respect of the COVID-19 response plan have yet to be released, what follows is a summary of the principal proposed tax measures announced by the Canadian government.
Federal Tax Measures for Canadian Businesses
Helping Businesses Retain their Employees
The COVID-19 response plan contains measures to help businesses retain their workers. To support small businesses that are facing revenue losses and to help prevent lay-offs, the federal government proposes to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum of $1,375 per employee and $25,000 per employer. The response plan states that businesses will be able to benefit immediately from this support by reducing their income tax remittances in respect of employee remuneration.
Flexibility for Businesses Filing Taxes
The response plan contains measures that will allow businesses to defer tax payments until after August 31, 2020 for 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. Note that the response plan does not specifically address any deferral of the filing obligations of corporations or partnerships.
The response plan also indicates that for the vast majority of businesses, the CRA will temporarily suspend audit interactions with taxpayers and their representatives. The CRA will also refrain from initiating any post-assessment GST/HST or income tax audits with small or medium businesses for the next four weeks.
Canadian Sales Taxes (GST/HST)
So far, the Federal government has yet to announce any relief measures from a sales tax perspective for GST/HST registrants who are directly impacted by the COVID-19 pandemic. This means that as of March 18, 2020, every person who is registered for GST/HST must act with diligence in filing their sales tax returns and meet any applicable deadlines despite the hardship caused by the COVID-19 pandemic.
Federal Tax Measures for Canadians
Temporary Income Support for Individuals
The COVID-19 response plan contains specific measures to provide income support to workers without paid sick leave and parents who are forced to stay home to supervise children.
For workers who qualify for Employment Insurance (EI), the response plan will waive the one-week waiting period and the requirement that the applicant provide a medical certificate to claim EI sickness benefits.
For individuals who do not qualify for EI sickness benefits (including self-employed persons) and are quarantined or sick with COVID-19 or are taking care of family members who are sick with COVID-19, the Response Plan includes a new Emergency Care Benefit of up to $900 in bi-weekly payments for up to 15 weeks. The Emergency Care Benefit will also be extended to parents of children who require care or supervision due to school closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.
Longer-Term Income Support for Workers
The response plan introduces an Emergency Support Benefit that will be delivered through the CRA to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment. In addition, the federal government is proposing to implement an EI Work Sharing Program, which will provide EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers, by extending the eligibility of such agreements to 76 weeks, easing eligibility requirements, and streamlining the application process.
Income Support for Individuals
The COVID-19 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 to be paid by early May 2020, which will double the maximum GST/HST credit for qualifying households for the 2019-2020 benefit year.
An increase to the maximum annual Canada Child Benefit (CCB) of $300 per child for the 2019-2020 benefit year, which is expected to be paid as part of the May 20, 2020 CCB payment date.
Flexibility for Taxpayers
The CRA will defer the filing due date for 2019 tax returns for individuals until June 1, 2020 (from April 30, 2020). Any income tax that becomes owing by the taxpayers between March 18, 2020 to August 31, 2020 will be deferred until after August 31, 2020.