March 27, 2020: Federal Tax Response to COVID-19

TAX UPDATE: Response to COVID-19

March 27, 2020

Prime Minister Justin Trudeau addressed Canadians today to announce further support for Canadian businesses. Today’s announcements included the following:

• A 75 percent wage subsidy for qualifying businesses for up to three months retroactive to March 15, 2020. Details on eligibility criteria will be shared before the end of the month.
• Goods and Services Tax (GST) / Harmonized Sales Tax (HST) remittances, as well as customs duties and sales tax owed on imports, will be deferred until June 30, 2020.
• The launch of the new Canada Emergency Business Account, which guarantees interest free loans of up to $40,000 to small businesses and not-for-profits to help cover operating costs during a period where revenues have been temporarily reduced. To be eligible for this program, businesses will need to show they paid between $50,000 to $1M in total payroll in 2019. Under certain conditions, up to $10,000 of the loan may be forgiven. Businesses should contact their financial institution to apply.
• Other loan guarantee and co-lending programs.

CRA also announced today additional extensions to income tax filings that specifically fall under the Income Tax Act:

• Unless specifically excluded, any tax filings that are due after March 18, 2020 now have a deadline of June 1, 2020. These include the filing of tax and information returns, elections, designations, and responses to information requests. Payroll deductions remittances and all related activities are excluded (except to the extent they relate to the reduction of remittances related to the Temporary Wage Subsidy for Employers). Please note that this measure does not apply to certain investment tax credit provisions (i.e. SR&ED).
• Trusts, partnership and NR4 information returns are all due May 1, 2020.
• For any objection requests due March 18, 2020 or later, the deadline is effectively extended until June 30, 2020.

The Quebec government also announced the following measures:

• Businesses are able to postpone filing their returns and remitting payments until June 30, 2020 with respect to Quebec Sales Tax.
• The processing of requests for tax credits and tax refunds intended for businesses will be accelerated.
• The processing of income tax returns that result in refunds for individuals will also be accelerated.

Please note these announcements have not been released in a formal communication by the government and without further details, conclusions cannot be made on how they truly impact you and your business. Our preliminary review of the announcements has us asking the following questions which we need clarity on:

Wage Subsidy:

• 1. Does the government intend the newly announced program to be a replacement of the previously announced Temporary Wage Subsidy for Employers or is it an enhancement?
• 2. If the government intends this to be an enhancement, what are the maximum subsidies per employee (previously $1,375) and employer (previously $25,000) given the increased wage subsidy percentage of 75 percent?
• 3. As the subsidy is significantly higher than the percentage of taxes generally withheld, is the subsidy claimable over a longer period than three months?
• 4. Does the government intend to have the subsidy apply against only federal income tax or could it be applied against Canada Pension Plan contributions or Employment Insurance premiums?
• 5. How will the government define an Eligible Employer under this program?

GST / HST Remittances:

• 1. Does the government intend on deferring the filing deadline of GST / HST returns as this falls outside of the Income Tax Act (i.e. Excise Tax Act)?

What Does This Mean?

While we appreciate that this is a show of support by our government for businesses and we are encouraged by commitment to helping Canadians through this crisis, it is important to remember that no details accompanied today’s announcements. At this point we must proceed with caution until clarification is provided by the government.

Details are expected to be released no later than Monday, March 30, 2020 and we will provide you with information as soon as it becomes available.

MNP is committed to sending regular email updates on government programs to address the pandemic. For insights, visit MNP COVID-19 Business Advice Centre – a dedicated microsite to providing information and insights, visit MNP COVID-19 Business Advice Centre – a dedicated microsite to providing information and solutions on how to manage through the impact of COVID-19.

For more information, contact your local MNP Advisor or visit MNP.ca.