Canada Introduces Support Measures for Businesses and Employees Affected by COVID-19

March 20, 2020

On March 18, 2020, Canada’s federal government announced measures designed to ease the financial strain resulting from the actions that have been taken to slow the spread of the COVID-19. These measures include substantial income support for workers and significant credit availability for affected businesses.

Update: On March 24 and 25, 2020 the House of Commons and Senate of Canada passed Bill C-13, which provides the legislative authority for the measures discussed in this post. It is expected that the key provisions of Bill C-13 will come into force immediately. (March 25, 2020)

The following is a summary of provisions of the plan that are of particular importance to businesses, including measures that are designed to help their employees.

Support for Businesses

Five days after announcing an initial set of measures designed to support Canadian business, the Government of Canada provided additional relief in its March 18, 2020 statement, the key elements of which are set out below.

Enhancing business credit availability

More than $10 billion will now be available to Canadian businesses under the newly announced Business Credit Availability Program (BCAP). Under the plan, the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) will coordinate with private lenders on credit solutions for businesses, with a focus on sectors such as tourism, the airline industry and oil & gas.

Boosting the banks’ lending capacity

In addition to recent Bank of Canada rate cuts, economic liquidity will be enhanced as a result of the Office of the Superintendent of Financial Institutions’ (OSFI) announcement that the Domestic Stability Buffer will be lowered, giving the major Canadian banks $300 billion in additional lending space. Additional relief was announced with respect to mortgage lending.

Reducing the need for layoffs

Small businesses will be eligible for 3-month temporary wage subsidy equal to 10% of total remuneration, to a maximum of $1,375 per employee or $25,000 per employer. Businesses targeted for this subsidy include those eligible for the small-business tax deduction, in addition to non-profits and charities.

Reducing the tax payment and audit burden

The CRA will allow businesses to defer income tax payments until August 31, 2020 without interest or penalty. In addition, most ongoing audits will be suspended and no new GST/HST or income tax audits will be initiated for the next four weeks.

Support for Workers

Easier access to EI sickness benefits

Canadians who don’t have paid sick leave or similar benefits and who are ill, in quarantine or forced to stay home with their children, may now claim Employment Insurance (EI) Sickness Benefits immediately. Normally there is a one-week waiting period. In addition, sickness benefits may be claimed without a medical certificate.

A short-term emergency benefit

Up to $900 will be available on a biweekly basis for self-employed workers and others who do not qualify for EI Sickness Benefits who are sick with COVID-19 and/or quarantined (or who are taking care of a family member with COVID-19). This Emergency Care Benefit (ECB) will also be available to parents of children who require care due to school closings, regardless of their EI eligibility. Administered by the CRA, the ECB may be claimed for a maximum of 15 weeks.

Additional support over the longer term

Those who face loss of employment (either total or partial) and who are ineligible for EI will be able to access an Emergency Support Benefit (ESB) as part of a new $5 billion initiative.

EI changes to facilitate mutually agreed reductions in employee hours

In a key development for employers announced on March 11, the maximum duration of the EI Work Sharing Program will be extended to 76 weeks. This program provides a top-up for workers who agree to reduce normal hours when their employer is facing financial hardship.

Other Measures for Individuals

In addition to work-related support are several measures designed to help disadvantaged and low-income groups, in addition to a 6-month Canada Student Loan repayment moratorium and a reduction in RRIF minimum withdrawal requirements. There is also a one-month extension of the income tax filing deadline and a provision allowing deferral of income tax payments owing until September 1, 2020 that parallels the arrangement for business taxpayers.

Going Forward

We are continuing to monitor the developments and will let you know when further information becomes available.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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