Taxation Aspects of Canada’s COVID-19 Economic Response Plan

March 27, 2020

The Government of Canada’s COVID-19 Economic Response Plan is a set of economic measures that will be implemented to stabilize the economy and to help Canadians facing hardship as a result of the COVID-19 outbreak. The Plan, which will provide indirect support through increased flexibility as well as up to $27 billion in direct support to Canadian individuals and businesses, includes a number of tax-related measures.  

Update: On March 27, 2020 the Government of Canada announced additional economic measures to support the stabilization of the economy. These measures include (1) an increase in the wage subsidy described below to 75 percent; and (2) guaranteed bank loans of up to $40,000 for small businesses.   The details of these measures are not yet available (particularly as to whether the wage subsidy will be subject to a cap). In addition, HST payments, as well as duties and taxes owed on imports, will be deferred until June which will provide liquidity assistance for businesses over the next three months.  The details of this measure can be found at https://www.canada.ca/en/department-finance/news/2020/03/additional-support-for-canadian-businesses-from-the-economic-impact-of-covid-19.html. Finally, the Government stated that the that the new $2000-a-month Canada Emergency Response Benefit will be tax-free.

We will be updating this post once further details become available.   (March 27, 2020)

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)

Goods and Services Tax Credit

Total cost/impact: $5.5 billion

The Government is proposing a one-time Goods and Services Tax credit (GSTC) that will double the maximum annual GSTC payment amounts for the 2019-20 benefit year. The credit is available for low- and modest-income families and is expected to boost the income of those qualifying by $400 for single individuals and close to $600 for couples.

Delays/Flexibility for Taxpayers

Total cost/impact: $55 billion

Deferral of the filing deadline for 2019 tax returns

For individuals (other than trusts), the deadline for filing tax returns will be deferred to June 1, 2020.  However, the Canada Revenue Agency encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined.

For trusts having a taxation year ending on December 31, 2019, the due date for filing returns will now be May 1, 2020.

Deferral of the payment of income tax

For all taxpayers (including corporations but excluding trusts), the payment of income tax amounts may be deferred until after August 31, 2020, if the amount becomes owing on or after March 18, 2019 and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. Further, no interest or penalties will accumulate on these amounts during this period.

The Canada Revenue Agency will not initiate any post assessment GST/HST or income tax audits with respect to any small or medium businesses for the next four weeks. For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives.

Flexibility for taxpayers

The CRA will temporarily recognize electronic signatures as meeting the requirements of the Income Tax Act. This provision applies to authorization forms T183 or T183CORP.

The CRA is now offering services that are traditionally available in-person, such as its Outreach Program (for individuals) and its Liaison Officer service (for small businesses) over the phone.

Delay of Budget 2020

The 2020 Federal Budget, which was scheduled to be presented in the House of Commons on March 30, 2020, will be delayed since Parliament been suspended for at least five weeks as of March 13, 2020.

Wage Subsidy for Eligible Small Employers 

Total cost/impact: $3.8 billion

The government is proposing to provide a temporary wage subsidy to eligible small employers to reduce their remittance of income tax withheld on their employees’ remuneration. Eligible small employers will include corporations eligible for the small business deduction, as well as non-profit organizations and charities. The subsidy will be available for a period of three months and will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

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.

Stay in Touch with Knowledge Hub