Taxation Aspects of Ontario’s Action Plan: Responding to COVID-19 (March 2020 Economic and Fiscal Update)

March 26, 2020

On March 25, 2020, the Government of Ontario released a $17 billion Action Plan that outlines the first steps in Ontario’s plan to tackle the COVID‑19 outbreak. As described below, the Action Plan includes tax-related measures that are collectively expected to cost the province $90 million for the 2019-2020 taxation year and $315 million for the 2020-2021 taxation year.

Employer Health Tax Exemption

Effective Dates: January 1, 2020 - January 1, 2021

Employer Health Tax (EHT) is a payroll tax paid by employers based on their total annual Ontario remuneration. The government proposes to retroactively double the EHT exemption from $490,000 to up to $1 million of an eligible employer’s payroll. Eligible employers include private-sector employers with total annual Ontario remuneration of less than $5 million and registered charities.

Increasing the exemption to $1 million would provide up to $9,945 of additional EHT relief per eligible employer. With this additional relief, about 57,000 private-sector employers would pay less EHT, including about 30,000 who would not pay EHT in 2020.

Interest and Penalty Relief

Effective Dates: April 1, 2020 - August 31, 2020

Penalties and interest will be waived for Ontario businesses that miss required filing or remittance deadlines under the following provincially administered tax programs:

  • Employer Health Tax;
  • Tobacco Tax;
  • Fuel Tax;
  • Gas Tax;
  • Beer, Wine and Spirits Taxes;
  • Mining Tax;
  • Insurance Premium Tax;
  • International Fuel Tax Agreement;
  • Retail Sales Tax on Insurance Contracts and Benefit Plans; and
  • Race Tracks Tax.

No action is required by the business to ensure the penalties and interest will not apply. The relief is expected to save businesses up to $25 million and it is estimated that the measure will help provide up to $6 billion to support the liquidity needs of approximately 100,000 Ontario businesses.

Regional Opportunities Investment Tax Credit

Effective Dates: March 25, 2020 - March 25, 2023 (mandatory review every three years)

The government is proposing to introduce a new 10 percent refundable Regional Opportunities Investment Tax Credit. The credit will be available to Canadian-controlled private corporations (CCPCs) that make expenditures in excess of $50,000 and up to a limit of $500,000 on qualifying investments that become “available for use” (determined in accordance with the Income Tax Act (Canada)) on or after March 25, 2020 in specified regions of Ontario outside the Greater Toronto Area (GTA).

A qualifying investment will include an eligible expenditure for capital property included in Class 1 and Class 6 for the purposes of calculating capital cost allowance; e.g. expenditures for constructing, renovating or acquiring eligible commercial and industrial buildings and other assets.

The government proposes to include a mandatory review to be undertaken every three years, which would evaluate the credit for effectiveness, compliance burden and administrative costs.

Postponing Property Tax Reassessment

Effective Date: Assessments for the 2021 Taxation Year

The Property Tax Reassessment updates the assessed values of properties in Ontario every four years. The Municipal Property Assessment Corporation (MPAC) was scheduled to issue new assessments for more than five million properties beginning in the spring of 2020 for the 2021 taxation year.

The 2021 property tax reassessment will be postponed in order to redistribute government resources and provide stability for Ontario’s property taxpayers and municipalities. This means that assessments for the 2021 taxation year will continue to be based on the same valuation date (January 1, 2016) that was in effect for the 2020 taxation year

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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