Chartered Professional Accountants

Canada’s COVID-19 Economic Response Plan

CANADA’S COVID-19 ECONOMIC RESPONSE PLAN – KEY POINTS FOR BUSINESSES AND INDIVIDUALS

Since the beginning of March, restrictions and measures related to COVID-19 have rapidly escalated. While the first stages focused on public health and safety, in very short order, businesses and personal finances began to be affected. It is clear that these challenges will become worse before they get better. In an effort to combat these effects, the Government of Canada released a series of financial measures in mid-March.

This webpage summarizes selected government comments up to April 1, 2020.

INDIVIDUALS

Tax Return Due Date Deferral: The personal tax filing due date will be deferred until June 1, 2020. However, those expecting refunds or benefits (such as the GST/HST credit, Guaranteed Income Supplement and Canada Child Benefit) should file as early as possible. The government release encourages Canadians not to delay their filings in order to ensure their income-tested benefits are accurately computed.

Tax Payment Deferral: Taxpayers may defer, until after August 31, 2020, the payment of income tax amounts that become owing on or after March 18, 2020 (also including installments) and before September 2020. The government documents indicate that payment will be deferred “until after August 31, 2020”, which seems to imply payment will be due on September 1. No interest or penalties will accumulate on these amounts during this period.

Individuals Without Paid Sick Leave: For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to stay home to care for children, the government is:

  • Waiving the one-week waiting period for those in imposed quarantine that claim Employment Insurance (EI) sickness benefits, effective March 15, 2020.
  • Waiving the requirement to provide a medical certificate to access EI sickness benefits.
  • Introducing the Emergency Care Benefit providing up to $900 bi-weekly, for up to 15 weeks (comparable to EI sickness benefit). This benefit would provide income support to:
    • workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for EI sickness benefits;
    • workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an elderly parent, but do not quality for EI sickness benefits; and
    • parents with children who require care or supervision due to school closures, and are unable to earn employment income, regardless of whether they qualify for EI or not.
  • Introducing the new Canada Emergency Response Benefit (replacing the above) providing a taxable benefit of $2,000 a month for up to 4 months to:
    • workers who must stop working due to COVID-19 and do not have access to paid leave or other income support.
    • workers who are sick, quarantined, or taking care of someone who is sick with COVID-19.
    • working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures.
    • workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work.
    • wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.

The eligibility period would begin on March 15, 2020 and end on October 3, 2020.

To be eligible a worker will need to meet the following criteria:

  • Be at least 15 years of age and a resident of Canada
  • have at least $5,000 for 2019 or in the 12 month period preceding the day on which the worker make an application from the following sources.
    • employment;
    • self-employment;
    • certain EI benefits (maternity and parental benefits); and
    • allowances, money or other benefits paid to the person under a provincial plan because of pregnancy or in respect of the care by the person of one or more of their new-born children or one or more children placed with them for the purpose of adoption.

A worker is eligible for an income support payment if the worker, whether employed or self-employed, ceases working for reasons related to COVID-19 for at least 14 consecutive days within the four-week period in respect of which they apply for the payment; and during that time they were not working, they do not receive employment, self employment and EI benefits and allowances listed above.

If a worker quit their work voluntarily, they would not be eligible for the program.

Application for the Benefit will be available beginning of the first week April 2020, and require Canadians to attest (and continue to attest every two weeks) that they meet the eligibility requirements. Individuals can apply through CRA’s MyAccount, their My Service Canada Account, or by calling an automated toll-free number not yet released.

Further details on about the program can be found in the link below: https://www.canada.ca/en/services/benefits/ei/cerb-application.html

Application details and instructions can be found in the link below:

https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html

Specifically for the Province of BC:

B.C. Emergency Benefit for Workers: this benefit will provide a tax-free $1,000 payment to British Columbians whose ability to work has been affected by the outbreak. The benefit will be a one-time payment for British Columbians who receive federal Employment Insurance (EI), or the new federal Emergency Care Benefit or Emergency Support Benefit as a result of COVID-19 impacts. This includes workers who have been laid-off, who are sick or quarantined, parents with sick children, parents who stay at home from work while child care centres and schools are closed, and those caring for sick family members, such as an elderly parent. The workers can be EI-eligible and non-EI eligible, such as the self-employed. The benefit will be paid to B.C. residents, in addition to their federal income supports.

Expanded the B.C. Climate Action Tax Credit: In July 2020 eligible families of four will receive up to $564 and eligible individuals will receive up to $218 in an enhanced payment. This boosts the regular climate action tax credit payment of up to $112.50 per family of four and up to $43.50 per adult.

Longer-Term Income Support

  • An Emergency Support Benefit will provide up to $5.0 billion in support to workers who are not eligible for EI and who are facing unemployment. The individual amounts and process will be disclosed shortly.
  • Implementing changes to the EI Work Sharing Program, which provides EI benefits to workers who agree to reduce their normal working hour 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.
  • Low/Modest Income Individuals
    • A one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC) will be made. This will double the maximum annual GSTC payment amounts and result in an average boost to income for those benefitting by close to $400 for single individuals and close to $600 for couples.
    • The maximum annual Canada Child Benefit payment amounts would be increased by $300 per child for the 2019-20 benefit year. This will be added to the May, 2020 benefit cheque.
  • Canadians Abroad: The Emergency Loan Program for Canadians Abroad will provide the option of an emergency loan to Canadians in need of immediate financial assistance to return home or to temporarily cover their life-sustaining needs while they work toward their return. Each application will be assessed according to their specific situation and needs. This emergency assistance is a repayable loan. Eligible Canadians currently outside Canada and needing help to return home can contact the nearest Government of Canada office (https://travel.gc.ca/assistance/embassies-consulates) or Global Affairs Canada’s 24/7 Emergency Watch and Response Centre in Ottawa at +1 613-996-8885 (collect calls are accepted where available) or email sos@international.gc.ca.
  • Students: A six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans will be provided. For the Province of BC, the Province is freezing B.C. student loan payments for six months, starting March 30, 2020.
  • Minimum RRIF Withdrawals: The required minimum withdrawals from Registered Retirement Income Funds (RRIFs) will be reduced by 25% for 2020. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.

BUSINESSES

Tax Payment Extension: Businesses may defer, until after August 31, 2020, the payment of income tax amounts that become owing on or after March 18, 2020 and before September 2020. This relief would apply to tax balances due, as well as instalments. No interest or penalties will accumulate on these amounts during this period.

GST Remittance and Customs Duty Payments : Businesses, including self-employed individuals, may defer the payment of GST/HST as well as custom duties owing on their imports until June 30, 2020.

The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

For GST and customs duty payments for imported goods, deferral will include amounts owing for March, April and May.

Other Payment and Filing Extensions: No comment was made about changing the filing and payments dates for payroll, GST/HST, and other non-income tax items.

New Canada Emergency Business Account: this is a new loan program implemented by rapidly by eligible financial institutions in corporation with Export Development Canada (EDC).

This program provides interest-free loans of up to $40,000 to small business and not-for-profits to help cover their operating costs during a period where their revenues have been temporarily reduced.

To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000)

More Details to be announced soon.

CRA Audit Activity: CRA will not contact any small or medium businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives.

Liaison Officer Service: The Liaison Officer service is now available over the phone and will be customizing information by ensuring small businesses are aware of any changes such as filing and payment deadlines, proactive relief measures, etc.

Payroll Subsidies: The government is proposing 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. Businesses will benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

More detail on how to calculate the subsidy can be found here: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

Canada Emergency Wage Subsidy: The subsidy will be equal to 75% wage subsidy on the first $58,700 of wages paid per employee or $846.63 per week for qualifying business for up to 3 months, retroactive to March 15, 2020.

To qualify, business with revenues that decreased by at least 30% as a result of COVID – 19 would be eligible for this wage subsidy. Non profits and charities would also be eligible. The number of employees will not affect eligibility which would mean large or small entities would be eligible.

There would be serious consequences for those that game the subsidy.

Preliminary details on the 75% wage subsidy can be found here: https://www.canada.ca/en/department-finance/news/2020/04/the-canada-emergency-wage-subsidy.html

Specifically For the Province of BC:

Employer Health Tax: Businesses with a payroll over $500,000 can defer their employer health tax payments until Sept. 30, 2020.

Provincial Sales Tax: the Province is extending tax filing and payment deadlines for the provincial sales tax (PST), municipal and regional district tax, tobacco tax, motor fuel tax and carbon tax until Sept. 30, 2020.

The scheduled April 1 increase to the provincial carbon tax, as well as the new PST registration requirements on e-commerce and the implementation of PST on sweetened carbonated drinks, will be delayed and their timing will be reviewed by Sept. 30, 2020.

OTHER FILINGS AND ADMINISTRATION

Trust Filing Due Date Deferral: For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

T3 Slips Submission Date: No specific statement was made regarding the deadline for filing T3 slips reporting income taxable to the trust beneficiaries.

Other Returns: Many taxpayers are required to file other tax and information returns. No mention was made of these, including partnership returns and NR4 reporting slips.

EFILE Signatures: In order to reduce the necessity for taxpayers and tax preparers to meet in person, effective immediately the CRA will recognize electronic signatures as having met the signature requirements of the Income Tax Act, as a temporary administrative measure. This provision applies to authorization forms T183 or T183CORP.

FINANCIAL ASSISTANCE

Individuals: Canada’s large banks have confirmed that this support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products. Banks have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness.

Specifically For the Province of BC:

Support for renters and landlords during Covid19: the Province of BC is introducing a new temporary rental supplement, halting evictions and freezing rents, among other actions.  The new rental supplement will help households by offering up to $500 a month towards their rent.

The full list of immediate measures includes:

  • The new temporary rent supplement will provide up to $500 per month, paid directly to landlords.
  • Halting evictions by ensuring a landlord may not issue a new notice to end tenancy for any reason. However, in exceptional cases where it may be needed to protect health and safety or to prevent undue damage to the property, landlords will be able to apply to the Residential Tenancy Branch for a hearing.
  • Halting the enforcement of existing eviction notices issued by the Residential Tenancy Branch, except in extreme cases where there are safety concerns. The smaller number of court ordered evictions are up to the courts, which operate independently of government.
  • Freezing new annual rent increases during the state of emergency.
  • Preventing landlords from accessing rental units without the consent of the tenant (for example, for showings or routine maintenance), except in exceptional cases where it is  needed to protect health and safety or to prevent undue damage to the unit.
  • Restricting methods that renters and landlords can use to serve notices to reduce the potential transmission of COVID-19 (no personal service and allowing email).
  • Allowing landlords to restrict the use of common areas by tenants or guests to protect against the transmission of COVID-19.

Businesses

  • The Business Credit Availability Program will allow the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses. The near-term credit available to farmers and the agri-food sector will also be increased through Farm Credit Canada.
  • The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action will allow Canada’s large banks to inject $300 billion of additional lending in to the economy.
  • For Exporters: The Minister of Finance would now be able to determine the limit of the Canada Account in order to deal with exceptional circumstances. The Canada Account is administered by Export Development Canada (EDC) and is used by the government to support exporters when deemed to be in the national interest.
  • Interest Rates: The Bank of Canada cut the prime interest rate to 0.75%. Other banks have also reduced rates.

Other Funding

  • Indigenous Community: $305 million for a new distinctions-based Indigenous Community Support Fund will be provided to address immediate needs in First Nations, Inuit, and Métis Nation communities.
  • Homelessness: The Reaching Home initiative will be provided with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak. The funding could be used for a range of needs such as purchasing beds and physical barriers for social distancing and securing accommodation to reduce overcrowding in shelters.
  • Domestic Abuse Shelters: Women’s shelters and sexual assault centers will receive $50 million to help with their capacity to manage or prevent an outbreak in their facilities.
  • Non-profits, service delivery agencies and child care providers in the Province of BC: the Province will continue to provide funding even if these agencies are closed or their regular operations have been disrupted. Licensed child care providers staying open will receive enhanced funding to keep operations going. These centres are eligible to receive seven times their average monthly operating funding from government, which is expected to cover approximately 75% of a group facility’s average monthly operating expenses.

CLOSING

Many of the measures listed above have only been announced recently (March 18, 2020) and are noted as requiring Royal Assent. In recent public comments, it was indicated that the opposition parties have promised their support to move these measures quickly, therefore, we can presumably expect draft legislation in the short term.

Over the next days and weeks, the specifics on these programs will be released. Most of the details for these initiatives will be released on one of these four webpages:

General: https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection/canadas-reponse.html


CRA:
https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

Travel: https://travel.gc.ca/assistance/emergency-info/financial-assistance/covid-19-financial-help


Employment and Social Development Canada:
https://www.canada.ca/en/employment-social-development/corporate/notices/coronavirus.html

As the situation develops further, there may be additional government measures, or modifications to those already announced.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a blog post such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this webpage accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

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