On March 25, 2020 the Canadian Federal Government announced a $107 billion emergency response package for Canadians and businesses. The Crowe MacKay tax team summarizes how this will positively impact you.

The global community is working together to prevent the spread of COVID-19 within our own communities. With the increase in social distancing, our daily routines have been impacted significantly. On March 18, the Federal Government first announced new economic measures that would be forthcoming in response to the COVID-19 crisis in an effort to stabilize the Canadian economy. 

In total, the Canadian Government has committed a $107 billion aid package to help Canadians and businesses across the country. These measures will be delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, providing up to $52 billion in direct support to Canadian workers and businesses, and another $55 billion to help business liquidity through tax deferrals.

The Federal Government’s COVID-19 Economic Response Plan can be found here.

Crowe MacKay specialists provide a summary below on how this Federal aid will positively impact Canadians and businesses.

Income and Support for Individuals

The New Canada Emergency Response Benefit

On March 25, the Federal Government announced the new Canada Emergency Response Benefit (“CERB”), replacing the previously announced Emergency Care Benefit and Emergency Support Benefit. The CERB will provide a taxable benefit of $2,000 a month, for up to four 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 of disruptions to their work situation due to COVID-19.
  • Wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.

Application details will be available through My CRA and My Service Canada, beginning the first week of April.

Employment Insurance

If you were recently laid off or have reduced hours and qualify for Employment Insurance benefits, you can apply here.

If you are sick, quarantined or have been directed to self-isolate, the Government is waiving the requirement to provide a medical certificate to access EI sickness benefits. In addition, the one-week waiting period to claim EI sickness benefits is temporarily waived for those individuals in imposed quarantine.

Apply for Employment Insurance sickness benefits here.

Income Support for Low and Modest-Income Families

The Federal Government is proposing to provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC), doubling the maximum annual GSTC payment amounts for the 2019-20 benefit year.

  • The average payment for those applicable individuals will be close to $400 for single individuals and close to $600 for couples.

The Federal Government is also proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts for the 2019-20 benefit year by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment.

The proposed enhancements of these two credits can give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

Income Support to Vulnerable Groups

  • $305 million in funding for a new distinctions-based Indigenous Community Support Fund to address immediate needs in First Nations, Inuit, and Métis Nation communities.
  • Placing a six month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
  • Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020. This will provide flexibility to seniors that are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.
  • Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness.
  • Supporting women and children fleeing violence, by providing up to $50 million to women’s shelters and sexual assault centres. This includes funding for facilities in Indigenous communities.

Role of Financial Institutions

Banks in Canada 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. Canada’s large banks have confirmed that this support will include up to a six month payment deferral for mortgages, and the opportunity for relief on other credit products. These targeted measures respond to immediate challenges being faced across the country and will help stabilize the Canadian economy. 

Please see our Support for Business section below for some of the business financing and loan measures that have already been announced.

Mortgage Default Management Tools 

The Federal Government, through the Canada Mortgage and Housing Corporation, is providing increased flexibility for homeowners facing financial difficulties to defer mortgage payments on homeowner CMHC-insured mortgage loans. CMHC will permit lenders to allow payment deferral beginning immediately.

Tax Filing and Payment Extensions

The COVID-19 Economic Response Plan also contains several measures that should help Canadians better manage their affairs for the upcoming tax filing and payment deadlines.

Administrative income tax actions required of taxpayers by the CRA that are due after March 18, 2020, can be deferred to June 1, 2020, unless otherwise noted.  These administrative income tax actions include returns, elections, designations, and information requests.  However, payroll deductions payments and all related activities are excluded.

Objections

Any objections related to Canadians' entitlements to benefits and credits have been identified as a critical service and will continue to be processed during the COVID-19 crisis. As a result, there should not be any delays in processing these objections.

For objections related to other tax matters filed by individuals and businesses, the CRA is currently holding these accounts in abeyance and no collection action will be taken with respect to these accounts during this period of time.

For any objection request due March 18 or later, the deadline is effectively extended until June 30, 2020.

Flexibility for Taxpayers 

  • For individual tax returns, the normal filing due date of April 30 will be deferred until June 1, 2020.

The CRA 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.

  • The tax filing deadlines for trusts, partnership and NR4 information returns are all extended to May 1, 2020.
  • The payment of any income tax amounts owing on or after March 18, 2020 and before September 2020, are not due until after August 31, 2020
  • This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.
  • 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, which are forms that are typically signed in person by millions of Canadians every year to authorize tax preparers to file taxes.

Flexibility in Filing Taxes for Businesses

  • The payment of any income tax amounts owing on or after March 18, 2020 and before September 2020 are not due until after August 31, 2020
  • This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act.  No interest or penalties will accumulate on these amounts during this period.

Canada Pension Plan/Employment Insurance (CPP/EI) appeals to the Minister

Taxpayers wanting to file an appeal in relation to CPP/EI rulings decisions are encouraged to do so through MyAccount to avoid potential delays.  The CPP/EI appeals program is currently only actioning appeals that are related to cases where EI benefits are pending and these cases will be treated on a priority basis. All other appeals will be actioned when normal services resume.

In addition, the CPP/EI Appeals to the Minister program will exercise discretion on a case by case basis when additional time is required to respond to a request.

Deferral of Sales Tax Remittance and Customs Duty Payments

The Federal Government is deferring Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances and customs duty payments to June 30, 2020.

GST/HST Remittance Deferral

To support Canadian businesses in the current extraordinary circumstances, the Minister of National Revenue will extend until June 30, 2020 the time that:

  • GST/HST Monthly filers have to remit amounts collected for the February, March and April 2020 reporting periods;
  • GST/HST Quarterly filers have to remit amounts collected for the January 1 through March 31, 2020 reporting period; and
  • GST/HST Annual filers, whose GST/HST return or instalment are due in March, April, or May 2020, have to remit amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

Deferral of Customs Duty and Sales Tax for Importers

Payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020.

Suspending Audit Activities and Collections on New Debt

The CRA will not initiate contact with taxpayers for audits, with certain exceptions, This includes:

  • no new audits being launched, and
  • no requests for information related to existing audits.

No audits should be finalized and no reassessments should be issued.

Collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available.  Payment arrangements are also available on a case-by-case basis if you can’t pay your taxes, child and family benefit overpayments, Canada Student Loans, or other government program overpayments in full.

Banks and employers do not need to comply or remit on existing requirements to pay during this time.

Taxpayer relief requests

Taxpayers who are unable to file a return or make a payment by the tax-filing and payment deadlines because of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met.

Support for Business

Wage Subsidies

On March 27, 2020 the Federal Government announced changes to their wage subsidy program, indicating an increase in wage subsidies to 75% retroactive to March 15.  More details will be announced in the coming days.

Loan Programs

Canada Emergency Business Account

This $25 billion program will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus. Small businesses and not-for-profits should contact their financial institution to apply for these loans.

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 percent (up to $10,000).

A New Loan Guarantee for Small and Medium Enterprises

Small and medium-sized enterprises (SMEs) may be particularly vulnerable to the impacts of COVID-19. To support their operations, Export Development Canada will guarantee new operating credit and cash flow term loans that financial institutions extend to SMEs, up to $6.25 million.

A New Co-Lending Program for Small and Medium Enterprises

The Co-Lending Program will bring the Business Development Bank of Canada (BDC), together with financial institutions, to co-lend term loans to SMEs for their operational cash flow requirements.  Eligible businesses may obtain incremental credit amounts up to $6.25 million and the BDC’s portion of this program is up to $5 million maximum per loan. Eligible financial institutions will conduct the underwriting and manage the interface with their customers.

Ensuring Access to Credit

  • The near term credit available to farmers and the agri-food sector will be increased through Farm Credit Canada.
  • The Domestic Stability Buffer is lowered 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.

The Bank of Canada has cut the interest rate to 0.25%.

Supporting Financial Market Liquidity

  • Insured Mortgage Purchase Program (IMPP) will be launched allowing the government to purchase up to $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC), providing long-term stable funding to banks and mortgage lenders, helping to facilitate continued lending to Canadian consumers and businesses, and adding liquidity to Canada’s mortgage market.
  • The Bank of Canada also announced measures to help the financial markets, such as adjusting its market liquidity operations, broadening eligible collateral for its repo facility and readiness to provide support to the Canada Mortgage Bond market.

Support for Charities

The Charities Directorate is extending the filing deadline to December 31, 2020, for all charities with a Form T3010, Registered Charity Information Return due between March 18 and December 31, 2020.

The Charities Directorate has suspended all operations until further notice, which includes their call centre, as well as all registration and audit activities.

Find more information on Federal support for Canadian charities here.

U.S. Tax Payment Deadlines

As of March 20, 2020 the U.S. tax filing and payment deadline for individuals and corporations are deferred to July 15, 2020.

In light of COVID-19, U.S. Treasury Secretary, Steven Munchin, announced on March 20 that a three month extension will apply for the filing and payment of the U.S. federal income taxes owed for 2019.

Individuals who owe a U.S. income tax payment of up to $1 million, based on their 2019 tax return, and corporation owing up to $10 million will have an additional 90 days to defer payment, with the new due date of July 15, 2020. During this three month deferral period, taxpayers won’t be subject to interest and penalties.

The 90 day extension is applicable at the federal level only. Many states are also relaxing their tax filing and payment deadlines, but one needs to check with each state on their position. The American Institute of CPAs (AICPA) provides more information on state guidelines in relation to COVID-19.

It is recommended you submit your 2019 income tax return as soon as possible to the U.S. federal government, especially if you are due a refund. If additional time is needed to file tax returns, one should consider filing extensions.

 

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.