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The Government of Canada and the B.C. Government have both announced its support for workers and businesses in this extraordinary time. We have summarized the relief available to businesses, and we will be updating this list of resources as further announcements are made. We fully expect that there will be further updates in the weeks to come as both the Federal Government and the B.C. Government have indicated that this is a starting point.
1. Income Tax
Businesses can defer payments, until after August 31, 2020, on any income tax amounts that become owing on or after March 18, 2020 and before September 2020. No interest or penalties will accumulate during this period. Nothing further needs to be done by businesses to access this relief.
The CRA has also indicated that it will not initiate any post assessment GST/HST or Income Tax audits in the next four weeks. We will be posting a more fulsome article on the extended timelines announced by the CRA in the coming week.
2. Business Credit Availability Program
The Government has provided additional capital to support businesses experiencing cash flow interruptions through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Businesses are expected to contact their financial institution for an assessment of their situation, and their financial institution will refer the business either to BDC or EDC if their financial need is greater than what can be offered in the private sector. We understand that BDC will evaluate each business on a case by case basis, and loans will only be approved for businesses that were financially viable except for the cash flow interruption caused by COVID-19.
The Business Credit Availability Program includes the following programs: 1) Canada Emergency Business Account, 2) Loan Guarantee for Small and Medium-Sized Enterprises, and 3) Co-Lending Program for Small and Medium-Sized Enterprises. These three programs are expected to roll out April 20, 2020.
The Canada Emergency Business Account, which will provide interest-free loans of up to $40,000 to small business and not-for-profits. To qualify the organization must have paid between $50,000 to $1 million in total payroll in 2019. Loan Guarantee for Small and Medium-Sized Enterprises and Co-Lending Program for Small and Medium-Sized Enterprises will offer loans of up to $6.25 million. We will provide an update as more information regarding BCAP as it becomes available.
3. Canada Emergency Response Benefit (“CERB”)
Previously the Canadian Government had announced two separate benefits, the Emergency Care Benefit and the Emergency Support Benefit, those have both been replaced with CERB. Self-employed individuals and others who would not otherwise be eligible for Employment Insurance (“EI”) would be covered by CERB. CERB will provide a taxable benefit of $2,000 a month for up to four months, and the portal to apply for the benefit will be available in early April.
CERB will also apply to any employees who are not receiving income because of disruptions to work. We have a more in-depth article for employers regarding managing their workforce during periods of economic uncertainty here.
4. Canadian Emergency Wage Subsidy (“CEWS”)
To help businesses keep and return workers to their payroll through the challenges posed by the COVID-19 pandemic, the Canadian Government proposed the new CEWS. This would provide a 75 per cent wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.
This subsidy is available to eligible employers that see a drop of at least 30 per cent of their revenue. Eligible employers include individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities. Public bodies including municipalities and local governments, crown corporations, public universities, colleges, schools and hospitals, are not eligible for this subsidy.
An employer’s revenue under CEWS is its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital. For non-profits and charities, the government will continue to work with the sector to ensure the definition of revenue is appropriate to their specific circumstances.
Amount of Subsidy
The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
The federal government has promised to provide further guidance with respect to how to define pre-crisis weekly remuneration for a given employee.
Employers may be eligible for a subsidy of up to 100 per cent of the first 75 per cent of pre-crisis wages or salaries of existing employees. Employers will also be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees. Such eligible remuneration may include salary, wages, and other remuneration.
Special rules apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.
There would be no overall limit on the subsidy amount that an eligible employer may claim and employers must make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.
Eligibility is determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. The amount of wage subsidy (provided under the COVID-19 Economic Response Plan) received by the employer in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues. The table below outlines each claiming period and the period in which it has a decline in revenue of 30 per cent or more.
For eligible employers established after February 2019, eligibility is determined by comparing monthly revenues to a reasonable benchmark.
How to Apply
Eligible employers would be able to apply for CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. The federal government has promised it will soon make available more details about the application process.
Interaction with 10 per cent Wage Subsidy
On March 18, 2020, the Prime Minister announced a temporary 10 per cent wage subsidy. For employers that are eligible for both CEWS and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under CEWS in that same period.
Interaction with CERB
An employer would not be eligible to claim CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for CERB.
Employers who are not eligible for CEWS would still be able to furlough employees who will receive up to $2,000 a month.
The usual treatment of tax credits and other benefits provided by the government would apply. As a consequence, the wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.
Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
5. GST/HST Deferment
The CRA will allow all businesses to defer, until the end of June 2020, any GST/HST payments or remittances that become owing on or after March 27, 2020, and before June 2020. This means that no interest will apply if your payments or remittances are made by the end of June 2020.
The deadline for businesses to file their returns is unchanged. Those who are able to, should continue to file their GST/HST returns on time reporting their net tax for the reporting period to help facilitate tax compliance and administration. However, recognizing the difficult circumstances faced by businesses, the CRA will not impose penalties where a return is filed late provided that it is filed by June 30th.
6. Work-Sharing Program for Forestry, Steel and Aluminum Sector
Work-Sharing is an existing adjustment program designed to avoid layoffs when there is a temporary reduction in normal business activity for specific industries. This is a three-party agreement between employers, employees and Service Canada, where an agreement is reached to reduce scheduled work and to share the available work. This program has been amended to extend the maximum duration of Work-Sharing agreements from 38 weeks to 76 weeks.
7. Employer Health Tax Payments
For businesses with a payroll over $500,000, employer health tax payments can be deferred until September 30, 2020. Businesses who have a payroll of less than $500,000 are already exempt from employer health tax.
8. Provincial Sales Tax
Deferred Sales Tax or Security Payments
For businesses that collect and remit PST, municipal and regional district tax on short-term accommodation, tobacco tax, motor fuel tax and carbon tax, filing and payment deadlines have been extended to September 30, 2020. Additionally, the April 1, 2020 PST registration requirement for e-commerce and sweetened carbonated drinks will be delayed.
Delayed Carbon Tax Increase
Carbon tax rates will remain at their current levels until the government gives further notice. The alignment of carbon tax rates with the federal carbon pricing backstop methodology as announced in Budget 2020 is also postponed until further notice.
International Fuel Taxation Agreement (IFTA) Commercial Carriers
Until further notice, IFTA carriers entitled to a refund on or after April 1, 2020 will receive refunds at the rates in effect on April 1, 2019.
9. Commercial Property Tax Reduction
Class 4, 5 & 6 properties (light- and major- industry and business) will have the school tax component of property taxes cut in half for the 2020 tax year. The 2020 school tax rate has not yet been determined, however the 2019 rate for Class 4, 5 and 6 properties was $3.70 per thousand dollars of the assessed value.
These measures will likely evolve as the situation is fluid, and the Government has committed to do “whatever it takes to ensure that […] businesses are supported and our economy remains strong”. As a Canadian business ourselves, we are here to weather this storm together with all the businesses we have the privilege to work with.
Original article by Alana-Dale Johnson and Dorothy Chu, updated by Alana-Dale Johnson and Natanya Garcia.
Our corporate commercial team focuses on business structuring and transactions for businesses of all sizes and types with a focus on the holistic support of our clients' businesses.
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