This article summarizes federal and provincial tax measures amid ongoing COVID-19 concerns. The key updates since RSM’s last COVID-19 Tax Alert on June 26 include the following:

1.  Enactment of Bill C-20, An Act respecting further COVID-19 measures.

a.    Part 1 of Bill C-20 extends the Canada Emergency Wage Subsidy (CEWS) through to November 21, with the ability to extend the CEWS by regulation to no later than December 31, 2020, and revises the eligibility criteria, creating a new structure that would offer support depending on which employers were hit hardest by the COVID-19 economic uncertainty.

b.    Part 2 of Bill C-20 amends the Pension Act, the Income Tax Act and other legislation dealing with veterans and children in order to provide a ‘one-time payment to persons with disabilities for reasons related to COVID-19.’

c.    Part 3 of Bill C-20 enacts the Time Limits and Other Periods Act (COVID-19) which addresses the need for flexibility in relation to certain time limits and other periods that are established by or under Acts of Parliament and that are difficult or impossible to meet as a result of the exceptional circumstances produced by COVID-19.

2.  The re-opening of the Tax Court of Canada.

3.  Extension of federal and Quebec tax return filing and tax payment deadlines.

These and other recent additions are highlighted within this article for easy identification. RSM continues to monitor new developments closely and will provide updates as information becomes available.

TAX FILING DEADLINES AND PAYMENT DATES

A number of tax filing and payment deadlines have been extended due to COVID-19. A table of these extended deadlines can be found in Appendix A.

FEDERAL BENEFITS, CREDITS AND SUPPORT PAYMENTS FOR INDIVIDUALS AND EMPLOYERS

The principal federal measures to help Canadians manage COVID-19 concerns are summarized below. For a complete list of CRA's updates, please visit the CRA’s official site.

For individuals

1. To support individuals that have lost their income due to the COVID-19 pandemic, the federal government introduced the Canada Emergency Response Benefit (CERB). The CERB provides a qualifying individual with a taxable benefit of $2,000 for each four-week period for a total of 24 weeks.

2. To support students, the federal government introduced the Canada Emergency Student Benefit (CESB). The CESB provides eligible high school students, post-secondary students, and Canadian students studying abroad with $1,250 per month between May and August 2020 (up to $2,000 a month for students with dependents or that have disabilities).

3. To support families, the federal government temporarily increased the Canada Child Benefit payments and provided a one-time supplementary payment under the Goods and Services Tax (GST) credit. The Minister of National Revenue further announced that eligible Canadians who are presently receiving CCB payments or GST credits will continue to receive them, until September 2020, if eligible Canadians are not able to file their 2019 returns on time.

4. The Employment Insurance Regulations were amended to offer assistance to those placed in quarantine by health officials due to COVID-19. Key amendments were:

a.    Temporarily waiving the one-week waiting period as of March 15, 2020;

b.    Requiring that, to access the EI sickness benefits, a claimant only need to provide a declaration that a period of quarantine was imposed under the laws of Canada or a province by a person in authority to place themselves under quarantine, rather than a medical certificate.

5. The Federal government is working in conjunction with the provincial and territorial governments to provide wage top-ups for essential workers. Each province or territory will determine which workers would be eligible for support, and how much support he or she will receive, but the Federal government has committed to provide up to $3 billion in support to increase the wages of low-income essential workers. The provinces who have opted in are highlighted below in the provincial updates section.

6. The Federal government has announced additional measures for Canadian seniors. The measures will include a one-time tax-free payment of $300 for seniors eligible for the Old Age Security (OAS) pension, with an additional $200 for seniors eligible for the Guaranteed Income Supplement (GIS), and extending GIS and allowance payments if their 2019 income tax returns have not been assessed.

7. The federal government is providing a non-taxable one-time payment of $600 to individuals who were certificate holders of the disability tax credit on June 1, 2020. If the certificate holder is also a senior and eligible for the OAS pension, they will receive $300 under the disability tax credit and $300 under the special COVID-19 one-time OAS pension payment. If the certificate holder is also eligible for the GIS payment, they will receive $100 as the disability tax credit, and $500 from the special COVID-19 one-time OAS pension and GIS payments.

The one-time payment shall be provided to the following persons with disabilities:

1.  Holders of a valid Disability Tax Credit certificate (eligible persons not yet in possession of such a certificate would be able to apply for one up to 60 days after Royal Assent to be considered for the one-time payment);

2.  Who currently receive Canada Pension Plan disability benefits or Quebec Pension Plan disability benefits; or

3.  Who receive disability supports provided by Veterans Affairs Canada.

Click here for more details.

For employers

1. The federal government launched the Canada Emergency Business Account to assist eligible small businesses and non-profit organizations with interest-free loans of up to $40,000. Applications for loans started on April 9, 2020, and are made directly through banks and credit unions. If the loan is repaid by December 31, 2022, 25% will be forgiven, up to $10,000. If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5% interest. Originally, an entity was eligible for the CEBA if it paid between $20,000 and $1.5 million in payroll between January 1 and December 31, 2019.

The government has expanded eligibility to include owner-operated small businesses that had been ineligible for the program due to their lack of payroll, sole proprietors receiving business income directly, and family-owned corporations remunerating in the form of dividends rather than payroll. Now, an entity that paid less than $20,000 in payroll in the 2019 calendar year is eligible for the CEBA if it has all of the following:

a.    A business operating account at a participating financial institution;
b.    A CRA business number;
c.    A 2018 or 2019 tax return; and
d.    Eligible non-deferrable expenses of between $40,000 and $1.5 million (eligible non-deferrable expenses could include costs such as rent, property taxes, utilities and insurance).

2. The employment insurance work-sharing program provides employment insurance benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers. This measure is an agreement between eligible employers, eligible employees and the Government of Canada. The application processing time is 10 business days prior to the start of the agreement. 

3. The Business Credit Availability Program (BCAP) has been expanded to include medium to large businesses. Under the expanded BCAP, eligible businesses can receive loans of up to $60 million per company, and guarantees of up to $80 million. The loans available to aid businesses are: (1) Loan guarantee for small and medium-sized enterprises; (2) Co-lending program for small and medium-sized enterprises; (3) BDC’s Mid-Market Financing Program; and EDC’s Mid-Market Guarantee and Financing Program.

RSM’s funding guide provides more details on these credit availability programs.

4. The federal government introduced the COVID-19 Emergency Response Act for the 10% temporary wage subsidy for employers. Individuals (other than a trust), certain partnerships, nonprofit organizations, registered charities and certain Canadian-controlled private corporations, are eligible for the temporary wage subsidy for March 18 to June 19, 2020 period. The subsidy covers 10% of eligible remuneration for each eligible period up to a maximum of $1,375 per employee and $25,000 per employer.

5. The federal government introduced the CEWS for employers. Eligible entities, such as individuals, taxable corporations, certain nonprofit organizations, registered charities, and partnerships, who satisfy the revenue decline threshold of either 15% to 30% in the first four claim periods depending on the eligibility period can apply for the CEWS. To qualify for the first period, an eligible entity must have experienced a drop of at least 15% of qualifying revenue in March 2020 when compared to the qualifying revenue for the prior reference period, generally meaning the same period in 2019 or the average of January and February 2020. To have qualified for periods 2, 3 or 4, an eligible entity must have experienced a drop of at least 30% of qualifying revenue in April 2020 (for the second period), May (for the third period) or June (the fourth period) when compared to the prior reference period. If an eligible entity satisfied the revenue decline for any period, it is deemed to have also satisfied the revenue decline for the period immediately following.

If an employer qualifies, the CEWS subsidizes up to of 75% of eligible remuneration paid to employees, up to a maximum of $847 per employee for the first four claim periods. The CEWS operates for four 4-week periods starting on March 15 and originally ending on July 4, 2020.  Refer to RSM’s previous Tax Alert for further details on the CEWS.

The CRA has released the following tools and resources to assist employers with applying for the CEWS.

1. Information and spreadsheets to help employers calculate the subsidy amount.
2. How to apply for the subsidy under one of three possible methods.
3.  FAQ document related to the wage subsidy.
4. Information on how to amend a CEWS claim.

6.  The Canada Emergency Commercial Rent Assistance (CECRA) program was introduced to help commercial property owners, small businesses, non-profit organizations, and charities suffering from COVID-19. Administered by the Canada Mortgage and Housing Corporation (CMHC), the CECRA provides qualifying commercial property owners with loans equal to 50% of a qualifying tenant’s monthly rent, but the loan converts into a subsidy (i.e., a forgivable loan) if the commercial property owner agrees to forgive at least 75% of the tenant’s monthly rent obligation. Under the CECRA, the federal government will pay 37.5% of the rent, the provincial government will pay 12.5% of the rent, the tenant will pay no more than 25% of the rent, and the property owner will forgo the remainder of the rent (at least 25%) for April, May and June 2020. To qualify, both the tenant and property owner must meet a host of criteria as stipulated on the CMHC website. If a property owner is eligible, applications can be submitted online to CMHC before August 31, 2020.

7. The Large Employer Emergency Financing Facility (LEEFF) was introduced to provide financing to Canada’s large employers who have been affected by COVID-19. The Canada Development Investment Corporation (CDEV), in cooperation with Innovation, Science and Economic Development Canada (ISED) and the Department of Finance, will administer the LEEFF program. Large for-profit businesses, other than those in the financial sector, and certain not-for-profit businesses who (a) have a significant impact on Canada’s economy, (b) have approximately $300 million or more in annual revenues, and (c) require a minimum loan size of $60 million, are eligible for this program.

8. On July 10, 2020, the government extended the timeline for junior mining companies to spend the capital they raise through flow-through shares by 12 months. This is aimed to protect jobs and avoid meeting costs for not meeting their original flow-through share timelines.

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CANADA REVENUE AGENCY COMMUNICATIONS

Call center services

The CRA has made various changes to its call center services and has provided contact options to the taxpayer. 

Outreach activities

1. The CRA is encouraging taxpayers to use the CRA’s suite of secure digital services to interact with the CRA and provide various options to file taxes.
2. The CRA is adapting its Outreach Program to help individuals better understand their tax obligations and is also modifying its Liaison Officer services to a telephone-based service.
3. The CRA has made various requests regarding correspondence, filing and payment procedures. All drop boxes not located at the CRA's tax centers have been closed and the drop boxes at certain limited tax centers will be monitored regularly and remain open.

Electronic signatures

For the authorization forms T183 or T183CORP, the CRA will recognize electronic signatures as having met the signature requirements of the Income Tax Act.

CRA lowering the prescribed interest rate to 1% on July 1, 2020

The CRA sets the prescribed interest rate on a quarterly basis. The prescribed rate represents the annual interest that, among other things, must be charged on non-arm's length loans in order to avoid taxable benefits (for example, when a corporation advances amounts to a shareholder or person not dealing at arm's length with a shareholder) and to avoid attribution of income and capital gains (for example, when the loan is between spouses). As described in RSM’s previous Tax Alert, a low-interest rate environment can present certain Canadian tax opportunities.

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COLLECTIONS, AUDIT, OBJECTIONS AND TAX COURT APPEALS

National Business Resumption Plan

On June 23, 2020, the CRA released its National Business Resumption Plan (NBR). The NBR sets out which services CRA will resume in July and August, and an estimated timeline for the resumption of the remaining services between September 2020 and January 2021. Below is a list of selected services that CRA will resume in July and August. CRA’s release includes the full list of services and timelines for resumption of each service.

CRA services to be resumed in July and August:

1. Collections and verifications, but only in respect of accepting incoming calls from taxpayers regarding payment arrangements. CRA anticipates that it will not start calling taxpayers for collections matters until, at the earliest, September, and will not send legal warning letters until January 2021. 
2. Trust exams and employer compliance audits related to the CEWS.

The reopening of the Tax Court of Canada

New legislation for Time Limits and Other Periods

INTERNATIONAL INCOME TAX: CRA & COVID-19

The CRA has updated its guidance on international income tax issues. The guidance outlines CRA’s approach to income tax issues arising due to the travel restrictions in place. It does not represent any interpretive position or intention to establish any broader policy nor does it represent any change in Canada's ongoing commitment to combat international tax evasion and avoidance. The guidance relates to the following key tax issues:

1. Income tax residency
2. Exemption from determination of carrying on business in Canada/permanent establishment due to travel restrictions.
3. Cross-border employment income.
4. Tax relief on payments to non-residents for services provided in Canada.
5. Tax relief on disposition of taxable Canadian property by non-residents of Canada.

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TAX COMMUNITY RESPONSE

Certain issues relating to the federal initiatives are yet to be addressed. Taxpayers and other stakeholders including Canadian tax and accounting organizations have raised questions and suggestions with respect to the tax aspects of the economic response to the COVID-19 pandemic, including:

Outstanding deadline issues

1. Although payment of customs and duty taxes by importers is extended to June 30, 2020, can an importer still claim an input tax credit for the GST payable on import?

Outstanding issues with respect to employee benefits and expenses

1. As described in RSM’s previous Tax Alert, an employee wishing to deduct home office expenses must have a Form T2200 signed by employer. Will CRA relieve the requirement that employers issue T2200 forms for each employee that received an allowance to set up a home office?
2. CRA has set out its administrative approach on international income tax issues raised by COVID-19 for matters such as corporate residence, carrying on business in Canada, cross border employment income and other matters. However, it is unclear whether CRA will adopt the same approach in the context of the foreign affiliate rules.

Outstanding issues with respect to the CEWS

1. Where the same employees work for different corporations in the group (i.e. they get separate T4s from each employer), the maximum subsidy the group can claim for the employee is $847 per week, but how will the $847 per week limit be allocated between the entities within the group?
2. The legislative changes in Bill C-20, if passed, will allow an employer to be a ‘qualifying entity’ in situations where another entity (a payroll entity) administers the payroll and makes remittances in respect of the employer’s employees. However, if the payroll entity allocates the payroll cost to the employer, it appears that salaries may not be ‘eligible remuneration’ because payroll entity is reimbursed for the cost of the salaries paid. Will the government amend the legislation so that the salaries paid will be considered ‘eligible remuneration’?
3. What are the eligibility rules for employers operating separate businesses or divisions?
4. The CEWS legislation does not contemplate providing the CEWS to owner-managers where they did not pay themselves employment income as described in paragraphs 153(1)(a) or (g) of the Income Tax Act in the baseline remuneration period.
5. The CEWS legislation also does not address the eligibility for non-arm’s length employees or owner-managers who had to work during the COVID-19 period to sustain the business.

Outstanding issues with respect to other government programs

1. Canada Emergency Business Account - In an event that a business undergoes a change in ownership structure (for example, a business is rolled over from one business structure to another) prior to March 1, 2020, would payroll deduction under the rolled-over business be included in determining the eligibility of CEBA?
2. Temporary Wage Subsidy - Where a CCPC is a member of an associated group but no annual business limit has been allocated to it in the prior year, can this allocation be amended in order for the CCPC to be eligible for the TWS program?
3. Voluntary Disclosure Program – Will the CRA consider deferring the payment of taxes owing at the time of filing voluntary disclosure request until a later time in order to encourage taxpayers to remain compliant with their tax obligations?

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SELECTED PROVINCIAL UPDATES

Description of measures introduced by their respective governments

Alberta

1. Delaying the remittance of the Alberta Tourism Levy until August 31, 2020.
2. Freezing the Residential education property tax rates at 2019 rates.
3. Deferring payment of non-residential education property tax for six months.
4. Various measures for employers and employees to appropriately respond to public health measures and remain attached to jobs respectively.
5. Delaying Timber dues up to six months to provide relief to forest companies.
6. Deferring WCB premiums until early 2021 for private sector employers.
7. Suspensions to the reporting requirements under various conservation acts.
8. Deferring public offerings and direct purchase requests of petroleum, natural gas, and oil sands.
9. Extensions for Petroleum and Natural Gas Agreements.

British Columbia (B.C.)

1. BC Emergency Benefit for Workers to people who lost their income as a result of COVID-19.
2. Emergency Relief Support Fund for children and youth with special needs and their families.
3. Enhancing the BC Climate Action Tax Credit.
4. Delaying the tax changes announced in Budget 2020 following until further notice.
5. Delaying filing of Carbon Tax Return – Inventory (FIN 103) as the returns will not be processed at this time.
6. Delaying the coming-into-force of the “significant control” reporting requirements from May 1, 2020 to October 1, 2020.
7. School tax rates for commercial properties will be reduced by 50% for 2020.
8. Stumpage, the fee operators pay the Province to harvest, buy or sell trees from Crown land, is being deferred for three months.
9. Postponing Property Tax Late Payment Penalties for Businesses until November 3, 2020.
10. BC logging tax returns due between March 18 and August 31 are now due Sept. 1, 2020.
11. Expanding COVID-19 related funding and support for the summer

Manitoba

1. Delaying until further notice the tax changes that were scheduled to be effective as July 1, 2020.
2. Implementing the Summer Student Recovery Plan to provide businesses with a wage subsidy for hiring students.
3. Providing financial support to seniors through a new Seniors Economic Recovery Credit will provide every Manitoban aged 65 and older with a one-time, refundable tax credit of $200.
4. Extending the payroll tax (Health and Post Secondary Education Tax Levy) filing deadline for small to medium sized business with monthly remittances of no more than $10,000. The returns and remittances normally due monthly from April 15 to September 15 are extended to October 15, 2020.

New Brunswick (NB)

1. 2020 New Brunswick Low-Income Seniors’ Benefit to assist low-income seniors.
2. Emergency Bridging Fund for vulnerable post-secondary students.
3. Government of New Brunswick Small Business Emergency Working Capital Program to provide small business owners with working capital loans. 

4. Business Property Tax Penalty Relief Program for business property owners for the months of June and July 2020.
   

Newfoundland & Labrador 

1. All tax returns, with the exception of tax returns required from inter-jurisdictional carriers, falling under the purview of the Revenue Administration Act and Regulations, which would otherwise be due March 20, 2020 to July 31, 2020, are now due August 20, 2020.
2. Fuel Tax Exemption Permits that were originally set to expire on March 31, 2020 have been extended to August 31, 2020.
3. Establishment of the Essential Worker Support Program, including hours and income thresholds during the 16-week eligibility period. Employers can begin submitting applications on July 6, 2020 and will have until July 30, 2020 in which to apply.
4. The Department of Tourism, Culture, Industry and Innovation of Newfoundland & Labrador announced additional measures to help businesses.

Northwest Territories

1. One-time emergency allowance for income assistance recipients.
2. Waiver of interest on all late tax returns between March 15, 2020 and June 30, 2020.
3. Excluding ‘gifts and unearned income’ from the calculation of income until June 30, 2020.
4. The Department of Industry, Tourism and Investment (ITI) and Community Futures Development Corporations (CFDC) are contributing funds to allow businesses to defer loan payments and cover interest costs.
5. Providing businesses with funding so that they are able to top up wages for low-wage workers. The temporary top up is for workers making less than $18 per hour, and for a maximum of 16 weeks between April 1 and July 31, 2020.
6. Providing additional funding to support for Entrepreneurs and Economic Development program.
7. Extension of the Northwest Territories’ Business Development and Investment Corporation for payment deferral/reduction initiative for the low-interest Working Capital Loans until March 31, 2021.
8. A proposal to increase the borrowing limit for the Northwest Territories from the current level of $1.3 billion to $1.8 billion. This is subject to Governor in Council approval.

Nova Scotia

1. New programs for providing financial assistance to self-employed and laid-off workers.
2. Worker Emergency Bridge Fund and Small Business Impact Grant for small businesses and social enterprises.
3. Provide businesses with the COVID-19 Small Business Credit and Support Program as a temporary stream for access to credit, cash grants and support delivered through participating credit unions.
4. Essential Health Care Workers Program which will provide a bonus of up to $2,000 after a four-month period to  full-time, part-time and casual health-care workers as well as cleaning staff.
5. The province is investing $750,000 in small businesses by giving funding to business incubators in Nova Scotia for the purpose of investing in startup activities..

Nunavut

1. The Government of Canada is proposing that the borrowing limit for Nunavut be increased from the current level of $650 million to $750 million, upon Governor-in-Council approval.

Ontario

1. Support for Families program support their children’s learning. Applications are open and can be submitted online.
2. Release of Ontario’s one-year economic and fiscal update entitled, “Ontario's Action Plan: Responding to COVID-19 (March 2020 Economic and Fiscal Update)”. RSM has released a Tax Alert capturing the changes introduced.
3. Doubling the payments made through the Ontario Guaranteed Annual Income System (GAINS), beginning April 2020 for a period of six months.
4. Increase in the Employer Tax Exemption on up to $1 million of payroll in 2020 for private-sector employers (other than registered charities) with total annual Ontario remuneration of less than $5 million.
5. The Ontario government has suspended the tax increase scheduled for the beer and wine tax until December 31, 2020. The beer basic tax rates were scheduled to increase by an adjustment factor on June 1, 2020.
6. The government of Ontario is providing loans of up to $50,000 to Indigenous-owned small and medium sized businesses. Up to 50% of each loan will be in the form of a non-repayable grant, with no interest due on the loan portion until December 31, 2022. Businesses may use these funds to cover general expenses such as payroll, rent, utilities and taxes..

Prince Edward Island (PEI)

1. Income Support Program for individuals who lost their job or got laid-off.
2. Special Situations Fund for individuals who are not eligible for other federal and provincial funding support.
3. Temporary Rental Assistance Benefit for supporting renters and landlords.
4. Emergency Income Relief Fund for the self-employed individuals.
5. Emergency Working Capital Financing for small business.
6. Emergency Relief Worker Assistance Program for employers to assist their employed workers who have been impacted by reduced hours at work. 

7. Business Adaptation Program that provides up to $2,500 non-repayable contribution to help businesses, entrepreneurs, not-for-profits and nongovernmental organizations.

Quebec

1. Incentive Program to Retain Essential Workers (IPREW) for low-income earners to make up the difference between the CERB and an eligible individual's wages.
2. Extension of 90-day time limit to file a notice of objection to June 30, 2020.
3. Suspension of time limit to file appeals before the Court of Québec until the health emergency is lifted.
4. Suspension of collection actions, including lifting garnishment notices.
5. The Minister of Revenue announced that the tax legislation will be amended to attribute, in certain cases, a discretionary power to the Minister that allows him to extend the time limit for applying for tax incentives intended for businesses.
6. The Quebec government announced its Tourism Recovery Plan.

Saskatchewan

1. Saskatchewan Small Business Emergency Payment (SSBEP) to help small and medium-sized businesses.
2. Saskatchewan PST audit program and compliance office has suspended all activities until further notice.
3. Saskatchewan is expanding the wage supplement program to include more workers.

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Appendix A

Summary of extended tax filing and payment deadlines

Further federal and Quebec extensions to tax filing and payment deadlines

Changes to indirect tax filing deadlines, tax payment deadlines, and other returns for federal and provincial returns