This article was originally posted on Mar 18, 2020 and has been updated to include Government announcements as of April 6, 2020.
In a bid to mitigate the economic impact of COVID-19, the Federal and the Provincial Governments have announced several relief measures for Canadian businesses. Below is a summary of key economic measures that are particularly useful to small businesses.
Launching the Canada Emergency Business Account
Under this $25-billion loan program, private sector banks – in cooperation with EDC – will provide interest-free operating finance of up to $40,000 to eligible businesses and non-profit organizations. To qualify, businesses must have paid between $50,000 and $1 million in total payroll in 2019. The Government has announced that repayment of loan by December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).
Businesses should contact their respective financial institutions to apply for loan.
Providing lending facilities through BDC and EDC
The Government will provide lending to cash stripped businesses through BDC and EDC. The new SME Loan and Guarantee program will provide up to $40 billion to small and medium-sized companies, which require greater help in meeting their operational finance requirements, through guaranteed loans.
Introducing 75% Canada Emergency Wage Subsidy
Wage subsidy at 75% of remuneration has been proposed for employers whose monthly revenue for March, April or May 2020 has reduced, but who continue to retain their workers. This 75% Canada Emergency Wage Subsidy is yet to be rolled out, but will be applicable retroactively from March 15, 2020 for a 12-week period. The maximum benefit is $847 per week for a given employee, with no cap on the overall benefit claimed by an eligible employer.
Providing 10% wage subsidy to small employers
Eligible employers can claim temporary wage subsidy to reduce their payroll cost, regardless of whether or not their business has been affected by COVID-19. The subsidy is equal to 10% of remuneration paid between March 18, 2020, and June 19, 2020, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Eligible employers include corporations that claim small business deduction, sole proprietors, partnerships as well as non-profit organizations and charities.
Extending the due date for payment of GST/HST
Businesses have been allowed to defer GST/HST payments until June 30, 2020. With this extension, amounts becoming due as early as March 31 are not payable until the end of June. The extension applies to all types of filers (i.e. those filing annually, quarterly, or monthly) in respect of GST/HST amounts due for payment between March and June 2020. CRA will not charge interest on unpaid amounts of tax due over this period.
It may be noted that the deadline to file GST/HST returns remains unchanged. However, recognizing the difficult circumstances faced by businesses, CRA will not impose penalties where a GST/HST return has been filed not later than June 30, 2020.
Extending the due date for payment of income tax
Businesses have also been allowed to defer, until September 1, 2020, the payment of any Part I income tax that becomes due between March 18, 2020 and before September 2020. The extension will apply to amounts owing for previous fiscal year as well as installments for current fiscal year that become due over this period. CRA will not charge interest or penalties on unpaid amounts of tax during the extension.
Extending the due date for filing of income tax returns
The applicable dates are as follows:
- Corporate tax returns (T2), as well as forms such as T1134, elections, and responses to information requests, that are due for filing after March 18, 2020 can now be filed up to June 1, 2020.
- The filing deadline for charity information returns (T3010), due between March 18, 2020 and December 31, 2020, has been extended until December 31, 2020.
- For trusts with taxation year ended on December 31, 2019 or later, the tax return (T3) filing due date has been deferred until May 1, 2020.
- The filing deadline for partnership information return (T5013) has been extended to May 1, 2020.
- The income tax filing deadline for sole proprietors remains unchanged at June 15, 2020.
Regardless of the flexibility to delay the filing of return, a business that is expecting a refund may expedite filing the income tax return to have its refund claim processed sooner rather than later.
Suspending tax collections and CRA audits
CRA has suspended collections activities on new debts until further notice. Moreover, it will not initiate any post-assessment GST/HST or income tax audit of small businesses for now. The obligation for banks and employers to comply or remit on existing Requirements to Pay (RTPs) has also been suspended.
Extending the due date for payment of GST and customs duties on imports
GST and customs duty payments owing on imported goods have been deferred until June 30, 2020. The extension will apply to amounts owing for March, April and May 2020.
Extending the due date for WSIB premium reporting and payment
Ontario businesses have been allowed to defer, until August 31, 2020, WSIB premium reporting and payments due between March 26, 2020 and August 2020. The relief is automatic and applies to all employers covered by WSIB, whether they report and pay on monthly, quarterly or annual basis. No interest or penalty will be charged on outstanding premium payments over this period. Additional details about the relief will be shared by WSIB.
Doubling the EHT exemption
The Ontario Government has increased EHT exemption to $1 million for private-sector employers in 2020. EHT exemption would return to its current level of $490,000 on Jan 1, 2021. Please note that only the exemption amount has increased; eligibility criteria for EHT exemption, tax rates and other conditions remain the same as before.
Enhancing the Work-Sharing Program
Employers that have suffered at least a 10% decline in business activity due to COVID-19 may benefit from the enhancements to the Work-Sharing Program. The maximum duration of Work-Sharing agreements has been extended to 76 weeks across Canada, over which period eligible employers and employees will agree to a reduction in working hours (by at least 10% and up to a maximum of 60%) while income support will be provided to employees by Service Canada.
Making it easier for banks to lend to consumers
As a concerted effort, the banking regulator and the central bank have introduced measures that will allow Canada’s large banks to inject additional lending into the economy at lower interest rates (interest rate has now been reduced to 0.25%). These measures are designed to provide Canadians with easier and cheaper access to financing. The government has also put in place actions to provide long-term stable funding to banks and mortgage lenders, so that they can continue to provide lending to businesses and households.
These are uncertain times, but do not hesitate to reach out to us if you have any questions.
J-MAK CPA Team
We are a CPA firm in downtown Toronto that provides tax, accounting, corporate and advisory services to businesses. We would be happy to answer any questions that you may have.