Coronavirus (COVID-19)

As we all are coping to the new reality of the Coronavirus (COVID-19), InVision Chartered Professional Accountants would like to update you on some of the government programs that have recently been announced to assist individuals, businesses and organizations with the recent economic fallout associated with the impact of the COVID-19 virus.

The list is long as there is a lot to tell! We’ve tried to make the list complete, yet in a condensed form, therefore it doesn’t cover all situations and details. Click the links for additional details and/or contact our office for additional guidance. Things can change daily and this information is based on the announcements to date (April 24, 2020).

Tax Filing Deadline and Tax Payment Extensions

2019 Individual tax filing deadline: has been extended until June 1. The payment deadline for the 2019 tax year has been extended to September 1, 2020.

2019 individual tax filing deadline for self-employed and their spouses: remains unchanged at June 15, 2020. The payment deadline for the 2019 taxes and the June 15th instalment payment for the 2020 tax year has been extended to September 1, 2020.

Corporations having tax filings due after March 18 and before June 1, 2020 have been given an extension to June 1, 2020. Payments for balance and instalments owing under Part 1 of the Income Tax Act that became due on or after March 18 and before September 1, 2020 are due September 1, 2020. If a corporation has amounts outstanding that became due before March 18, there is no extension on those amounts.

Payroll remittances are due by existing payment due dates. Note: No extensions have been granted for payroll remittances.

For more information regarding tax filing and payment date extensions in response to COVID19 please refer to the following link:

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

Information for Businesses

Wage Subsidy Programs

The government has announced two wage subsidy programs:

  • Canada Emergency Wage Subsidy (75%) - CEWS
  • Temporary Wage Subsidy (10%) - TWS

Canada Emergency Wage Subsidy (CEWS) 75% - March 15 to June 6, 2020

The CEWS was initially announced on Friday March 27, 2020. This new CEWS program subsidizes 75% of wages paid to employees to a maximum of $58,700/year (or $1,129/week) of wages paid per employee. That is a maximum subsidy of $847 (= $1,129 x 75%) per week per employee. The program is 12 weeks, so the most an employer can get for an employee is $10,164 (=$847 x 12 weeks).

**special rules apply to non-arm’s length wages

Step 1: First calculate if you have had a drop in revenue. One of the conditions to businesses receiving the (CEWS - 75%) is that they must experience a 15% reduction in revenues in March 2020 or a 30% reduction in revenues in April and May 2020. Based on the legislation enacted on April 11, the reduction will be measured by comparing the gross revenue earned in each month March, April and May in 2020 to the gross revenues earned in the corresponding months in 2019 OR comparing it to average revenue for January/February 2020. For example, your revenues could be 30% down in April, but not 15% down in March. You would qualify for the subsidy in April but not in March. (You can’t switch comparison methods. Either compare using the same month in 2019 OR compare using the January/February 2020 average.)

If you qualified for the 75% wage subsidy for March 2020 based on a 15% March 2020 revenue drop, then you are automatically qualified on your April 2020 revenue (it doesn’t matter if your actual April 2020 revenue has dropped or not).

If you qualified for the 75% wage subsidy for April 2020 based on a 30% April 2020 revenue drop, then you are automatically qualified on your May 2020 revenue (it doesn’t matter if your actual May 2020 revenue has dropped or not).

The subsidy will be retroactive to wages paid from March 15, 2020. CEWS (75% wage subsidy) will be available to all businesses (corporations; partnerships and sole proprietors) and charities and non-profit organizations.

Step 2: If you qualify in step one, next calculate the wages paid during the subsidy period that corresponds to your 30% drop in revenue. There are 3 subsidy periods (March 15-April 11, April 12-May 9 and May 10-June 6) and you must apply for the subsidy for each period.

March 2020 Revenues: Paycheques to employees for wages earned between March 15 and April 11 will be eligible for the subsidy based on a 15% revenue drop for March 2020 revenue compared to March 2019 revenue. OR compare the March 2020 revenue to the average revenue for January/February 2020.

April 2020 Revenues: Paycheques to employees for wages earned during the second subsidy period (April 12-May 9) will be based on the 30% revenue drop for April 2020 revenue compared to April 2019 revenue. OR compare the March 2020 revenue to the average revenue for January/February 2020.

May 2020: Paycheques to employees for wages earned during the third subsidy period (May 10-June 6) will be based on the 30% revenue drop for May 2020 compared to May 2019. OR compare the March 2020 revenue to the average revenue for January/February 2020.

**Use the wages that relate to the hours worked during the subsidy period, not the date the wages were paid. For example, an employee is paid monthly. For the subsidy period March 15-April 11, use the hours worked from March 15-April 11, which will be a combination of hours from his March payroll cheque (use his hours/wage from March 15-31) and his April payroll cheque (use his hours/wage from April 1-11).

Do employee cheques and payroll remittances as normal. The 75% wage subsidy does not affect the employees pay cheque or your payroll remittance.

Mr. Morneau stated that businesses can apply for the (CEWS - 75%) online using the CRA “My Business Account” or through an on-line portal on that should be available in late April or early May. He expects businesses who have registered for direct deposit to have funds deposited into their account within 6 weeks of applying. We recommend getting set up for My Business Account at: https://www.canada.ca/en/revenue-agency/news/cra-multimedia-library/businesses-video-gallery/register-mybusiness-account.html

For more information regarding the CEWS program refer to the following link: https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html

Temporary Wage Subsidy (TWS) 10% - March 18 to June 19, 2020

Organizations that do not qualify for the new CEWS (75%) wage subsidy, likely continue to be eligible for the previously announced Temporary Wage Subsidy Program (TWSP 10%) on wages/salaries paid from March 18 to June 19, up to a maximum of $1,375 per employee and $25,000 per employer. The 10% subsidy will be deducted from the 75% subsidy application whether or not the business applied for the 10% subsidy, if applicable. Therefore claim the 10% subsidy through payroll remittances in order to effectively receive the full 75% wage subsidy between the two programs.

For example, if your payroll periods are March 1-15 and March 16-31, the subsidy would first apply to the March 16-31 pay period. If you do payroll on March 31 and date the cheques for March 31, you can receive the 10% temporary wage subsidy for the March 16-31 wages/salaries, even though they include a couple of days of work before this was announced on March 18. The subsidy is based on the day the wage is paid, NOT the days the employee worked.

You can reduce your payroll remittance for that month or a future month or wait to the end of the calendar year to receive the subsidy. It is speculated there will be something on the 2020 T4 summary to reconcile for the reduced payments or to request the 10% subsidy at that time.

There is nothing specifically excluding wages to shareholders or non-arm’s length employees under TWS. Note that dividends do not qualify for the 10% TWS.

For more information regarding the TWSP (10%) program refer to the following link: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

Canada Emergency Business Loans

Banks will offer interest free $40,000 loans, guaranteed by the government to small business and not-for-profits to help cover their operating costs during a period where their revenues have declined due to the economic impacts of COVID-19. To qualify, businesses need to have incurred payroll costs between $20,000 and $1.5 Million in 2019. The loan must be repaid by December 31, 2022 and will result in forgiveness of 25% up to a maximum of $10,000. There does not appear to be a requirement to prove decreased cashflow or revenues to get this loan or $10,000 forgiveness. The eligibility is based on payroll amounts and the proof of this is the business’ 2019 T4 summary. The government has placed restrictions on the use of the funds from the loan stating they shall only used to pay non-deferrable operating expenses including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinance or existing indebtedness, payments of dividends, distributions and increases in management compensation. Contact your financial institution if you wish to apply for this loan or need more details. https://www.canada.ca/en/department-finance/news/2020/03/additional-support-for-canadian-businesses-from-the-economic-impact-of-covid-19.html#_New_Loan_Programs

New Access to Credit through Small and Medium-sized Enterprise Loan Guarantee Program

The government announced $12.5 Billion of additional lending support through EDC and BDC to help small to medium-size businesses with cashflow requirements through the new Small and Medium-sized business Enterprise Loan and Guarantee program. Loans of up to $6.25 million to individual businesses will be made available under this program.  We recommend you contact your financial institution to obtain access to this funding.

Farm Credit Canada (FCC) Lending Capacity Increases by $5.0 Billion

In order to alleviate financial pressure in the agriculture sector, the Government of Canada has increased FCC’s lending capacity by an additional $5.0 Billion. Customers facing financial pressure are encouraged to contact their FCC relationship manager or the FCC Customer Service Centre at 1-888-332-3301 to discuss their situation and options.

For more information regarding this option please refer to the following link:

https://www.fcc-fac.ca/en/about-fcc/media-centre/news-releases/2020/lending-capacity-increases-to-alleviate-industry-financial-pressure.html

Deferred GST Payments

Businesses have the option to defer certain GST remittances until June 30, 2020.

Monthly filers: The extension applies to monthly filers that would have to pay their GST returns for the months of February, March, and April. Such GST payments for those 3 GST returns are now due June 30, 2020.

Quarterly filers: Quarterly filers can defer payments of GST owing to June 30, 2020, ONLY for the January 1 to March 31, 2020 GST return. If you have a quarterly GST reporting period other than January 1 to March 31, 2020, there is no payment deferral.

Annual filers: For annual filers whose instalments are due March, April or May 2020, the deadline is extended to June 30, 2020.

Filing deadline for all GST return: Unfortunately, CRA has not given specific guidance whether GST returns still need to be filed within the normal deadlines. Our interpretation of CRA’s announcement is that the returns should still be filed on time and only the deadline for the payment of the GST has been extended as per above.

For more information regarding the deferral of GST remittances in response to COVID19 please refer to the following links:

https://www.canada.ca/en/department-finance/news/2020/03/additional-support-for-canadian-businesses-from-the-economic-impact-of-covid-19.html#_Deferral_of_Sales

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-gst-hst.html

EI Work-Sharing Program

The EI Work-Sharing Program (WS) is intended for employers that would prefer to reduce the hours of work for their employees rather than laying them off entirely. Employers must reduce the regular work week schedule by a minimum of 10% (one half day) and a maximum of 60% (three day). For the regular scheduled hours that the employee is not working, they are permitted to receive EI benefits without the benefits being reduced for the wages they received from their employer. This arrangement must include all employees of the same class and the work must be shared equally. The program must run a minimum of 6 weeks and a maximum of 76 weeks (extended from the previous 38 weeks under COVID-19 response). Application must be made 30 days in advance of the start of the WS arrangement.

https://www.canada.ca/en/employment-social-development/services/work-sharing.html

Information for Individuals

The new Canada Emergency Response Benefit (CERB)

The new CERB will provide a taxable benefit of $2,000 for up to 4 months to:

  • Workers who must stop working due to COVID-19 and do not have access to 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 CERB will be accessible through CRA My Account or My Service Canada starting in early April. Applicants will also be able to apply via an automated telephone line or via toll-free number. It is based on 4-week periods beginning March 15, 2020.

The first 4-week period runs from March 15, 2020 to April 11, 2020. Individuals need to look at each 4-week period separately to see if they qualify for that 4-week period, based on the above criteria.

For example, an employee will be laid off on April 16 and will receive 2 weeks of pay up to an including April 30. They do not qualify for CERB for the first 4-week period from March 15 to April 11 because they were still working. They do not qualify for CERB for the second 4-week period April 12 to May 9 because they only have 9 days in that period where they were not receiving pay (and need 14 days without pay to qualify). They would qualify for third CERB 4-week period from May 10 to June 6.

For more information about applying for CERB benefits please see the following links:

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

https://www.canada.ca/en/services/benefits/ei/cerb-application/questions.html

Child Tax Benefit Changes

The government has increased the Canada Child Benefit payment by up to $300 per child for the 2019-2020 benefit year. Payments will be revised July 1, 2020. In order to ensure you receive your benefits on time, you should file your 2019 personal tax return before the June 1 filing deadline (or June 15th tax filing deadline for self-employed individuals)

Registered Retirement Income Funds (RRIF's)

Due to market volatility, the minimum required withdrawals from RRIF’s will be reduced by 25% for 2020.

Canada’s Economic Response Plan

See the link below for the Government of Canada’s COVID-19 Economic Response Plan: https://www.canada.ca/en/department-finance/economic-response-plan.html