Understanding COVID-19 federal government support

TAXATION

The COVID-19 pandemic has resulted in unprecedented demands on the Canadian health system, along with strains on our economy and our personal financial situations. The federal government has announced several programs offering targeted support for individuals, businesses and other organizations. These programs have been updated and amended throughout the past two months; here is the current information as of May 12.

All individuals

The deadline for filing most personal tax returns has been extended to June 1; the deadline for self-employed individuals and their spouses remains unchanged at June 15. Any balance due will not have to be paid until September 1, with no interest or penalties payable. However, if you receive the Goods and Services Tax (GST) credit or the Canada Child Benefit (CCB), or if you expect to receive a refund, you should file as soon as possible to ensure that the 2020/21 payments will not be delayed. If you pay tax by instalments, you will also not have to pay the June 2020 instalment until September 1.

The Canada Emergency Response Benefit (CERB) provides $500 per week for up to 16 weeks to those who have lost income because of COVID-19. It is available to Canadian residents over the age of 15 who meet one of these criteria:

• have stopped working because of COVID-19
• are eligible for Employment Insurance (EI) regular or sickness benefits
• have exhausted their EI benefits and are unable to find a job because of COVID-19

To qualify for the CERB, workers must not have quit their jobs voluntarily, and they must have had employment or self-employment income (or maternity / paternity benefits) of at least $5,000 in 2019 or in the 12 months before they applied; they can earn up to $1,000 per month without it affecting their eligibility. The CERB is jointly delivered by Service Canada and the Canada Revenue Agency, and there is an application questionnaire on www.canada.ca that will direct people to either the EI or the CERB depending on their particular situation.

There is a special one-time payment in April or May to those currently receiving the GST credit, effectively doubling the 2019/20 credit amount. The CCB for 2019/20 has been increased by $300 per child, also to be paid in May. If you received the GST credit or the CCB in 2019/20, there is no need to apply for the extra payments.

Employees

Many employees have had to adjust their work arrangements during the COVID-19 pandemic, which raises questions about how the CRA will apply the rules when it comes to what reimbursements are considered a taxable benefit to the employee and whether home office expenses are deductible during this extraordinary time. While guidance on many of these areas is limited, the CRA released a technical interpretation on April 22 to clarify the matter; it is prepared to accept reimbursements of up to $500 so that an employee can update their home technology in order to work from home more effectively. As these updates are primarily for the benefit of the employer, there would be no taxable benefit to the employee, and the employee must provide receipts to support reimbursement.

The federal government also announced that it has confirmed, or is in the process of confirming, agreements with all the provinces and territories to share the costs of a temporary salary top-up for essential workers. Each province or territory will identify which essential workers will be eligible for this support and how much they will receive.

Students

There is a proposed Canada Emergency Student Benefit (CESB) that would provide support to students and new graduates who are not eligible for the CERB or EI or are unable to work due to COVID-19. The CESB will be $1,250 per month for eligible students or $2,000 per month for eligible students with dependents or disabilities, from May to August 2020.

The government will also expand existing federal employment, skills development and youth programming to create up to 116,000 jobs, and will launch a new Canada Student Service Grant (CSSG) for students who choose to do national service and serve their communities. The new CSSG will provide up to $5,000 for their education in the fall.

Proposals are under review to make the following enhancements to other existing support programs:

• Double the Canada Student Service Grants amounts for full-time and part-time students.
• Broaden eligibility for student financial assistance and increase the maximum amount under the Canada Student Loans program.
• Extend support for eligible student researchers and post-doctoral fellows.
• Remove the maximum 20 hours per week restriction until August 31 for international students working in essential services.
• Suspend the repayment and interest on the federal portion of student and apprentice loans.

Additional support is also available to First Nations, Inuit, and Métis Nation post-secondary students.

Seniors

Given the volatility in the stock market, the Registered Retirement Income Fund minimum withdrawal percentages have been reduced by 25 per cent to allow seniors more flexibility to manage their funds.

Seniors who are eligible for the Old Age Security Pension will receive a one-time tax-free payment of $300; those who receive the Guaranteed Income Supplement will receive an additional $200.

Small business

The CRA has provided more flexibility for small business to file and pay taxes during the pandemic.

Income tax deadlines extended

Deadlines for all corporate income tax filings that were otherwise due between March 18 and June 1 have been extended to June 1; for example, corporations with a September 30 year-end that would normally have to file their T2 Income Tax Return on March 30 will now not have to file until June 1. However, the deadline for filing a Scientific Research & Experimental Development tax credit claim has not been extended, though this may be under review.

The deadline for filing tax and information returns for partnerships and trusts with a December 31 year-end has been extended to May 1; other trusts are required to file their tax and information returns by June 1.

The deadline for paying tax remittances due under Part I of the Income Tax Act on or after March 18 has been extended to September 1, with no interest or penalties. The payment deadlines for payroll remittances and for tax payments outside Part I tax (for example, the Part IV tax on taxable dividends received by private corporations), remain unchanged.

While the filing deadline for GST/HST returns has not been formally extended, the CRA has indicated that it will not impose late filing penalties if the returns are filed by June 30. GST/HST payments or custom duties otherwise due between March 27 and June 30 do not have to be paid until June 30.

The deadline for filing NR4s (the reporting slip for amounts paid or credited to non-residents of Canada) was extended to May 1; however, the payment deadline for the withholding tax on these amounts remains unchanged at the 15th of the month after the payment.

Support to fill wage gaps

The Temporary Wage Subsidy is available for eligible employers from March 18 to June 19, 2020 and equals 10 per cent of remuneration paid during that period; the subsidy is capped at $1,375 per employee and $25,000 per employer and is claimed by reducing source deductions including Canada Pension Plan (CPP) and Employment Insurance (EI) amounts. This subsidy is available to employers that are individuals, non-profit organizations, registered charities and Canadian-controlled private corporations. It also is available to partnerships for which all the partners would be eligible for the Temporary Wage Subsidy.

The Canada Emergency Wage Subsidy (CEWS) is available to all employers (except public institutions) that, compared to the prior year, have experienced a decrease in revenues of at least 15 per cent in March and 30 per cent in April and May. In certain circumstances, a different prior reference period may be used. The CEWS will reimburse employers for up to 75 per cent of an employee’s wages up to $847 per week for up to 12 weeks.

Employers who are eligible for the CEWS will also be eligible for a refund of the full amount of the EI, CPP, Quebec Pension Plan and Quebec Parental Insurance Plan contributions for employees who are on leave with pay. Any benefit that the employer receives under the Temporary Wage Subsidy will reduce the amount that they can claim under the CEWS for the same period. Applications for the CEWS opened on April 27. The CEWS was originally set to expire on June 6; however, on May 8 it was announced that the CEWS would extend past that date and that more details would follow.

In addition to these measures, the government is doubling the maximum duration of the Work-Sharing program to 76 weeks for employers affected by COVID-19. This provides income support to employees eligible for EI who reduce their normal working hours because of developments beyond their employer’s control.

Increased access to credit

The government is also increasing small and mid-sized businesses’ access to credit through the Business Credit Availability Program, which provides support through the Business Development Bank of Canada and Export Development Canada. In this program, private sector lenders support small and medium enterprises through loan guarantees and co-lending programs.

The federal government will also provide interest-free loans of up to $40,000 for small businesses and not-for-profit organizations through the Canada Emergency Business Account. To qualify, the organization must have had payroll expenses of between $20,000 and $1.5 million in 2019. Eligible organizations apply for the benefit through their bank or credit union.

Assistance with paying rent

The proposed Canada Emergency Commercial Rent Assistance (CECRA) program will provide support to commercial property owners who forgive a portion of the April, May and June rent of eligible small business tenants. The landlord must reduce the rent for those tenants by 75 per cent and agree not to evict the tenant during that period, and the CECRA will provide a forgivable loan of 50 per cent of the rent otherwise payable.

Eligible small business tenants are those that pay less than $50,000 per month in rent and temporarily ceased operations or experienced a 70 per cent drop in revenue. This support will also be available to non-profit organizations and charities. The CECRA is expected to be operational by mid-May.

Support for employers hiring students

Employers who were approved to hire students under the Canada Summer Jobs program will have increased flexibility. These temporary changes increase the wage subsidy to one hundred per cent of the provincial minimum hourly wage, permit businesses to hire part-time staff and extend the end date for employment from August 28, 2020 to February 28, 2021. Employers will also be able to adapt the activities outlined in their application to accommodate for COVID-19 restrictions, such as moving from providing in-person services to using digital tools for service provision.

Programs for other circumstances

Targeted programs have been introduced to meet the needs of organizations that do not qualify for the above programs or that are considered to need additional support.

• Innovative and early-stage businesses that do not qualify for other COVID-19 business supports may be able to access financial and other support from the Industrial Research Assistance Program.
• Additional funding is being provided to Futurpreneur, a non-profit organization that supports young entrepreneurs, to provide payment relief for its clients for up to 12 months.
• The Regional Relief and Recovery Fund will provide additional access to capital for rural businesses and organizations; eligible businesses should apply through their Regional Development Agency (RDA).
• The RDAs have also received increased funding to provide financing support for other small and medium-sized businesses that are unable to access other COVID-19 programs.
• The Northern Business Relief Fund will provide additional non-repayable support for businesses in the territories, and additional funding will be provided to Aboriginal financial institutions to support First Nations, Inuit, and Métis Nation small and medium-sized businesses.

As these programs are being updated or amended over time, it is important that you check www.canada.ca for the most recent information.