COVID-19 Update: Federal and Ontario Economic Response Measure

March 31, 2020 Published by
Post Categories: Tax AccountingAdvice For YouCOVID-19

COVID-19 TAX UPDATE

Federal and Ontario Governments Economic Response Measures to COVID-19

(Released March 30, 2020)

The Canadian and Ontario governments have pledged over $124 billion to fight the COVID-19 pandemic through announcements made up to March 30, 2020.  Many of the programs and initiatives are geared towards keeping the economy moving by assisting businesses, the public sector and individuals through these challenging times by alleviating cash flow pressures many are facing.  Both levels of government’s economic response measures aim to achieve this goal through:

  1. direct cash infusions including wage subsidies, tax credits, and benefits;
  2. reducing cash outflows including deferrals of various federal and Ontario tax payments; and
  3. increasing access to cash by way of interest-free loans for small businesses and incentivizing financial institutions to extend credit by guaranteeing credit facilities or sharing default risk.

In many cases, the logistics of the programs and initiatives, such as how funds will flow or how application processes for wage subsidies will work, are still being developed.  We will update our newsletter as the plans are fleshed out.

However, given the large volume of announcements made to date, we wanted to provide an easy to follow summary of the key economic initiatives announced through March 30, 2020. The summary is separated by businesses, charities/NPOs and individuals so you can hone in on the measures meant for you.

Key COVID-19 Economic Initiatives

GroupFederal Programs & InitiativesOntario Programs & Initiatives
Businesses
·  Small and medium enterprises (SMEs)·  Canada Emergency Business Account (CEBA) to provide $25 billion in funding to financial institutions to provide interest-free lines of credit of up to $40,000.  CEBA loans are available to employers with 2019 total payroll between $50,000 to $1 million.

·  Loan repayment by December 31, 2022 will result in 25% loan forgiveness up to $10,000.

·  Export Development Canada (EDC) to guarantee up to $20 billion in new operating credit and cash flow term loans issued by financial institutions to SMEs. Each loan is capped at $6.25 million with EDC guaranteeing 80% of each loan. Loans are due within one year.

·  Business Development Bank of Canada (BDC) will issue incremental credit to eligible SMEs of up to $6.25 million per eligible SME, jointly with financial institutions with BDC taking on 80% of the risk. This co-lending arrangement will make up to $20 billion of financing available to SMEs.

·  Between the EDC and BDC lending programs, eligible SMEs can access up to $12.5 million in credit facilities.

·  CRA will not contact any SMEs to initiate post-assessment GST/HST or income tax audits for the next 4 weeks.

·  Hydro rates reduced to “off-peak” rates for 24 hours/day for 45 days for eligible small businesses.

·  Increasing the Employer Health Tax (EHT) exemption from $490,000 to $1 million for 2020, retroactive to January 1.

 

·  All enterprises·  A 75% wage subsidy for eligible employers for salaries paid since March 15, 2020. This replaces the previously announced 10% subsidy.

·  The subsidy will be 75% of the first $58,700 earned per employee. This equates to a subsidy of $847/week per employee.

·  Available to all employers facing a revenue decline of 30% or more.

·  Deferral[i] until September 1, 2020 payment of any income tax amounts that become owing on or after March 18, 2020 and before September 1, 2020.  Relief applies to tax balances due and instalments under Part I of the Income Tax Act.  No interest or penalties will accumulate on these amounts during this period if paid by September 1, 2020.[ii]

·  Deferral of all GST/HST payments until June 2020.[iii]

·  Extension of the EI Work Sharing Program (EIWSP) from 38 to 76 weeks for businesses affected by COVID-19 related downturn in business and for companies in the forestry, steel and aluminum sectors.

·  Five (5) months of interest and penalty relief[iv] on unfiled returns or unpaid amounts on most provincially administered taxes including:

Ø EHT;
Ø Fuel and gas tax;
Ø International fuel tax;
Ø Tobacco tax;
Ø Wine and spirits tax;
Ø Mining tax;
Ø Insurance premium tax;
Ø Retail sales tax; and
Ø Race tracks tax.

·  Deferral of WSIB payments for up to 6 months.

·  Introducing the Regional Opportunities Investment Tax Credit (ROITC), a 10% refundable tax credit for investments in capital property that:

Ø are made by a Canadian-controlled private corporations (CCPCs) that build, renovate or acquire commercial and industrial buildings that are either Class 1 or Class 6 assets[v] for capital cost allowance purposes;

Ø have a cost between $50,000 to $500,000; and

Ø are available for use on or after March 25, 2020 in a designated Ontario region.[vi]

·  Suspension of audit interactions with most businesses and their representatives during April 2020.

·  Charities and non-profit organizations (NPOs)·  A 75% wage subsidy for eligible employers for salaries paid since March 15, 2020. This replaces the previously announced 10% subsidy.

·  The subsidy will be 75% of the first $58,700 earned per employee. This equates to a subsidy of $847/week per employee.

·  Available to all charities and NPOs facing a revenue decline of 30% or more.

·  Canada Emergency Business Account (CEBA) to provide $25 billion in funding to financial institutions to provide interest-free lines of credit of up to $40,000.  CEBA loans are available to employers with 2019 total payroll between $50,000 to $1 million.

·  Loan repayment by December 31, 2022 will result in 25% loan forgiveness up to $10,000.

·  Filing deadline for charity returns extended to December 31, 2020.

·  Charities Directorate has suspended all operations until further notice, including call centres, registration and audit activities.

·  $148 million in funding for social service organizations such as food banks, homeless shelters, churches and emergency services.  Funding will be provided directly by regional Consolidated Municipal Service Managers and District Social Service Administration Boards.
Individuals
·  Without paid leave only·  Waiving of one-week wait period to claim EI sickness benefits (if quarantined).

·  Waiving requirement to have a medical certificate to access EI sickness benefits.

·  Canada Emergency Response Benefit (CERB)[vii].  The CERB provides a $2,000 monthly taxable benefit, up to 4 months. The following are eligible:

Ø  workers who cannot work due to COVID-19 without access to paid leave or other support;

Ø  workers who are quarantined, sick with COVID-19 or caring for family members sick with COVID-19;

Ø  working parents who must stay home with children due to school or daycare closures;

Ø  workers who remain employed but unpaid due to lack of work; and

Ø  self-employed individuals.[viii]

·  With paid leave but face job loss or hour reductions·  Canada Emergency Response Benefit (CERB)[ix].  The CERB provides a $2,000 monthly taxable benefit, up to 4 months. The following are eligible:

Ø  workers who cannot work due to COVID-19 without access to paid leave or other support;

Ø  workers who are quarantined, sick with COVID-19 or caring for family members sick with COVID-19;

Ø  working parents who must stay home with children due to school or daycare closures;

Ø  workers who remain employed but unpaid due to lack of work; and

Ø  self-employed individuals and contractors.

·  EI Work Sharing Program (EIWSP) to provide EI benefits for up to 76 weeks to workers who agree to reduce their working hours.

·  Low and modest income families·  Special one-time payment in early May 2020 through the Goods and Services Tax Credit (GSTC). Expected average income boost for singles is close to $400 and close to $600 for couples.

·  Increasing the Canada Child Benefit (CCB) maximum by $300 per child and paying the increase as a one-time payment in May 2020.

·  Canada Emergency Response Benefit (CERB).  The CERB provides a $2,000 monthly taxable benefit, up to 4 months. The following are eligible:

Ø  workers who cannot work due to COVID-19 without access to paid leave or other support;

Ø  workers who are quarantined, sick with COVID-19 or caring for family members sick with COVID-19;

Ø  working parents who must stay home with children due to school or daycare closures;

Ø  workers who remain employed but unpaid due to lack of work; and

Ø  self-employed individuals.[x]

·  Special one-time payment to parents of $200/child and $250 if a child has special needs.

·  $9 million expansion in energy bill support to families eligible for the Low-income Energy Assistance Program (LEAP).

·  Seniors·  25% reduction in minimum RRIF withdrawals for the 2020 year.

 

·  Increasing the Guaranteed Annual Income System (GAINS) maximum payment to $166/month for singles and $332/month for couples for up to six months, starting in April 2020.

·  Subsidized delivery of meals, medicines and other essentials.

·  All individuals·  Six (6) month interest-free moratorium on the repayment of Canada Student Loans to September 30, 2020.

·  CRA will defer, until September 1, 2020, payment of any income tax amounts that become owing on or after March 18, 2020 and before September 1, 2020.  Relief applies to tax balances due and tax instalments under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

·  Deferral of personal tax instalments due June 15 to September 15, 2020.

·  Tax filing deadline extended from April 30, 2020 to June 1, 2020.[xi]

·  If self-employed, deferral of all GST/HST pay-ments until June 2020.[xii]

 

·  Six (6) month relief for Ontario Student Assistance Program (OSAP) loan and interest for student borrowers, in partnership with the federal government.

·  Hydro rates reduced to “off-peak” rates for 24 hours/day for 45 days for consumers.

 

 

[i] Please refer to our Tax Filing Deadline and Payment Measures newsletter for more details on filing and payment deferral provisions the Federal government has put in place for businesses, charities/NPOs and individuals.

[ii] Please note these measures do not apply to GST/HST or payroll taxes.

[iii] Includes custom duties on imports.

[iv] Businesses are not required to provide any notification or reasoning for delays in filing or payment to the Ministry of Finance.

[v] As defined by Schedule II of the Income Tax Regulations.

[vi] Please refer to the annex to Ontario’s March budget update for a listing of designated regions. https://budget.ontario.ca/2020/marchupdate/annex.html#ca-2

[vii] Replaces the previously announced Emergency Care Benefit that was available to individuals without paid leave.

[viii] Including contractors.

[ix] Replaces the previously announced Emergency Support Benefit for workers with paid leave who are ineligible for EI and facing unemployment.

[x] Including contractors.

[xi] However, individuals who expect to receive a refund or benefits under the GSTC or the CCB are encouraged to not delay the filing of their returns.

[xii] Includes custom duties on imports.