April 3, 2020

Wage Subsidies

The government has now two wage subsidy programs available:  The Canada Emergency Wage Subsidy and The Temporary Wage Subsidy.

The Canada Emergency Wage Subsidy allows up to a 75 per cent wage subsidy for qualifying businesses, for up to 3 months, retroactive to March 15, 2020.

In order to qualify, the monthly revenue in 2020 must be 30% lower than the revenue earned in the corresponding month in 2019. For example, to qualify for the March subsidy, revenues for March 2020 will need to be at least 30% lower than March 2019 revenues. A separate application will need to be submitted for each month (March, April and May).

Eligible employers would include employers of any size and in any industry, except for public sector entities.

Note that this subsidy must be applied for through a Canada Revenue Agency online portal. The availability date of the portal has not yet been announced.

Please see the memorandum headlined The Canada Emergency Wage Subsidy for further details.

Employers who are not eligible for the Canada Emergency Wage Subsidy may instead be eligible for The Temporary Wage Subsidy.   Eligible small employers are being given a temporary wage subsidy for a period of three months.

The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration.

Please see the memorandum headlined The Temporary Wage Subsidy for further details.

Extension of Time to Pay Corporate Taxes

Corporations are being allowed to defer, until September 1, 2020 the payment of any income tax amounts that become owing on or after March 18 and before September 1, 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act.

No interest or penalties will accumulate on these amounts during this period.

Note that this deferment does not apply to any other taxes (payroll withholdings, non-resident withholdings, Part IV tax on intercorporate dividends, etc.) imposed under the Income Tax Act.

Due Dates for Corporate Tax Returns

Corporate tax returns that would otherwise have a filing due date after March 18 and before June 1, 2020 are now due by June 1, 2020.  This extension applies to corporations with year-ends from September 19, 2019 until November 30, 2019.  Corporations with year-ends after November 30, 2019 are still required to be filed within six months after the year-end.

Extension of Time to File Various Information Returns with CRA

Partnership information returns (Form T5013) that had a filing due date after March 18, 2020 has now been deferred until May 1, 2020.  This extension applies to partnerships who have at least one member who is not a corporation.  This deadline is normally March 31.  Partnerships whose members are all corporations will continue to have a deadline of five months after its year-end.

The 2019 Non-resident information return (Form NR4 Statement of Amount Paid or Credited to Non-Residents of Canada), which has a filing deadline of March 31, 2020, has now been extended to May 1, 2020.

Trust Information and Income Tax Returns (Form T3) that had a filing due date after March 18, 2020 has now been deferred until May 1, 2020.

Various other returns (other than those listed above and Form T2 corporate tax return), forms, elections, designations and responses to information requests that are due after March 18, 2020 have now been deferred to June 1, 2020.

Note that these extensions do not apply to the filing of Form T661 (Scientific Research and Experimental Development), Form T2038 Investment Tax Credit for Individuals, Form T2 Schedule 31 Investment Tax Credit for Corporations, or any prescribed forms, receipts, documents or prescribed information related to these three forms.

GST/HST and Import Duties Relief

The government has recently announced for the deferral of the following remittances to June 30, 2020 for the following:

  • GST/HST monthly filer’s remittances for amounts collected for the February, March and April 2020 reporting periods;
  • GST/HST quarterly filer’s remittances for amounts collected for the January 1, 2020 through March 31, 2020 reporting period;
  • GST/HST annual filers, whose GST/HST balances for 2019 are due March, April or May 2020, as well as any instalments due for 2020; and
  • Statement of accounts on GST and custom duties on imports due for March, April and May 2020.

Businesses should continue to file their HST returns on a timely basis.

Canada Emergency Business Account

The new Canada Emergency Business Account will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced due to the economic impact of COVID-19. The government has earmarked $25 billion to this program.

To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.  Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).

It is expected that this program will roll out in the three weeks after March 27.  Small businesses and not-for profits should contact their current financial institution to apply for these loans.

Issuing Record of Employment

If your employees are directly affected by the coronavirus (COVID-19) and they are no longer working, you must issue a Record of Employment (ROE).

When the employee is sick or quarantined, use code D (Illness or injury) as the reason for separation (block 16). Do not add comments.

When the employee is no longer working due to a shortage of work because the business has closed or decreased operations due to coronavirus (COVID-19), use code A (Shortage of work). Do not add comments.

When the employee refuses to come to work but is not sick or quarantined, use code E (Quit) or code N (Leave of absence), as appropriate. Avoid adding comments unless absolutely necessary.

Extending the Work-Sharing Program

The Government of Canada has put in place Work-Sharing (WS) temporary special measures for employers affected by the downturn in business due to COVID-19.   WS temporary special measures are only available to employers either directly or indirectly experiencing a downturn in business due to COVID-19.

WS is an Employment Insurance (EI) program that helps employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer. The program provides EI benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers. The goal of the program is for all participating employees to return to normal working hours by the end of the agreement.

Effective March 15, 2020 to March 14, 2021, the Government of Canada is introducing the following temporary special measures:

  1. extend the maximum duration of WS agreements from the current 38 weeks to 76 weeks
  2. waive the mandatory waiting period between agreements, and
  3. ease recovery plan requirements for the duration of the WS agreement

These measures extend the duration of Work-Sharing agreements by an additional 38 weeks, for a total of 76 weeks. The mandatory waiting period has also been waived so that employers with a recently expired agreement may immediately apply for a new agreement, without waiting between applications and ease Recovery Plan requirements for the duration of the WS agreement.

The employer and the employees (and the union, if applicable) must agree to participate in a WS agreement and must apply together.

The guide to determining whether your business is eligible, and the conditions required to apply can be found through this link:

This program must be applied for through Service Canada.

Loan Guarantee for Small and Medium Enterprises

Small and medium-sized enterprises (SMEs) may be particularly vulnerable to the impacts of COVID-19. To support their operations, EDC will guarantee new operating credit and cash flow term loans that financial institutions extend to SMEs, up to $6.25 million.

The program cap for this new loan program will be a total of $20 billion for export sector and domestic companies.

It is expected that this program will roll out in the three weeks after March 27.  Interested businesses should work with their current financial institution.

Co-Lending Program for Small and Medium Enterprises

To provide additional liquidity support for Canadian businesses, the Co-Lending Program will bring the Business Development Bank of Canada (BDC) together with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts up to $6.25 million BDC’s portion of this program is up to $5 million maximum per loan. Eligible financial institutions will conduct the underwriting and manage the interface with their customers. The potential for lending for this program will be $20 billion.

It is expected that this program will roll out in the three weeks after March 27.  Interested businesses should work with their current financial institution.

Disclaimer:  The COVID-19 Canadian tax policies in the above article are changing rapidly as the governments introduce new measures. Certain details have yet to be published. We will aim to update them as soon as they are available.