On March 18, 2020 the Government of Canada announced significant proposed measures to combat the financial difficulty caused by the current crisis.
A summary of the Canada Revenue Agency’s explanation of the changes can be reviewed here:
Canada’s COVID-19 Economic Response for Businesses.
Please note that details on how you can sign up for many of these benefits is yet to come. Once details are known, we will communicate how to take advantage of these benefits. Many of the announced proposals require expedited Parliamentary approval (Royal Assent).
Our highlights and recommendations, in order of priority, are as follows:
HEALTH
Please take care of your personal health (mental and physical) and be mindful of the health of your family and friends and employees.
LAY-OFFS
Application for the Emergency Care Benefit through Employment Insurance (EI) will be available for qualifying employees in April 2020. The easiest way to apply for the benefit will be through the individual taxpayers CRA MyAccount secure portal. We recommend you and all your employees sign up for access to your secure CRA MyAccount portal as soon as possible.
Consider applying for the EI Work Sharing Program where all or an identifiable unit of 2 or more full-time employees agree to reduce their normal working hours. It may make sense to keep employees employed in a reduced capacity and have EI pay the top up of the employees’ salaries. Historically this takes about 6 weeks to set up. Apply early and be prepared for the approval process to take a long time.
The government is proposing to provide eligible small employers 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. Employers benefiting from this measure will include corporations eligible for the small business deduction. There are no details as to how to apply for this benefit at this time.
CASH FLOW
You may stop making monthly corporate tax instalments immediately. All corporate taxes payable arising on or after March 18, 2020 have been deferred to August 31, 2020.
In August, you may be able to reduce your corporate tax instalments for the year. It may be the case that profitability is less than expected in the 2020 fiscal year so your instalment requirement might be reduced. Calculating your reduced corporate tax instalment requirement is something you can contact our team to help you with.
You can also put a hold on payment of personal income taxes owing on or after March 18, 2020. Personal income taxes will be due August 31, 2020. We expect this is also the case if you have Trust taxes owing.
There is limited certainty at this moment regarding GST/PST or other provincially regulated sales taxes owing. For the moment we assume the payment deadlines for these provincially regulated tax assessments has not changed.
The proposals indicate that all of the Chartered Banks have agreed to flexible lending solutions (personal and corporate). We recommend you speak with your banker as soon as possible about temporary changes to your current credit facility and/or mortgage payments. You may also consider reaching out to the Business Development Bank of Canada (BDC) and/or Export Development Canada (EDC) for lending solutions. We expect the bankers will be overwhelmed with requests so getting to the front of the line for an online meeting with your banker may be smart.
DUE DATES FOR TAX COMPLIANCE
For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020. However, the CRA encourages individuals who expect to receive benefits under the GST or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined. We recommend you follow through on the original planned timetable to send us your personal tax information. Note that we may have other constraints that may make it difficult for us to complete your tax return by April 30.
For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.
There is no indication that deadlines have changed for corporate tax filings. Consequently, corporate tax returns must be filed within 6 months of their year-end. Only the taxes payable related to the filings has been deferred.
Those of you with deadlines imposed by financial institutions or other agencies for financial statements or personal tax returns may want to ask them if an extension will be granted.
As always, please reach out to us with questions or concerns.
We also remind you that we request that all information be sent to us electronically at this time. If you are unable to do so, please contact us for assistance.
More communications to come as details are released. We have also included a link below to a helpful blog post from Moody’s Tax Law.
Horizon CPAs
