In response to the rapidly evolving threat of the COVID-19 pandemic, the Federal Government of Canada and the Government of Ontario have introduced a number of tax and economic measures intended to benefit individuals and businesses alike.
In this Tax Update, we provide a summary of the following major tax and financial measures announced to date:
- The 75% Canada Emergency Wage Subsidy
- The temporary 10% wage subsidy
- Federal Tax filing and payment extensions
- Provincial EHT relief and WSIB extension
- Canadian Emergency Response Benefit
While the details of many of these programs are still being finalized, we encourage you to speak to your Grewal Guyatt advisor to examine all the options available and determine whether you or your business is eligible to apply for any of these relief measures.
Canada Emergency Wage Subsidy
On April 1, 2020, the Federal Government released details of the Canada Emergency Wage Subsidy (“CEWS”). The CEWS provides a 75% wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020. The subsidy will be available to eligible businesses of all sizes and from all sectors of the economy – regardless of the number of workers they employ – that suffer a drop of at least 30% in gross revenues due to COVID-19 in March, April or May, when compared to the same month in 2019.
The CEWS will cover up to 75% of an employee’s eligible salary or wages paid between March 15 and June 6, 2020, up to a maximum of $847 per week. There is no overall limit on the subsidy that an employer may claim.
Employers will need to attest to make their best effort to pay employees the 25% top-up, but it is not required if they are unable to do so.
Any amounts received by an employer under the previously announced “10% wage subsidy” (discussed below) would reduce the benefits available under the CEWS.
Employers will be able to apply through CRA’s My Business account on through an online application. Funds are expected to start being paid to employers in 6 weeks. Like other subsidies, the CEWS will be taxable income to employers who receive it.
Temporary 10% Wage Subsidy
The temporary 10% wage subsidy was previously announced by the Federal Government on March 18, 2020, and has since been passed into law. The 10% wage subsidy permits eligible employers to reduce the amount of payroll income tax remittances made to the Canada Revenue Agency (“CRA”) between March 15, 2020 and June 20, 2020. Eligible employers include non-profit organizations, registered charities, Canadian controlled private corporations (“CCPCs”), individuals or partnerships whose partners are individuals or CCPCs.
The subsidy will be limited to 10% of the remuneration paid by an eligible employer between March 15, 2020 and June 20, 2020. There is also a per employee cap of $1,375 and a maximum total subsidy of $25,000 per employer. The subsidy will be taxable to employers.
Eligible employers can start reducing the income tax portion of their payroll remittances (the subsidy cannot be used to reduce EI premium or CPP contribution remittances or remittances to Revenue Québec) when they make their first remittance for remuneration paid after March 14, 2020.
Extension of Federal Tax Filing and Payment Deadlines
The Government of Canada extended the deadlines to file tax returns and to pay tax for many taxpayers:
- All taxpayers (both individual and businesses) with taxes owing that become due on or after March 18, 2020 will be able to defer payment until September 1, 2020. This relief would apply to most regular income tax payments as well as instalments. No interest or penalties will accumulate on these amounts during this period.
- For individuals (other than trusts), the filing due date for 2019 tax returns will be deferred until June 1, 2020.
- For trusts with a December 31 taxation year-end, the return filing due date will be deferred until May 1, 2020.
- All businesses, including self-employed individuals, will be able to defer GST/HST payments until June (as well as customs duties owed for imports). The deferral will generally apply to remittances that become due in March, April, and May.
- For income tax returns, elections or designations due after March 18, 2020 and before June 1, 2020, the deadline has been extended to June 1, 2020.
Ontario Employer Health Tax and Workplace Safety and Insurance Board
Private-sector employers (except registered charities) with total annual Ontario remuneration of less than $5 million are currently eligible for an exemption on Employer Health Tax up to $490,000 of their payroll. The Ontario government will retroactively increase this exemption from $490,000 to $1 million for 2020
In addition, the Workplace Safety and Insurance Board (WSIB) will allow employers to defer payments for a period of six months. All Schedule 1 and Schedule 2 employers covered by the Board’s workplace insurance will be allowed to defer reporting and payments until August 31, 2020.
Canadian Emergency Response Benefit
On March 25, 2020, the Government of Canada proposed legislation to establish the Canada Emergency Response Benefit (“CERB”). The CERB is a taxable benefit of $2,000 per month for persons that can’t earn income due to COVID-19 and, generally speaking, would not qualify for EI.
To be eligible, an individual must:
- have ceased working (whether employed or self-employed) for reasons related to COVID-19. This would include those who need to stop working to care for children or other dependents.
- be 15 or older;
- have not earned (and not expect to not earn) employment income, self-employment income, maternity benefits or EI benefits for at least 14 consecutive days; and
- have earned at least $5,000 of employment or self-employment income in 2019 or in the 12-month period prior to applying for the CERB.
The CERB is not available to those who cease working voluntarily.