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COVID 19 Financial Relief for Canadians

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Since the beginning of March, restrictions and measures related to COVID-19 have rapidly escalated. On March 18, 2020, the Government of Canada announced a series of measures designed to support the finances of individuals, businesses, charities, and non-profit organizations. Since then, on an almost daily basis, new possibilities have been introduced, and old ones have been adjusted. This document aims to provide a consolidated summary of support in their most current state of affairs, as of April 8, 2020.

Businesses

Payroll Support

There are generally three payroll programs available: the 10% Temporary Wage Subsidy (10% WS), the 75% Canada Emergency Wage Subsidy (75% WS), and the Employment Insurance (EI) Work-sharing Program. In general, the 75% WS is available to a wide variety of entities whose revenue has dropped by at least 30%. The 10% WS is available only to smaller businesses, but does not require a revenue decline. In cases where employers are entitled to both, amounts received under the 10% WS will reduce the amounts receivable under the 75% WS.

10% Temporary Wage Subsidy (10% WS)

A business may benefit immediately from a 10% subsidy by reducing their remittances of income tax withheld from their employees’ remuneration.

75% Canada Emergency Wage Subsidy (75% WS)

On March 27, 2020 the government announced a 75% wage subsidy program for eligible employers for up to 12 weeks, retroactive to March 15, 2020. Unlike the 10% WS, the 75% WS is not limited to smaller businesses. However, a significant reduction of revenue is generally required to be eligible. The 75% WS also differs from the 10% WS in that it will be paid in cash to the employer.

Employment Insurance Work-sharing Program

The Work-sharing Program, which provides EI benefits to workers who agree to reduce their normal working hours (from a 10% to 60% reduction) as a result of developments beyond the control of their employers, is not a new program. However, it has been broadened as a consequence of COVID-19.

Pre-crisis remuneration

Will be the average weekly remuneration paid to the employee between January 1 and March 15, excluding any seven-day periods in respect of which the employee received no remuneration (so if an employee was hired on February 1, the lack of any remuneration in January would not reduce their pre-crisis remuneration).

Employment Insurance Work-sharing Program

The Work-sharing Program, which provides EI benefits to workers who agree to reduce their normal working hours (from a 10% to 60% reduction) as a result of developments beyond the control of their employers, is not a new program. However, it has been broadened as a consequence of COVID-19.

Layoff considerations

Each of these programs assists employers to keep employees. This can be very useful in facilitating a quick restart or gearing-up of the business. Factors to consider when determining which program should be used, if any:

  • the need to have staff ready when the business is ready to re-start or gear-up;
  • the magnitude of revenue decline;
  • whether the business will be permanently closed;
  • the programs for which the employer is eligible;
  • whether there is any work available for the employee to do;
  • how much payroll needs to be reduced;
  • employment agreement conditions, restrictions, and costs of termination; and
  • staff and client morale.

Financing

On March 27, 2020, details of the Business Credit Availability Program were announced. It provides support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). Both organizations will work with private lenders to extend credit for businesses. In many cases, financial institutions will reach out to their clients with details and the specific application process.

Deferral of tax payment and filings

Income tax.

Deadlines for payment of corporate income tax payable under Part I of the Income Tax Act that become due on or after March 18, 2020 (also including instalments) and before September 2020 are deferred to September 1, 2020. No interest will accumulate on these amounts during this period.

GST/HST

A GST/HST remittance deferral is offered which would extend until June 30, 2020 the time for:

  • Monthly filers to remit amounts collected for the February, March and April 2020 reporting periods;
  • Quarterly filers to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
  • Annual filers, whose GST/HST return or instalment are due in March, April or May 2020, to remit amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.

Individuals

A number of measures have been offered to individuals based on the number of individuals in their family, employment/business status, and income levels. These can be divided into the following categories: one-time payments, tax deferrals, employment insurance sickness benefits, the Canada Emergency Response Benefit and other supports

One-time payments

Special GST Credit payment

A one-time special payment through the Goods and Services Tax Credit (GSTC) was to be made on April 9, 2020. This will double the maximum annual GSTC and result in an average payment for those benefitting by close to $400 for single individuals and close to $600 for couples. Some individuals or families whose “adjusted income” was too high to qualify for any quarterly GSTC payments will be eligible for this one-time payment. No application was required to receive the benefit.

Tax deferrals

Payment deadlines for income tax amounts that become due on or after March 18, 2020 and before September 2020 are deferred to September 1, 2020. This includes the June 15, 2020 instalment. No interest will accumulate on these amounts during this period.

Employment insurance (EI) sickness benefit

EI sickness benefits provide up to 15 weeks of income replacement and is available to eligible claimants who are unable to work because of illness, injury or quarantine. The government has enhanced access to this benefit by:

  • Waiving the one-week waiting period for new claimants who are quarantined that claim EI sickness benefits, effective March 15, 2020; and
  • Waiving the requirement to provide a medical certificate.

Note that sickness and regular EI benefits will be rolled into the Canada Emergency Response Benefit discussed below.

Canada Emergency Response Benefit (CERB)

The CERB will provide a taxable benefit for up to four months for workers who lose their income as a result of the COVID-19 pandemic but are not eligible for traditional EI. It will also cover sickness and regular EI claims made for periods commencing on or after March 15, 2020.

Amounts

These income support payments can be made for a maximum of 16 weeks. $2,000 would be provided per 4-week period. The first 4-week period goes from March 15 to April 11, 2020. The CERB is taxable although tax will not be deducted at source. It must be reported as income for the 2020 tax year. CRA has indicated an information slip will be issued

Other support

Mortgage/debt support

The government has stated that Canada’s large banks have confirmed that support will include up to a 6-month payment deferral for mortgages and the opportunity for relief on other credit products. Banks have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness. Further, some banks have begun to offer reduced credit card interest rates.

Emergency Loan Program for Canadians Abroad

This provides the option of an emergency loan to Canadians in need of immediate financial assistance (of up to $5,000) to return home or to temporarily cover their life-sustaining needs while they work toward their return. Each application will be assessed according to their specific situation and needs. Eligible Canadians currently outside Canada and needing help to return home can contact the nearest Government of Canada office (https://travel.gc.ca/assistance/embassies-consulates), Global Affairs Canada’s 24/7 Emergency Watch and Response Centre in Ottawa at +1 613-996-8885 (collect calls are accepted where available), or email sos@international.gc.ca

Student loans

A six-month interest-free moratorium, from March 30, 2020 to September 30, 2020, has been provided on the repayment of loans under the Canada Student Act, Canada Student Financial Assistance Act, and Apprentice Loans Act for all individuals currently in the process of repaying these loans.

Minimum RRIF withdrawal

In recognition of the substantial recent value declines in the investment markets, the minimum withdrawal from a RRIF or a money purchase pension plan for 2020 (computed as a percentage of its value on January 1, 2020) has been reduced by 25%. No similar reduction is available for defined benefit individual pension plans.

Other Filings and Administration

The following summarize administrative changes aimed at easing or delaying filing obligations and other CRA related activities. A summary of filing and payment deadlines is included in Appendix 2.

EFILE signatures

In order to reduce the necessity for taxpayers and tax preparers to meet in person, CRA will recognize electronic signatures as a temporary administrative measure. This provision applies to authorization forms T183 and T183CORP

CRA audit and verification activity

On March 18, 2020, CRA stated that they will not contact any small or medium businesses to initiate any post-assessment GST/HST or income tax audits for the next four weeks. For the vast majority of businesses, CRA will temporarily suspend audit interaction with taxpayers and representatives. Interaction with taxpayers will be limited to high risk and exceptional cases, or cases of high-risk GST/HST refund claims which require some contact before they can be paid out. Other audits are temporarily suspended.

CRA collections

Collection activities on new receivables have been suspended until further notice, and flexible payment arrangements will be offered. As well, CRA has noted that, where payments or other tax obligations have been missed due to COVID-19, the usual process of requesting penalties and/or interest be waived is available. CRA has also temporarily suspended requirements to pay (RTP) sent to employers to require they withhold amounts for unpaid taxes from employees’ remuneration.

CRA objections and appeals

Any objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service which will continue to be delivered. As a result, there should not be any delays associated with the processing of these objections.

CRA Call Centres

The individual and benefit CRA call centres will continue to be open from 8 a.m. to 11 p.m. Monday to Friday and 9 a.m. to 5 p.m. on Saturdays (local time). Hours will be reduced for April 10-13 due to the holidays.

Future Changes

In many situations, the legislation behind these programs have been constructed in ways that allow the government to make quick modifications to criteria, amounts and timing. Further, over the next days and weeks, the specifics on some programs will be released.

Most of the details for these initiatives will be released on one of these four government webpages

General: https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection/canadas-reponse.html

CRA: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

Travel: https://travel.gc.ca/assistance/emergency-info/financial-assistance/covid-19-financial-help

Employment and Social Development Canada: https://www.canada.ca/en/employment-social-development/corporate/notices/coronavirus.html

Thank you very much. We appreciate you and want to support you as much as possible over these challenging times.