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Mar 18, 2020

Canada’s COVID-19 Economic Response Plan

By Saam Nainifard and Robert Santia

Today, Prime Minister Justin Trudeau announced a new set of economic measures to help protect the economy from the damage caused by COVID-19. Included in the Government’s package is a set of tax measures designed to provide immediate relief to businesses and individuals that may be facing hardship during this difficult time.

Support for Businesses

To support businesses that are facing revenue losses and to help prevent layoffs, the Government is proposing to provide eligible employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid to an employee 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, but source deductions must still be remitted on time. Employers benefiting from this measure will include corporations eligible for the small business deduction under the federal Income Tax Act, as well as non-profit organizations and charities. It is unclear whether an employer that is organized as a partnership will qualify for this relief.

The Canada Revenue Agency (“CRA”) will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the federal Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The CRA will not contact any small or medium (SME) business to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives.

Support for Individuals

The Government proposes to make a one-time special payment by early May 2020 through the Goods and Services Tax credit (“GSTC”) to 12 million low-and modest-income families. In addition, the Government is proposing to increase the maximum annual Canada Child Benefit (“CCB”) payment by $300 per child for the 2019-2020 benefit year. Together, the proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

In recognition of current volatile market conditions and its impact on many seniors’ retirement savings, the Government proposes to reduce the required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020.

CRA will defer the filing due date for the 2019 tax returns of individuals, including certain trusts. For individuals other than trusts, the return filing due date will be deferred until June 1, 2020. For trusts with a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020. It is assumed that the filing due dates for income tax elections (e.g. rollover elections) and information returns (e.g. Form T1135) that must be filed on a tax return filing due date is likewise deferred, although this was not specifically mentioned in the announcement.

The CRA will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the federal Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

As a temporary administrative measure, the CRA will recognize electronic signatures in order to reduce the necessity for taxpayers and tax preparers to meet in person during this difficult time.

The Government also proposed many non-tax measures that you can read by Clicking here.

For more information, contact a member of our Tax Group.

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