Is there any tax and business relief for businesses in Canada with the COVID-19 pandemic? Updated June 16.
The government makes new announcements daily. Many of the announcements are made before the related money or programs are ready. Thus, the confusion and “clarification” later. The best place to get the latest on the federal programs is Government and COVID-19 and Canada’s COVID-19 Economic Response Plan.
The plans for personal relief are the next FAQ; this is the business relief FAQ.
1. Canada Emergency Wage Subsidy
The government of Canada has introduced a 75% wage subsidy for qualifying businesses, for up to 12 weeks, retroactive to March 15, 2020. Employers can also claim 100% of employer-paid contributions for Canada Pension Plan (CPP) and Employment Insurance (EI). This will help businesses to keep and return workers to the payroll.
This subsidy is available to eligible employers that see a drop of at least 15% of their revenue during March 2020 and 30% for the following months (see eligible periods). The maximum subsidy is $847 per week per employee.
This program has been extended to August 29, 2020. Please click on this link to help you calculate the subsidy using the CEWS Calculation spreadsheet.
Please note that you should register for CRA My Business Account in order to apply for this program.
If you do not qualify for this subsidy, please check if you are eligible for the next subsidy below.
It is important to note that this subsidy is on top of the 10% subsidy and that if you are eligible for the 10% subsidy you must apply for it before the 75% subsidy. It reduces your 75% subsidy so the total is 75%, not 85%. If you do not apply for the 10% you will have your 75% subsidy reduced to 65% approximately.
2. Temporary Wage Subsidy
The subsidy is equal to 10% of the remuneration you pay from March 18, 2020, to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total 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, as well as non-profit organizations and charities.
At this page: FAQs – Temporary Wage Subsidy for Employers
If you missed applying for the 10% subsidy in the first periods it was available you can “catch it up” on a later payroll run. However, you must be within certain limits. For example, you can’t reduce your remittance so far that you are not remitting CPP and EI. You can only reduce income tax withheld.
3. Delay of tax payments to August 31, 2020
“The Canada Revenue Agency 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 Income Tax Act. No interest or penalties will accumulate on these amounts during this period.”
At this page: Income tax filing and payment dates: CRA and COVID-19
Please be cautious with delaying filings or payments. The deadlines are easy to confuse. Please see our FAQ #1 in this series for best practices.
4. British Columbia Deferred Tax Payments
B.C. is extending filing and payment deadlines for the following taxes until September 30, 2020:
- Employer health tax
- Provincial sales tax
- Carbon tax
- Motor fuel tax
- Tobacco tax
At this page: COVID-19 Action Plan – Provincial Tax Changes
5. Deferral of GST and Customs Duty Payments
“To support Canadian businesses in the current extraordinary circumstances, the Minister of National Revenue will extend until June 30, 2020 the time that:
- Monthly filers have to remit amounts collected for the February, March and April 2020 reporting periods;
- Quarterly filers have 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, have 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.
“Imported goods by businesses are generally subject to the GST, at a rate of 5%, as well as applicable customs duties, which vary by product and country of origin. Payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020”
6. Temporary suspension of audits
“The CRA will generally not contact small or medium (SME) businesses to initiate any post-assessment GST/HST or income tax audits until further notice. 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.”
At this page: Changes to taxes and benefits: CRA and COVID-19
7. Business Credit Availability Program (BCAP)
“Through this program, Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) will provide more than $65 billion in direct lending and other types of financial support at market rates to businesses with viable business models whose access to financing would otherwise be restricted. By working in close cooperation with financial institutions, this program will fill gaps in market access and leverage additional lending by private sector institutions.
Businesses seeking support through BCAP should contact the financial institutions with whom they have a pre-existing relationship, so that the financial institutions may assess the client’s financial request. If the needs of the client exceed the level of support the financial institution is able to provide, the financial institution will work alongside BDC or EDC to access additional resources the Government has made available under BCAP.”
The BCAP includes the following programs:
- Loan Guarantee for Small and Medium-Sized Enterprises
- Co-Lending Program for Small and Medium-Sized Enterprises
- BDC’s Mid-Market Financing Program (coming soon)
- EDC’s Mid-Market Guarantee and Financing Program (coming soon)
At this page: Business Credit Availability Program overview (BCAP)
8. Work Share EI Program
An old program that has been revived to allow partial layoffs and for EI to partially cover employee wages. For example, you could go to an 80% work week and EI would cover 20%. The information is still referring to old programs in lots of places.
9. Canada Emergency Business Account
The 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.
To qualify, these organizations will need to demonstrate they paid between $20,000 to $1 million in total payroll in 2019 and the borrower has to have an active business/chequing account with a financial institution.
Please check with your financial institution as they will be administering the loans. Up to $10,000 is forgivable is loan is repaid by December 31, 2022. If balance not paid by December 31, 2022, the remaining balance will be converted to a 3-year term loan at a 5% annual interest with monthly payments.
There are restrictions on use of CEBA funds as they should be used only to pay operating expenses such as payroll, rent, utilities, property tax, insurance, etc. and not to be used for shareholder distributions, dividends or increases in management compensation.
At this page: Canada Emergency Business Account
The prime minister has recently announced an expansion to this program to allow businesses to apply that do not meet the payroll threshold above. Instead, they will have to demonstrate that they have eligible operating expenses of $40,000 to $1 million such as rent, property taxes, utilities and insurance.
A unique thing to know about this program is the calculation of the up to $10,000 forgiven. It is calculated as 25% of the loan balance on December 31, 2020, as being available to be forgiven on December 31, 2022. So if you pay some of the loan before December 31, 2020, you actually reduce the amount that can be forgiven. If you think about it you should not repay any until January 2021 and plan to have 75% of it ($30,000 in most cases) paid by December 31, 2022.
10. Canada Emergency Commercial Rent Assistance (CECRA)
Eligible businesses will provide forgivable loans to eligible commercial property owners who will give a rent reduction to their tenants of least 75% for April and May (retroactive) and for June. The forgivable loan will cover 50% of the three monthly payments for eligible small business tenants who are experiencing financial hardship. The program is open for applications as of May 25.
At this page: CECRA for small business
We are familiar with government systems and programs and the differences between announcements and actual programs in place. Contact us below if you have any questions.