COVID-19: Canadian Tax-Relief
This bulletin summarizes certain enacted amendments and further announcements made by the Federal Government, as well as announcements by some provinces. We expect to continue to see additional detail on these measures over the coming days.
Enacted Federal Tax Measures
The Federal Government passed the Act respecting certain measures in response to COVID -19, which provides for various elements of the Federal tax relief measures. It is estimated that the system will be in place by the week of April 6 and that the first payments will be made ten (10) days later.
These measures include:
- GST/HST Credit: one-time special payment of the Goods and Services Tax (GST) credit of $290 for individuals and $580 per couple and $153 per child, payable in May 2020.
- CCTB: increasing the maximum Canada Child Tax Benefit (CCTB) benefits for the year 2020 by $300 per child.
- Wage Subsidy: a reduction from the obligation to remit income tax withheld from their employees’ remuneration during the period between March 18, 2020, and June 19, 2020, for:
- employers who are individuals,
- Canadian-controlled private corporations (CCPCs) with taxable capital employed in Canada of less than $15M, and
- partnerships all the members of which are individuals, charities or CCPCs, non-profit organizations, and other tax-exempt entities or registered charities.
The Federal Government initially announced a subsidy equal to 10% of the remuneration paid during this period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. On March 27, 2020, it was announced that the subsidy would be increased to 75% of the remuneration. The regulations are to follow. Additional detail is expected over the coming days, including the revised monetary caps. Details regarding the initial announcement can be found here.
- CERB: the Canada Emergency Response Benefit (CERB) is an emergency benefit of an amount to be determined (an amount of $2,000 was previously announced) per four week-period (up to a maximum of 16 weeks) for employees and self-employed persons who cease to be employed or to perform work for reasons related to VIDOC-19. The qualifying period begins on March 15, 2020, and ends on October 3, 2020. This amount will be subject to income tax.
- RRIF Withdrawals: a reduction for 2020 of the minimum amount required to be withdrawn from a registered retirement income fund (RRIF) by 25%. A similar reduction applies to individuals receiving benefits under defined contribution registered pension plans.
Income Tax Deferrals
Income Tax Filing Deferrals
In the ordinary course, individuals typically must file a tax return for the year by April 30 of the following year and self-employed individuals must file by June 15. Trusts with a December 31 year-end must file by March 31 of the following year, while corporations must file a corporate tax return within six months after the corporation’s taxation year-end.
The Federal and Québec Governments have announced the following deferrals to these dates:
- For individuals, the 2019 personal income tax return must be filed by June 1, 2020 (the deadline for the self-employed remains unchanged at June 15).
- For trusts, the 2019 trust income tax return must be filed by May 1, 2020.
The Québec Government has also announced that partnerships that had until March 31, 2020 to file the 2019 Partnership Information Return (TP-600-V) will have until May 1, 2020, see details here.
For charities whose T3010, Registered Charity Information Return, is due between March 18th and December 31st, the filing deadline has been extended to December 31st. Revenu Québec has not announced a similar measure.
It is noteworthy that no income tax filing deferral has been announced for corporations.
Income Tax Payment Deferrals
The Federal Government has announced that all taxpayers will be permitted to defer the payment of income tax, without incurring interest or penalties.
For individuals (including those who are self-employed), the deadline to pay any income tax balance for 2019 is extended from April 30 to September 1, 2020.
For businesses, the deadline for amounts that become owing or due from March 18 to September 1, 2020, has been extended to September 1, 2020. This includes balances of income tax owing from the 2019 taxation year, as well as income tax installment payments that become due as of March 18, 2020, and before September 2020.
For trusts that have an income tax balance or installment due before September 1, 2020, the deadline for making the payment is extended to September 1, 2020.
The Québec Government has extended the 2019 tax payment deadline for individuals to date after August 31, 2020, and will extend the deadline to pay the June 15, 2020 tax installment to September 1, 2020. For corporations, the deadline to pay tax installments and to pay any tax owing that becomes due as of March 17, 2020, and before August 31, 2020, will be extended to date after August 31, 2020, that is yet to be announced.
Alberta businesses with corporate income tax balances that become owing on or after March 19, 2020, or installment payments coming due between March 18, 2020, and August 31, 2020, can defer making these payments until August 31, 2020.
It is noteworthy that the foregoing announcements did not include any tax relief in the form of tax rate reductions or increases to the basic personal exemption. Further, the installment base for calculating the payments of tax on an installment basis has not changed and is thus based on the prior year’s income, despite an anticipated reduction in economic activity and incomes during 2020.
GST/HST, Customs, QST, and PST
- GST/HST and QST: the Federal Government announced a deferral of Goods and Services Tax/Harmonized Sales Tax (GST/HST) remittances to June 30, 2020, which can be accessed here.
This measure will extend to June 30, 2020, the deadline by which:
- monthly filers have to remit amounts collected for the February, March, and April 2020 reporting periods.
- quarterly filers have to remit amounts collected for January 1, 2020, through March 31, 2020 reporting period.
- annual filers, whose GST/HST return or installment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of the filer’s current fiscal year.
The Québec Government has also announced that it will defer the filing of Québec Sales Tax (QST) returns and amounts owing to June 30, 2020, for amounts in the period between March 27 and June 1, 2020.
The Federal announcement did not include a deferral of the filing due date for GST/HST returns. The CRA has indicated that the deadline to file returns remains unchanged. However, the CRA will not impose penalties where a return is filed late provided that it is filed by June 30th.
- Customs Duties: imported goods by businesses are generally subject to the GST at a rate of 5 percent, as well as applicable customs duties. Payments owing for customs duties and the GST on imports are typically due before the first day of the month following the month in which the Statements of Accounts are issued. the Federal Government announced that payment deadlines for statements of accounts for March, April, and May are being deferred to June 30, 2020.
- Excise Taxes: The CRA has advised that excise taxes and duties must be remitted by their usual due dates. However, taxpayers having difficulty making timely payment can request that interest on outstanding amounts be waived, with decisions to be made on a case by case basis.
- BC PST: The British Columbia Government has announced an immediate extension of filing deadlines to September 30, 2020, for provincial sales tax (PST), as well as for the Province’s employer health, carbon, motor fuel, and tobacco taxes. In addition, the previously proposed requirement for certain additional sellers outside of British Columbia to register for the PST has been postponed until further notice, as have previously announced increases to the provincial carbon tax.
- Saskatchewan PST: the Saskatchewan Government has announced the availability of immediate relief from penalty and interest charges on unremitted Saskatchewan PST, whether or not PST returns have been filed. The announcement indicates that businesses that are unable to file their PST returns may submit a request for three (3) months of relief from penalty and interest charges on the return(s) affected. Saskatchewan further announced the suspension of audit and compliance activities.
- Manitoba RST: the Manitoba Government has announced an extension of the April and May filing deadlines for Manitoba retail sales tax and for the Provincial payroll tax for businesses with monthly remittances of not more than $10,000. The announcement advised that Manitoba will work with businesses with remittances above the cap on flexible payment options.
Ontario Tax Relief
- Employer Health Tax: temporary increase to the EHT exemption from $490,000 to $1 million for 2020, intended to result in the elimination of EHT for more than 90% of private-sector employers.
- Deferral of Payment of Provincially-Administered Taxes: For the five months commencing April 1, 2020, Ontario will not apply any penalty or interest on any late-filed returns or incomplete or late payments under provincially-administered taxes such as the Employer Health Tax, Tobacco Tax, and Gas Tax. There is no relief provided for land transfer taxes. This measure is intended to provide $1.9 billion in financial relief.
- Regional Opportunities Investment Tax Credit: Ontario is proposing a 10% refundable corporate income tax credit for investments in regions of the province where employment growth has been significantly below the provincial average; the credit would be available to eligible businesses that construct, renovate or acquire qualifying commercial and industrial buildings in designated regions, producing savings up to $45,000 in the year.
- Deferral of WSIB Premiums: the Workplace Safety and Insurance Board (WSIB) will allow employers to defer payment of premiums for six months, until August 31, 2020, without penalty or interest.
While the Canada Revenue Agency (CRA) has promised relief from collection actions, the guidance is somewhat vague: collection activities on new debts are to be suspended until the CRA advises otherwise, and the CRA promises flexible payment arrangements. Without specifying a date, the term “new debts” is elusive. Further, given the payment deferrals set out above, and the cessation of CRA audit and appeals activities described below, it is difficult to envision what “new debts” might otherwise become enforceable in the near term. Additionally, banks and employers are temporarily relieved from complying or remitting with respect to existing requirements to pay.
According to news reports, CRA employees who provide “non-critical” services are on paid leave until at least April 5, with a re-evaluation of the next steps to occur prior to any resumption of work. Critical services appear to be processing benefit payments (including processing returns and answering related calls), and government responses to the COVID-19 pandemic and related internal CRA matters.
The March 18, 2020 announcement confirmed that the CRA will not contact any small or medium-sized (SME) businesses in the next four weeks to commence any GST/HST or income tax audits and, further, that for the vast majority of businesses the CRA will suspend audit interaction with taxpayers and their representatives. However, there may be CRA contact with taxpayers in connection with the expiration of the normal reassessment period or GST/HST refunds where the CRA perceives tax-at-risk. There was no indication of whether audit activity might commence against large corporations or why the restrictions on audits are limited to the “vast majority” but not all businesses. Practically speaking, any reason to suspend audit activity would presumably apply regardless of the type of taxpayer, thus the CRA’s choice of words may be more political than anything: it is optically favorable to been seen to be providing relief in the SME space.
Notices of objection are being held in abeyance by the CRA, other than objections concerning entitlements to benefits and credits which are considered a “critical service” that should not be delayed. For any notice of objection due on or after March 18, the filing deadline is extended until June 30. It is not unreasonable to expect that CRA officers will show flexibility with respect to requests for documents and information in connection with pending appeals matters. Collection activities associated with matters under appeal are also being suspended for the time being.
While relief is being provided for filings and remittances, and from penalties and interest, there are other potential problems to which the government has not spoken. For example, there are some provisions in fiscal statutes that provide for hard deadlines, such as extensions for late-filing notices of objection. Where the deadline for filing an objection has expired, a taxpayer may seek an extension of time, but the application must be made within one year after the expiration of the time otherwise limited for filing the objection. Failing to seek an extension within that one year timeframe is fatal to the late-filed objection. It does not take an active imagination to picture a situation where an otherwise discoverable failure to file is not surfaced during the current pandemic crisis. Unless the CRA were to agree that the scope of ss. 220(2.1) (waiver of filing documents) is sufficiently wide as to encompass objections, taxpayers could be irrevocably prejudiced if they discover too late that they missed their time to seek an extension, as a result of the chaos caused by the pandemic.
The progress of tax litigation matters is also stalled for the time being. Our litigators are aware of situations in which matters are not proceeding because CRA litigation officers are unavailable to instruct their counsel. Further, all Tax Court sittings and conference call up to May 1, 2020, have been canceled. The computation of time under the Court’s rules and pursuant to any Court order or direction made before March 16 is suspended for the period of March 16 to May 1, 2020. The Court will revisit its schedule on April 14 and will advise if further cancellations will occur.
One of the CRA’s positions concerning the appeals process and related timelines is open to question, based on a March 29 posting on Twitter that states “[i]f you want to file an objection to the Tax Court of Canada and the deadline is March 18th, 2020 or later the deadline has been extended until June 30th, 2020”. One cannot help being skeptical of this advice: the Tax Court’s processes are not originated by way of an “objection” but rather a “notice of appeal” and the use of the wrong terminology is troubling. The source of this dubious CRA statement is probably a misinterpretation of the extended filing deadline for filing notices of objection with the CRA. Although the timelines for starting a Tax Court appeal are expressly set out in statutes the CRA administers, it is the Tax Court that possesses the jurisdiction to grant extensions. The CRA’s statutory power to extend the time to commence a Tax Court appeal is foggy and some clarification or correction from the CRA is necessary for connection with the March 29 Twitter statement. That said, presumably, if a taxpayer were to miss a Tax Court appeal filing deadline due to the pandemic crisis, an application for an extension would not be strongly opposed by the Crown in light of the CRA’s announcements.
The Federal Court of Canada has implemented a suspension period up to at least April 17, including timelines, and, while the Federal Court of Appeal has also adjourned hearings to May 15, it has not yet suspended filing deadlines (extensions must be requested). Further details concerning the Courts are set out in the practice notes on each of their websites, since the Courts’ management of their affairs may rapidly change.
The Federal Charities Directorate has also suspended its operations including the call center, registration, and audit activities.
Additional details regarding the administrative measures announced by the CRA can be found here.
The provinces have made various announcements regarding the temporary cessation of audits and other activities.