Authors: Erin Moch, Kurt Wintermute, Nicholas Horlick
This blog was originally published on March 30, 2020. It has been updated as of July 3, 2020.
In the wake of the COVID-19 pandemic, the Federal Government of Canada and various provincial governments have announced tax measures to provide relief to both individuals and businesses in respect of their taxes.
On March 18, 2020 the Federal Government announced measures to support business and individuals with their taxes during COVID-19. Additional changes have been announced by CRA on May 26, 2020, extending additional filing deadlines.
Individual Income Tax Returns and Payments
In response to COVID-19, Canada Revenue Agency (“CRA”) will be providing flexibility to Canadian taxpayers in filing their tax returns and making tax payments, during the COVID-19 outbreak.
For individuals (other than trusts), the return filing due date has been deferred until June 1, 2020, as opposed to the original filing deadline of April 30, 2020. However, CRA has also stated that “you will not be charged late-filing penalties or interest if your 2019 individual (T1) income tax returns are filed and payments are made prior to September 1, 2020.” Therefore, although the deadline for filing is June 1, 2020 and CRA encourages timely filing, individuals who file in July or August will not be penalized for missing the June 1, 2020 deadline.
Individuals will also be able to defer payment of any income tax amounts that become owing from March 18, 2020 to August 31, 2020. This relief will apply to tax balances due, as well as instalments under Part I of the Income Tax Act (Canada) (the “Act”). Individuals who defer payment of income tax amounts will not be subject to interest or penalties on these amounts during such deferment period.
To assist taxpayers and tax advisers in preparing tax returns during the COVID-19 outbreak, the CRA will also recognize electronic signatures as having met the signature requirements of the Act, as a temporary administration measure. This will apply to authorization forms T183 or T183CORP, which are signed by Canadians every year, authorizing tax advisers to file their tax returns.
Trust, Partnership and NR4 Income Tax Returns
T3 Trust Income Tax Returns that would otherwise be due in June, July or August of 2020 are now due September 1, 2020 instead. Income tax balances on or after March 18, 2020 and before September 1, 2020 are now due on September 1, 2020.
Partnership and NR4 information return deadlines were previously extended to May 1, 2020.
Corporate Returns Due September 1, 2020
As of May 26, 2020, CRA announced an extension to deadlines for filing corporate income tax returns. T2 Corporation Income Tax Returns that would usually be due in June, July, or August of 2020 are now due September 1, 2020 instead.
Corporate Income Tax Payments
To provide relief from COVID-19 to businesses CRA will now allow businesses to defer the payment of any income tax amounts that become owing from March 18, 2020 until August 31, 2020. This relief will apply to tax balances due, as well as instalments under Part I of the Act. In addition, no interest or penalties will accumulate on these amounts during this set period.
GST/HST Remittance Deferral
On March 27, 2020, CRA had announced deferral of GST/HST payments. This deferral program is now over.
For monthly GST/HST filers, February, March and April, 2020 remittances now are due June 30, 2020. For quarterly filers, June 30, 2020 is the deadline for amounts collected for the quarter ending March 31, 2020. Annual filers whose GST/HST return or instalment would be due in March, April, or May 2020 must now remit by June 2020 instead.
Although the referral program is over, CRA has invited businesses experiencing difficulty remitting GST/HST to request cancellation of penalties and interest, and for flexible payment terms.
Requirements to Pay
The Department of Finance has announced that banks and employers are not required to comply with or remit amounts demanded according to Requirements to Pay (or “RTPs”) during this time. No specific end date has been indicated as of the time of writing.
As a response to the COVID-19 outbreak, the CRA will not be contacting any small or medium businesses to initiate any post-assessments of GST/HST or income tax audits for four weeks commencing on March 18, 2020. Further, the CRA will temporarily suspend audit interactions with taxpayers and representatives for the period of time during which the COVID-19 pandemic continues.
CRA is continuing its evaluation of taxpayer objections where access to a benefit or credit is in issue. However, objections that do not fall into this category are being held in abeyance and CRA indicates that “no collection action will be taken with respect to these accounts during this period of time.”
CRA has also indicated that objections that would ordinarily be due on March 18, 2020 or later are subject to a deadline extension to June 30, 2020.
Taxpayer Relief Requests
CRA has invited taxpayers who are unable to file a return or make a payment because of COVID-19 to request relief under the Taxpayer Relief program. For clarity, the Department of Finance has indicated that meeting an extended deadline announced because of COVID-19 is sufficient to ensure no interest or penalties will be charged.
To reduce the need for taxpayers and preparers to meet in person, CRA is temporarily recognizing electronic signatures as meeting signature requirements under the Income Tax Act (applying to the individual and corporate authorization forms, Form T183 and T183CORP).
Temporary Wage Subsidy (Updated April 2, 2020)
The Federal Government has proposed to provide a temporary wage subsidy to certain employers. More details were announced on the afternoon of April 1, 2020.
The earlier announced subsidy will continue, being equal to 10% of renumerations paid during the period beginning March 18, 2020, and ending June 20, 2020, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. The subsidy is delivered by way of an offset to income tax instalment remittances, and the benefit will be included in income, and is for employers who are individuals (other than trusts), non-profit organizations, registered charities, Canadian-controlled private corporations (“CCPCs”) eligible for the small business deduction, or partnerships whose members are individuals, registered charities, or CCPCs eligible for the small business deduction.
For employers who can show their revenues have fallen by 30% or more in March, April or May (compared to the same month in 2019) because of COVID-19, the subsidy would cover up to 75% of wages up to $847 per week. In gross terms, the $847 per week limit is based on a $58,700 gross annual wage, or $1,130 per week gross wage. Furthermore, the subsidy will be based on amounts actually paid to employees, and employers are expected to make every effort to continue paying the unsubsidized portion of salaries and wages. The subsidy will have retroactive effect to March 15, 2020, and apply for 12 weeks ending June 6, 2020.
This higher emergency wage subsidy is available to employers who are individuals, taxable corporations, partnerships consisting of eligible employers, and also includes non-profit organizations and registered charities. Municipalities, local governments Crown corporations, public universities, colleges, schools and hospitals are not eligible.
Further information regarding the wage subsidy can be found here. We expect additional details and clarifications to be announced soon.
In addition to the Federal measures, the provincial governments of Alberta, British Columbia, Manitoba and Saskatchewan have each announced measures to help support businesses and individuals impacted by COVID-19.
The Alberta government has announced corporate income tax balances and instalment payments will be deferred from March 19, 2020 to August 31, 2020, a measure intended to assist employers in paying employees, other creditors, and maintain their operations.
Alberta Treasury Board and Finance, Tax & Revenue Administration has asked individuals not to physically attend at their offices, but instead to utilize their online services. In regards to making payments, the Alberta government has provided further information to taxpayers regarding how to make such payments.
Employer Health Tax
The Office of the Premier announced that businesses with payroll over $500,000 can defer employer health tax payments until September 30, 2020. Employers required to make instalment payments do not need to make instalment payments until after September 30, 2020. Future due dates are yet to be determined.
B.C. logging tax returns due between March 19, 2020 to May 31, 2020 are now due June 1, 2020, instead. Penalties and interest will not be charged if deferred payment requirements are met by this extended deadline.
The filing and payment deadline for PST, municipal and regional district taxes, tobacco tax, motor fuel tax, and carbon tax has been extended to September 30, 2020. The deferral is automatic, so no action is required.
Delay of Other Changes
A number of other planned changes have been delayed at least until September 30, 2020, where their timing will be reviewed. These changes are: increases to carbon tax, PST registration requirements for e-commerce businesses, and the application of PST to sweetened carbonated drinks.
Provincial and corporate income tax filings and payments have been extended to August 31, 2020.
Manitoba Finance has announced that retail sales tax (“RST”) returns for small and medium businesses with monthly RST remittances of no more than $10,000 per month are now due on June 22, 2020, instead of April 20, 2020 and May 20, 2020.
Businesses that file quarterly with a due date of April 20, 2020, now have their RST return due June 22, 2020, instead.
Interest and Penalty Relief
Businesses that qualify for one of the above-mentioned extensions that were unable to file and remit a February return by March 20, 2020 will not be assessed late penalties and will not be charged interest until after June 22, 2020.
Interest and Penalty Relief
Saskatchewan’s Ministry of Finance has invited businesses “directly impacted by COVID-19 that are unable to file their provincial tax return(s) by the due date” to submit a request for relief from penalties and interest on the affected returns. Requests can be submitted electronically through Saskatchewan eTax Service (“SETS”) at sets.saskactchewan.ca, by email to firstname.lastname@example.org, or in writing to the Ministry of Finance, Revenue Division, PO Box 200, Regina SK, S4P 2Z6 (Saskatchewan Ministry of Finance Information Notice IN 2020-03, issued March 2020)
Three Month PST Remittance Deferral
The Saskatchewan government has announced that businesses unable to remit PST due to cashflow concerns will have relief from penalty and interest charges, stating that over three months, up to $750 million in PST collections will be deferred.
On April 2, 2020, Saskatchewan Ministry of Finance issued an Information Notice stating that while PST returns must still be filed as usual on a monthly or quarterly basis, payments may be deferred as described below.
Monthly filers may defer payments due for February, March, and April of 2020 to July 31, 2020.
Quarterly filers may defer payments due for the first quarter of 2020 to July 31, 2020.
The deferral is automatic, so no relief request is necessary to defer payments in this way. The Ministry expects that full payment should be made by July 31, 2020, or a payment arrangement should be in place by that same date.
Audit and compliance activities have also been suspended at this time.
To learn more about the taxation measures being taken by the Federal Government as a result of COVID-19, and how to navigate them contact one of our taxation team members.
This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.