Federal government COVID-19 tax updates
April 13, 2020 CPA Canada is a respected and influential voice relaying matters raised by our members to the Canada Revenue Agency (CRA) and working collaboratively to identify solutions. Be sure to check back regularly for updates.
Update: April 13, 2020
Revised tax blog post on the 75% Canada Emergency Wage Subsidy (CEWS)
Read our updated tax blog post which reflects the federal government CEWS legislation that enacted on April 11, 2020. Update: April 11, 2020
Legislation released on the Canada Emergency Wage Subsidy (CEWS)
New legislation relating to the 75 per cent Canada Emergency Wage Subsidy has been introduced in Parliament. It is expected that the legislation will receive Royal Assent later today. In addition to the legislation, the government has also released a revised backgrounder. The legislation is generally consistent with the April 8th backgrounder, but we want to highlight two new beneficial measures that were included today:
- The revised backgrounder states that special rules for the computation of revenue would be provided to take into account certain non-arm’s length transactions, such as where an employer sells all of its output to a related company that in turn earns arm’s length revenue. As well, affiliated groups would be able to compute revenue on a consolidated basis.
- The government is also announcing that, in order to provide certainty to employers, once an employer is found eligible for a specific period, the employer would automatically qualify for the next period.
Update: April 9, 2020
New tax blog post: Canada Emergency Wage Subsidy (CEWS)
Read our new tax blog post about key rules and issues on the 75 per cent CEWS. This post is based on the information released by the Department of Finance on April 8, 2020. Legislation has not yet been released. Once it is, we will provide an update as needed.
Tax webinar update
The tax webinar recording, originally posted April 3, 2020, has been removed as the information is out of date with the April 8 federal government announcement pertaining to the Canada Emergency Wage Subsidy. We are planning a second webinar based on updated information and government measures. Update: April 8, 2020
Canada Emergency Wage Subsidy (75 per cent subsidy)
The government released more details on the Canada Emergency Wage Subsidy (CEWS). At an initial glance, it appears that the revised rules will deal with only some of the key issues that CPA Canada has brought forward to senior officials at the CRA (see this list in the April 7 update below).
Summary of Identified COVID-19 Tax Issues (Non-CEWS)
CPA Canada, in conjunction with the Canadian Tax Foundation (CTF), has received many inquiries about tax issues generally related to the COVID-19 pandemic. Together, we documented this input and compiled a summary of the key matters. This was recently forwarded to the federal government and we look forward to the clarification of these points. View the summary. Update: April 7, 2020
Summary of identified COVID-19 tax issues (CEWS)
CPA Canada, in conjunction with the Canadian Tax Foundation (CTF) has received many inquiries about the Canada Emergency Wage Subsidy (CEWS). Together we documented this input and compiled a summary of the key matters. This was recently forwarded to the federal government and we look forward to the clarification of these points. View the summary. Update: April 6, 2020
Canada Emergency Response Benefit
Today is the first day that Canadians can apply for the Canada Emergency Response Benefit (CERB). We were informed by an applicant that tried the system this morning of the following:
- The taxpayer does not require the full access version of MyAccount to apply. They can apply for CERB using the limited version of MyAccount which is granted to them while they wait for the access code in the mail
- The CRA will deposit the funds into the same account as a taxpayer’s prior year tax return refund unless indicated otherwise
CRA has confirmed with us that the CERB application will not be available on Represent a Client since attestation is needed. We encourage you to visit “Frequently Asked Questions” website for important updates made over the weekend. For more general information on CERB please also refer to the CRA’s general guide and CERB Application Page.
Message from CRA on portal use to assist Canadians making CERB applications
In support of Canadians applying for the Canada Emergency Response Benefit (CERB), as a temporary measure, we ask that you avoid accessing the CRA portals from Monday to Thursday, April 6 – 9, 2020. Instead, we encourage you to continue to use the services within your certified software such as electronic authorizations, Auto-Fill My Return and Client Data Enquiry, Express NOA and ReFILE. Some of these services may use the same log-in credentials as the portals but are accessed via web service rather than through the portals directly. Update: April 3, 2020
Update on sending returns, correspondence and payments to the CRA
More information has been provided on sending returns, correspondence and payments to the CRA. Update: April 2, 2020
Update on federal government wage subsidy programs
On April 1, 2020, the Department of Finance released additional details on the Canada Emergency Wage Subsidy (CEWS) program. This is the new 75 per cent subsidy program that was first announced last week by the Prime Minister. It should be noted that the original 10 per cent subsidy program announced on March 18, 2020, called the Temporary Wage Subsidy (TWS), will remain available. Despite some initial uncertainty, individuals and partnerships can qualify for both programs, subject to the conditions of each programs. With two programs, it will be important to determine which program applies. For employers who meet the 30 per cent decline in revenue test for the CEWS, they can also claim the TWS but any benefit from the TWS “would generally reduce the amount available to be claimed under the CEWS”. We assume this means the total subsidy claimed by such an employer can’t exceed the benefit under the CEWS. For employers that do not meet the conditions for the CEWS, they can claim the TWS, assuming that they meet the conditions for that program, which have not changed. For more information, see:
- Temporary Wage Subsidy: How it works (CPA Canada tax blog)
- CRA Frequently Asked Questions on the TWS
- Department of Finance backgrounder on the CEWS
CRA’s position on transfer pricing deadlines
We received the following statement from CRA on contemporaneous documentation: “This message provides more information for taxpayers regarding requests for transfer pricing contemporaneous documentation issued by the Canada Revenue Agency (CRA). The CRA recognizes that taxpayers are experiencing challenges and have limited resources during the COVID-19 outbreak, and that administrative relief may be necessary on various issues. Requests for contemporaneous documentation that were made prior to April 1, 2020 having a deadline of March 18, 2020 or later will be considered cancelled and will be re-issued at a later date, providing the maximum amount of time of 3 months to submit the documentation. We anticipate that a more formal communication will be provided but wanted to provide early confirmation of our planned approach.” Update: April 1, 2020
New 75 per cent wage subsidy details announced
The Department of Finance has released additional information on the new 75 per cent Canada Emergency Wage Subsidy. The new program will be available to a wide group of employers in the event their revenue has decreased by 30 per cent or more. For more details, see the Department of Finance backgrounder. The original 10 per cent Temporary Wage Subsidy will continue to be available to employers who don’t qualify for the 75 per cent subsidy.
Updates on government announcements:
Deadlines for GST/HST returns – In a new Q&A page on GST/HST, the CRA made the following statement on the deadlines for GST/HST returns: “The deadline for businesses to file their returns is unchanged. Those who are able to, should continue to file their GST/HST returns on time, reporting their net tax for the reporting period to help facilitate tax compliance and administration. However, recognizing the difficult circumstances faced by businesses, the CRA won’t impose penalties where a return is filed late provided that it is filed by June 30th.” The Quebec government will apply the same policy for QST returns. Update: March 31, 2020
Updates on government announcements:
- CRA posts revised income tax deadline list – As many of you know, the CRA had posted a list of income tax deadlines over the weekend. This list now incorporates the deadline extensions announced on March 26 and 27, 2020.
- Deadlines for GST returns – Despite comments made by the Quebec government, the federal government has not announced an extension for GST returns. We are expecting a statement from them soon to clarify this issue.
Update: March 30, 2020
Update on wage subsidy
The Prime Minister announced a few details on the 75 per cent wage subsidy that will be available to qualifying Canadian businesses. According to the federal government, if an employer’s revenue has decreased by 30 per cent as a result of the COVID-19 pandemic, that business will be eligible for the wage subsidy. The federal government has said that it will cover 75 per cent of the first $58,700 of income earned, which works out to $847 per week. This subsidy will be retroactive to March 15, 2020. The Prime Minister also advised that the wage subsidy will apply to all non-profit organizations, charities, and companies of all sizes. We anticipate that partnerships and sole proprietors will also be eligible based on Bill C-13 even though the Prime Minister did not mention these employers specifically. More substantive details are expected to be announced Tuesday March 31 by the federal government. Update: March 27, 2020 The government announced additional support for businesses and employees. The tax measures announced include:
- Enhanced wage subsidy – The wage subsidy rate will be increased to 75 per cent from 10 per cent for qualifying businesses. More details, presumably including revised per employee and per employer limits, should follow soon.
- GST deferral – Generally, GST/HST remittances can now be deferred until June 30, 2020. Deferrals will similarly be available for customs duty and sales taxes for importers. It is unclear whether GST/HST returns will have to be filed while the deferral is in effect and we are following up with the government.
- Objections – For any objection request due March 18 or later, the deadline is effectively extended until June 30, 2020.
For more details, please see the Department of Finance backgrounder. Keep in mind that the Canada Revenue Agency also announced tax deadline extensions on March 26, 2020 (see below). Update: March 26, 2020
Federal government announces broad tax measures
The federal government announced additional extensions to many tax-related deadlines. Most federal tax filing deadlines have been extended to June 1, 2020, including the March 31 deadline for T1134 forms and T2s. The filing deadline for the T5013 partnership return and other information that individuals will need to complete their T1 returns has been extended to May 1, 2020. The deadline for most T1 returns remains June 1, 2020. Note that some returns and payments will still be due at the usual time. Find more information on the announcement.Update: March 23, 2020 As discussed in our previous update, we are continuing to communicate with CRA on the issues related to COVID-19 and the relief that the government announced. The highlights include:
- CPA Canada has developed a list of issues and questions related to the COVID-19 crisis, and we have sent that to the CRA. Please keep in mind that the CRA wants to deal with issues raised as quickly as they can, but since they are operating at a reduced capacity, we will work with them to prioritize the list. Also, the CRA is giving priority to keeping the benefits and transfer system operating for lower income and vulnerable Canadians.
- We also are working on a plan for posting the key questions online, both those that have been answered and those that are awaiting a response. We will provide more details on this process once it has been finalized.
- CPA Canada will continue to regularly communicate with the CRA until the crisis has subsided. We will use these communications to discuss key issues and updates.
- Filing deadlines. We continue to discuss the upcoming deadline for partnership returns with the CRA, and it appears more likely that an extension will be given (note that Quebec has announced an extension to May 1, 2020).
- Although discussions continue, the CRA has not announced specific extensions for other key deadlines arising during the next 45 days. This includes due dates for T2s for September and October year-ends, NR4 forms and slips, foreign reporting forms such as the T1134 and GST returns/payments.
- Note that the deadline for the T1135 form is the taxpayer’s filing due date, so the T1135 deadline for individuals and trusts eligible for a filing extension will be the same as the revised due date.
On some of the key issues we know that you are concerned about, we have a few updates:
- Tax payments deferral includes provincial income tax. On the income tax payment deferral deadline, it is our understanding that the payment extensions announced will apply to provincial income tax in those provinces where the federal government collects tax. Alberta and Quebec have announced their own extensions.
- Relief for other corporate taxes. We have also asked whether relief will be provided for other corporate taxes such as under Part IV and Part VI.1. On other tax-related payments such as payroll remittances, GST/HST and withholding taxes under Part XIII, we do not expect that payment relief will be announced, as some or all of these amounts relate to amounts withheld or collected from other taxpayers. We understand that there may be misinformation circulating on the source deduction remittances – the CRA has re-confirmed that these payments are not eligible.
- Alternatives for filing paper forms. We are exploring alternatives with CRA whereby forms and other documents that are normally filed in paper only could be filed by tax advisors electronically.
- Wage subsidy. CRA is aware that many are asking for more detailed information on the wage subsidy announced by the Department of Finance.
- Mail sent to CRA. We have been made aware that there have been issues with mail and courier deliveries to the CRA, and they are looking into these issues. We also understand that some drop boxes have been shut down.
We will continue to provide updates on a regular basis. Finally, we strongly recommend that you monitor the CRA’s COVID-19 page, as the CRA will be updating this page as more information becomes available. And, you should sign up for one of CRA’s social media channels on Twitter, Facebook or LinkedIn as they are providing updates through social media. A deferral for charity returns was announced late Friday as an example. March 19, 2020 On March 18, 2020, the federal government released information on tax extensions and other changes that have become necessary due to the COVID-19 crisis. Although this was welcomed news, there is still some uncertainty as the announcement did not provide a comprehensive update on all tax deadlines that are soon approaching. The specific measures in the announcement include the following
- Personal returns — The deadline for filing T1 returns that were due on April 30, 2020 has been extended to June 1, 2020. Individuals expecting a refund or benefits should file sooner if possible, as the Canada Revenue Agency (CRA) will process refunds.
- Trust returns — For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.
- Income tax payments for all taxpayers — 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 income tax balances due, as well as instalments and no interest or penalties will accumulate on these amounts during this period.
Despite requests made by CPA Canada to specifically address the filing deadlines for many partnerships coming at the end of March, no mention of an extension was made for those returns. Also, no information was provided for corporate tax returns which are due near-term. It should also be noted that no mention was made on relief for GST/HST for businesses. A key concern is that businesses that continue to operate will have to collect and remit HST/GST but may not be paid immediately by their customers, or at all in the case of bad debts. This could create significant cash flow issues. As relief for income tax preparers, to reduce the necessity for taxpayers and tax preparers to meet in person during this difficult time, effective immediately the CRA will recognize electronic signatures as having met the signature requirements for T183 and T183Corp forms, as a temporary administrative measure. We will continue to discuss issues of concern with CRA with a goal of providing more clarity, and in particular, whether extensions can be provided for other key tax deadlines that are approaching. We do believe from our discussions with CRA that relief will be provided for returns and other filings and we will continue to ask for more clarity. On CRA services, they have sent most staff home and will focus on essential services including the continuity of benefit payments and associated functions while cutting back activities in other areas. Although the CRA will continue to respond to incoming calls at call centres, they will operate at a significantly reduced capacity and may give priority to enquiries related to benefits. The government also announced that benefits such as the Canada Child Benefit and the GST credit will be enhanced.