Canada’s tax measures to stabilize economy
Wednesday, April 08, 2020 @ 12:59 PM | By Christopher Steeves
Income tax return filing deadlines
With the usual April 30 tax return filing deadline for individuals approaching, the Canada Revenue Agency (CRA) has announced it will extend the filing due date for 2019 tax returns. For certain individuals (other than trusts), the return filing due date will be deferred until June 1, 2020. Self-employed individuals and their spouses are unaffected by these measures as the filing due date for 2019 tax returns remains June 15, 2020.
For trusts having a taxation year ending on Dec. 31, 2019, the return filing due date will be extended from March 30, 2020, to May 1.
For corporations, the CRA has granted an extension to the deadline for filing corporate income tax returns (T2) that would otherwise be due after March 18, 2020, and before June 1. These corporate tax returns may now be filed by June 1. Quebec and Alberta, which require the filing of separate provincial corporate tax returns, have adopted the same extension.
Income tax liabilities
The CRA will permit all taxpayers, including businesses, to defer until Sept. 1, 2020, the payment of any amounts on account their income tax liabilities that become owing on or after March 18 and before September. This relief applies to income tax balances due, as well as instalments on account of such taxes. CRA will not charge interest or penalties on these amounts during this period.
It should be noted that the timing of payment of other Canadian taxes, including payroll taxes and non-resident withholding taxes, are not deferred.
GST/HST tax returns and liabilities
CRA has also announced that it will allow all businesses to defer, until the end of June, any GST/HST payments or remittances that become owing on or after March 27 and before June. No interest will be charged for payments or remittances provided payments are made by June 30.
The deadline for businesses to file their GST/HST returns remains unchanged. However, CRA has stated that it won’t impose penalties where a return is filed late, as long as it is filed by June 30.
The Canada Border Services Agency announced that it will allow businesses to defer some payments of customs duties owing on imports until June 30. This includes charges on an importer’s statement of account of March, which ordinarily would be due on April 1.
Importers are still required to submit accounting declarations for imported goods released on minimum documentation within the usual required time frames.
Suspension of audit and collections activity
CRA has indicated that it will not contact any small or medium businesses to initiate any post assessment GST/HST or income tax audits until after April 15 and the CRA will temporarily suspend audit interaction with taxpayers and representatives for the “vast majority of businesses.”
Further, CRA collections activities with respect to new debts has be suspended until further notice.
Temporary Wage Subsidy for Employers
Certain “eligible employers” who qualify for the Temporary Wage Subsidy for Employers (TWSE) for a period of three months may reduce the amount of tax deductions required to be remitted to CRA. Generally, eligible employers include individuals (not trusts), certain Canadian-controlled private corporations that are eligible for the small business deduction and certain partnerships, as well as non-profit organizations and charities.
The TWSE is equal to 10 per cent of remuneration paid from March 18 to June 19, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
There is no requirement to apply for the TWSE. Employers will continue to deduct income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from salary, wages, bonuses or other remuneration paid to employees. The TWSE is calculated by the employer at the time it remits these amounts to the CRA and it may reduce the amount of the payroll remittance in respect of the federal, provincial or territorial income tax by the amount of the TWSE. The amount of CPP contributions or EI premiums to be remitted for this period is not reduced.
Employers who benefit from the TWSE are required to include the amount of reduced remittances in computing their income for tax purposes in that taxation year.
Canada Emergency Wage Subsidy
The Canadian government has also proposed to introduce the Canada Emergency Wage Subsidy (CEWS). The details of the CEWS will not be complete until legislation is released but, at this stage, it is expected to be a monthly subsidy payable to eligible employers equal to 75 per cent of the first $58,700 of salary, wages and other remuneration paid to employees (up to $847 per week per employee) during the period from March 15 to June 6.
Eligible employers will include individuals, partnerships, taxable corporations (whether or not they are public or private, or Canadian or foreign-controlled), not-for-profit organization and registered charities.
To claim the CEWS, eligible employers will be required to attest to a reduction of gross revenue of at least 30 per cent on a monthly basis when compared to the same month in 2019. There is currently no proposed maximum subsidy that an eligible employer may claim.
The Canadian government has stated that the CRA will accept monthly applications through an online portal which it is in the process of creating. The minister of Finance expects that monthly payments to employers will begin before the middle of May.
Employers who benefit from the CEWS will be required to include the amount received in computing their income for tax purposes in that taxation year.
The CEWS will be available in addition to the TWSE, described above. Employers who are eligible for both programs may only claim a subsidy under one.
The announcements related to CEWS have cautioned that businesses that make inappropriate claims for subsidy will be subject to significant penalties. Given some of the uncertainty still surrounding this proposal, it may be prudent for businesses to wait until legislation is available before taking steps to recall employees from layoff or to restart payments to employees.
Other tax proposals
The Canadian government has also announced a special payment to be made on April 9 through the GST credit (GSTC). The payment will double the maximum annual GSTC payment amounts for the 2019-2020 benefit year. The minister of Finance (Canada) estimated that the average increase to income for those benefiting from this measure will be approximately $400 for single individuals and nearly $600 for couples.
Finally, the Canadian government says it will reduce by 25 per cent the amount that is required to be withdrawn from a registered retirement income fund (RRIF). Presumably, this measure is intended to assist seniors who would otherwise be compelled to dispose of RRIF assets that may have drastically dropped in value in recent weeks as a result of falling stock market indexes.
Christopher Steeves is a partner and leader of the tax practice group for Fasken. Based in Toronto, Steeves assists businesses with Canadian income tax matters, including the resolution of disputes with tax authorities.
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