Both the Federal and Ontario Governments have introduced various tax measures and economic programs to help businesses weather the economic downturn caused by the COVID-19 pandemic.
This article covers the following:
1. The Canada Emergency Business Account
2. The Canada Emergency Commercial Rent Assistance Program
3. Extended Deadlines for Businesses to File and Pay Taxes
4. Deferral of GST/HST Remittances and Customs Duties
5. Changes to the WSIB: Deferral of Insurance Premiums
6. Changes to the WSIB: COVID-19 WSIB Claim Assessments
7. Employer Health Tax Exemption
8. Other Provincial Tax Deferrals
The Federal Government’s COVID-19 Economic Response Plan
Since March 18, 2020, the Federal Government has introduced various economic measures as part of its COVID-19 Economic Response Plan. In our previous blogs we have discussed some of these measures, such as the Canadian Emergency Response Benefit (discussed here and here), and the Canada Emergency Wage Subsidy Program (“CEWS”) (discussed here and here).
Expanded Eligibility of the Canada Emergency Business Account
The Federal Government previously announced that loans for eligible businesses are available via the Canada Emergency Business Account (CEBA), which we previously discussed here. These loans are interest free for the first year and can provide eligible businesses with up to $40,000 to help cover non-deferrable operating costs. Businesses who can repay the balance of the loan on or before December 31, 2022 will receive loan forgiveness of 25% (up to $10,000).
On April 16, 2020, the Federal Government announced that the criteria for the CEBA will be expanded. Now, businesses that paid between $20,000 and $1.5 million in total payroll in 2019 will be eligible for the CEBA.
In order to apply for the CEBA, eligible employers should contact their primary financial institution.
To be eligible for the CEBA, the employer must:
- be a Canadian operating business (i.e. not a holding company) in operation as of March 1, 2020;
- have a federal tax registration;
- have paid between $20,000.00 and $1,500,000.00 in total payroll in 2019;
- have an active business chequing/operating account with the financial institution who will provide the loan (the “Lender”).The Lender must be the employer’s primary financial institution. This account must have been opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as of March 1, 2020;
- have not previously used the CEBA and will not apply for support under the CEBA at any other financial institution;
- acknowledge its intention to continue to operate its business or to resume operations; and,
- agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.
The funds received from the CEBA must only be used by the employer to pay non-deferrable operating expenses of the employer, including (without limitation):
- property tax; and,
- regularly scheduled debt service.
The CEBA may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.
New Canada Emergency Commercial Rent Assistance Program
On April 16, 2020, the Federal Government announced its intention to introduce the Canada Emergency Commercial Rent Assistance (“CECRA”) for small businesses. This program seeks to provide loans, including forgivable loans, to commercial property owners who in turn will lower or forgo the rent of small businesses for the months of April (retroactive), May, and June 2020.
The implementation of this program will require a partnership between the Federal Government and Provincial and Territorial Governments, as they are responsible for property owner-tenant relationships.
There are currently no further details on this initiative. We will continue to monitor the details of the CECRA.
Extended Deadlines for Businesses to File and Pay Taxes
In addition to the above measures, the Federal Government’s COVID-19 Economic Response Plan allows businesses to defer until September 1, 2020 the payment of any income tax that becomes owing between March 18, 2020 and August 31, 2020. No interest or penalties will apply to these unpaid tax balances during this time period. This measure is applicable to both monthly instalments and year-end tax balances due under Part 1 of the Federal Income Tax Act.
The deadline to file and/or pay the following categories of tax and information returns have also been extended:
- the deadline for self-employed individuals and their spouse or common-law partners remains unchanged (June 15, 2020), but the payment date for the 2019 tax year has been extended to September 1, 2020;
- trusts that have a taxation year end date of December 31, 2019 may defer filing T3 returns until May 1, 2020;
- trusts that would otherwise have a filing due date in April or May 2020 may defer filing T3 returns until June 1, 2020;
- partnerships and their members may defer filing T5013 Partnership Information Returns until May 1, 2020;
- the deadline to file the 2019 NR4 Statement of Amounts Paid or Credited to Non-Residents of Canada Information return has been extended to May 1, 2020.
For more information on these tax deadline extensions, please visit the Canada Revenue Agency’s webpage (accessible here).
Deferral of GST/HST Remittances and Customs Duties
As part of the COVID-19 Economic Response Plan, businesses, including self-employed individuals, can defer all Goods and Services Tax/Harmonized Sales Tax (GST/HST) payments or remittances that become owing on or after March 27, 2020, and before June 2020. Thus, no interest will apply so long as payments or remittances are made by June 30, 2020.
The deferral will apply to:
- the GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers;
- the GST/HST remittances for the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and,
- for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.
For businesses and self-employed individuals who import commercial goods, payments owing for customs duties and GST for March, April and May will be deferred to June 30, 2020.
Ontario’s Action Plan: Responding to COVID-19
Recently, the Ontario Government announced its $17 billion response to the COVID-19 crisis, titled Ontario’s Action Plan: Responding to COVID-19 (“Action Pan”). The Action Plan is designed to support Ontario’s health care system, communities, and economy during the COVID-19 crisis. The Action Plan also implements important tax deferrals and support for businesses in Ontario.
Changes to the WSIB: Deferral of Insurance Premiums
As part of the Action Plan, the Ontario Government is enabling $1.9 billion in relief to allow businesses to defer their insurance premium payments for six (6) months. This measure is administered by the Workplace Safety and Insurance Board (“WSIB”). All employers covered by the WSIB’s workplace insurance, whether they report and pay monthly, quarterly, or annually based on their insurable earnings, are automatically eligible. Eligible workplaces can defer their premium payments until August 31, 2020. Employers do not need to “opt in” to receive this benefit.
Further, the WSIB will cease interest accrual on all outstanding premium payments, and it will not charge penalties during the six-month deferral period. The WSIB will continue to fully cover workers at eligible workplaces.
For more information on this benefit, please visit the WSIB’s webpage (accessible here).
Changes to the WSIB: COVID-19 WSIB Claim Assessments
Further, the WSIB has published an “adjudicated approach document” to summarize its approach to COVID-19 related claims (accessible here). Such claims will be determined on a case-by-case basis, and the WSIB will consider whether the nature of the worker’s employment creates a risk of contracting COVID-19 to which the public at large is not normally exposed, and whether the worker’s COVID-19 condition has been confirmed. For a COVID-19 claim to succeed, the worker must demonstrate his or her employment created an elevated risk of contracting COVID-19.
The document outlines several factors the WSIB may consider when determining a worker’s entitlement in a COVID-19 claim:
- when considering the nature of work,
- has a contact source to COVID-19 within the workplace been identified?
- does the nature and location of employment activities place the worker at risk for exposure?
- was there an opportunity for transmission of COVID-19 in the workplace?
- when considering the specific condition of the employee,
- is the incubation period, the time from the date of exposure and the onset of illness, clinically compatible with COVID-19 that has been established to exist in the workplace?
- has a medical diagnosis been confirmed? If not, are the worker’s symptoms clinically compatible with the symptoms produced by COVID-19? Is this supported by an assessment from a registered health professional?
Finally, the document also states there is no coverage for workers who are symptom-free, even when quarantined or sent home on a precautionary basis. However, symptom-free workers who develop symptoms or illness while in quarantine may be eligible for WSIB benefits.
Employer Health Tax Exemption
The Ontario Government also announced a five-month relief period for Ontario businesses who are unable to file or remit certain provincial taxes on time due to the extraordinary circumstances caused by the COVID-19 pandemic.
This five-month relief period will begin April 1, 2020 and will end on August 31, 2020.
The most significant change for employers is the temporary increase to the Employer Health Tax (EHT) exemption. The EHT is a payroll tax on the remuneration paid to employees and to former employees. The exemption will be increased from $490,000 to $1 million for 2020. Therefore, businesses that pay less than $1 million in payroll for 2020 will be exempted from the EHT tax.
Other Tax Deferrals
In addition to the EHT exemption, the Ontario Government will also allow the five-month interest and penalty-free period to apply to many other provincially administered taxes.
From April 1, 2020, to August 31, 2020, the Province will not apply any penalty or interest on any late-filed returns or incomplete or late tax payments under the following provincially administered taxes:
- Employer Health Tax (as discussed above);
- Tobacco Tax;
- Fuel Tax;
- Gas Tax;
- Beer, Wine & Spirits Tax;
- Mining Tax;
- Insurance Premium Tax;
- International Fuel Tax Agreement;
- Retail Sales Tax on Insurance Contracts and Benefit Plans; and,
- Race Tracks Tax.
The relief from these taxes for the five-month interest and penalty-fee period is automatic. Businesses who are unable to file their returns or remittances during the relief period do not need to contact the Ministry of Finance.
For more information on the Ontario Government’s tax deferrals, please visit their website (accessible here).
Our firm will continue to provide you with updates as the Federal and Ontario Governments’ responses to the COVID-19 pandemic evolves.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of SOM LLP’s lawyers by email or telephone.