Tax Highlights of Canada’s COVID-19 Economic Response Plan

It’s true! Various economic measures to defer tax payments and deadlines have been announced by the Department of Finance Canada on March 18, 2020.

We’ve highlighted several tax points below that we thought you would find most relevant. For the full disclosure, here is the release from the Department of Finance Canada.

Even though CRA has extended the personal tax filing deadline up to June 1, 2020, VR will be maintaining the normal tax filing deadline of April 30, 2020 (as long as it is safe for us to do so). Get ready for the exciting and hilarious reminders (ok, ok, maybe they are only funny to us). Thank you for helping us maintain our workflows so we can also honor our May commitments and deadlines.

Individuals:

  1. Tax payment deferral until September 1, 2020
  • Income tax amounts that become owing on or after March 18, 2020 and before September 1, 2020, can be deferred until September 1, 2020. No interest or penalties will accumulate on these amounts during this period.
  • Relief will apply to Part 1 tax balances due, as well as instalments.
  1. Various income supports
  • Increased one-time GST and Canada Child Benefit payment amounts for the 2019-2020 benefit year are to be paid in May 2020.
  • Six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently repaying these loans.
  • Minimum withdrawals from RRIFs will be reduced by 25% for 2020.
  • Various EI benefits previously unavailable to the self-employed and others. Please see the full report for details.

Businesses:

  1. Temporary wage subsidy
  • Eligible small employers would have access to a temporary wage subsidy for a three-month period. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
  • Note that “eligible” employers and the actual three-month period have not yet been defined.
  • It appears that businesses would reduce their remittances of the income tax withheld on their employees’ remuneration. Stay tuned for more details on how to implement this item.
  1. Part 1 tax payment deferral until September 1, 2020
  • Similar to the tax payment deferral for individuals noted above.
  • Corporations with passive income also incur Part IV tax, which has NOT been included as part of the deferral benefit. This tax payment would still be due within three months of the corporate year-end. We would recommend continuing with normal tax preparation timelines to ensure all tax can be calculated prior to tax payment deadlines. Then you can remit each type of tax at the appropriate time.
  • NO corporate tax filing deadline extensions have been offered at this time. Filing is still due within six months of the corporate year-end.
  • Note that GST/HST payments and payroll remittances are not eligible for the deferral.
  • Alberta has announced a similar extension on corporate income tax balances and instalment payments to September 1, 2020.

The Recap:

The overall takeaway from the plan is that certain tax payments can be deferred until September 1, 2020, which could help with some cash flow issues. But it’s important to note that not everything falls into this category and certain payments will still be required as per usual. You can find more information on the income tax filing deadline and payment dates here.

 

While we are most disappointed to be missing our in-person meetings this tax season, we hope you and your families are safe and healthy. In the meantime, creative thinking for the win! If there is anything, we can do to assist you during this time, please connect with us.

We're here to help. Stay well!