Extraordinary Times Call for Extraordinary Measures: Three Things Everyone Needs to Know about the Canadian Government’s Tax Response to Covid-19

Wednesday, March 18, 2020

The Government of Canada is taking immediate, significant and decisive action to help all Canadians who are dealing with financial hardship as a result of the Covid-19 outbreak. On March 18, 2020, Prime Minister Trudeau announced a new set of economic measures to help stabilize the economy during these uncertain times. Finance Minister Bill Morneau says that the Government is hoping to roll out the direct economic aid within three weeks.  

Here are three things everyone needs to know about the Government’s tax response to Covid-19:

1) Help for small businesses

To support small business owners, the Government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of the salary paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ salaries. Employers that will benefit from this measure include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

2) Delay of tax filings and payment

In a welcome change that the tax community has been asking for in recent days, the Canada Revenue Agency (the “CRA”) will defer the filing due date for the 2019 tax returns of individuals, including certain trusts:

• For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020 (from April 30, 2020). However, the CRA is encouraging individuals who expect to receive benefits, such as the Canada Child Benefit, to file promptly to ensure their entitlements are properly calculated.
• For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020. 

The CRA will also allow all taxpayers (including corporations) 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 tax balances due, as well as instalments, under Part I of the Income Tax Act (Canada). No penalties or interest will accumulate on these amounts during this period. In addition, for the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and their representatives.

3) Budget 2020 is delayed

As previously announced, Budget 2020 was to be held on March 30, 2020. The Government has since stated that the date of the Budget will be delayed as the House will not be back to work until at least April 20, 2020. This means that proposed changes to the stock option regime, among other changes to the tax rules, will not be proposed or come into effect until the new Budget is released at some later date. 

If you have any questions with respect to the matters discussed above, please contact Katy Pitch by email at [email protected] or any other member of our Tax practice group.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.

If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.