On March 18, 2020, the federal government announced Canada's COVID-19 Economic Response Plan, containing a number of measures to be implemented by the Department of Finance to help manage the financial hardships Canadians are experiencing during the COVID-19 outbreak. The announced measures are designed to provide up to $27 billion in support to Canadian workers and businesses. A copy of the Response Plan can be found at the government of Canada's website.
Selected tax-related measures from the Response Plan are summarized below.
As part of the Response Plan, the Canada Revenue Agency (CRA) will defer the filing-due date for the 2019 tax returns of individuals and certain trusts as follows:
The Response Plan does not expressly address whether the above extensions also apply to tax elections by individuals and trusts that are required to be filed by the filing-due date for their 2019 income tax returns. Further guidance from the CRA in this regard will likely be required.
The Response Plan does not include any extension of the filing-due date for corporate income tax returns or partnership information returns. Such returns should be filed within the regular prescribed statutory time limits.
The Response Plan also does not address any extensions for GST/HST returns, elections or designations, and such forms should be filed within the regular prescribed statutory time limits.
The Response Plan indicates that amounts owing under Part I of the Income Tax Act (Canada) (ITA) that become owing on or after March 18, 2020, and before September 1, 2020, will not be due until “after August 31, 2020” (presumably, on September 1, 2020), without incurring interest or late payment penalties. This relief extends to all taxpayers, including corporations, and applies to income tax balances that become due during that period, as well as income tax instalments that are otherwise required to be made during that period.
Some things that should be noted in connection with the proposed payment relief:
We understand that the CRA, like most government agencies, has instructed or encouraged its employees to work from home. This will likely impact the interaction between CRA officials and taxpayers. Specifically, the Response Plan indicates that:
In addition to impacting CRA audit activities, we expect that general government “work from home” directives will also impact files that are currently under review by the Appeals division of the CRA as well as tax litigation files. Tax litigation files may also be impacted by temporary closures recently announced by the Tax Court of Canada and Federal Court. This could provide taxpayers with time to review their audit and litigation strategies.
To mitigate revenue losses and prevent layoffs, the federal government announced plans to provide eligible small businesses a temporary wage subsidy for a period of three months. The subsidy will amount to 10 percent of the remuneration paid during the three-month period, up to a maximum of $1,375 per employee and $25,000 per employer. The primary types of employers that will benefit from these measures includes corporations eligible for the small business deduction, as well as non-profit organizations and charities.
The CRA is adapting a number of its programs and policies to accommodate the social distancing mandate. As such, the following programs which typically involve face-to-face interactions between CRA agents and taxpayers are being modified as follows:
With office closures and curtailed services, extra steps should be taken to track and evidence the timely filing of all documents, correspondence, returns, elections and designations with government agencies during this period of social distancing.
Other tax-related measures announced in the Response Plan include the following:
The Bennett Jones Tax group will continue to provide updates as further details are released. We remain available during this period to answer questions and provide advice regarding how these measures might impact your business interests, including any tax audits, disputes and litigation.