Written by Thomas Bauer, Darcy Moch, Ed Kroft, Q.C., Greg Johnson and Taylor Page
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.
Extension of Tax Return Filing-Due Dates
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:
- For individuals (other than trusts), the 2019 income tax return filing-due date will be deferred until June 1, 2020.
- For trusts having a taxation year ending on December 31, 2019, the 2019 income tax return filing-due date will be deferred until May 1, 2020.
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.
Temporary Relief from Interest and Penalties
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:
- The payment relief does not apply to income tax amounts that became owing prior to March 18, 2020—such outstanding tax balances will continue to accrue interest in the normal course.
- Technically, the relief only extends to amounts owing under Part I of the ITA—there is no indication in the Response Plan as to whether the provinces will be extending similar relief for any provincial income taxes payable. Further clarification from the CRA will be required in this regard.
- There is no deferral or relief relating to source deductions or withholding taxes. Taxpayers should continue to deduct and remit applicable taxes in accordance with their current practices.
- There is no deferral or relief relating to other "special taxes" imposed under the ITA, such as Part IV, IV.1 or VI.1 taxes. Returns for those taxes should be filed and any tax owing paid within the regular prescribed statutory time limits.
- There is no deferral or relief relating to GST/HST filings or remittances. Such filings should be made and remittance paid within the regular prescribed statutory time limits.
Audit and Litigation Measures
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:
- The CRA will not contact any small or medium (SME) businesses to initiate any post–assessment GST/HST or income tax audits for the next four weeks.
- The CRA will temporarily suspend audit interaction with taxpayers and their representatives “for the vast majority of businesses”. At this point there is no indication which businesses will continue to remain subject to audit interaction.
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.
Temporary Small Business Support Measures
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.
CRA Adaptations to Support Social Distancing
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:
- The Outreach Program, which is offered by the CRA to help individuals to better understand their tax obligations and to obtain the correct benefits and credits to which they are entitled, will now be offered over the phone and webinar, where possible.
- The Liaison Officer, which helps small business taxpayers to understand their tax obligations, will now be available over the phone to advise taxpayers.
- As a temporary administrative measure, effective immediately the CRA will recognize electronic signatures as meeting the signature requirements of the ITA.
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
Other tax-related measures announced in the Response Plan include the following:
- A temporary increase to the maximum annual Canada Child Benefit for the 2019/2020 benefit year by up to $300 per child.
- A one-time special payment by early May 2020, through the GST credit for low- and modest-income families, boosting the average income for those benefitting from this credit up to $400 for single individuals and up to $600 for couples.
- A reduction in the required minimum withdrawals from registered retirement income funds (RRIFs) by 25 percent for 2020.
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.