Governments’ COVID-19 economic responses

Canada’s federal and provincial governments’ COVID-19 economic response

The following article discusses COVID-19 financial compensation measures that were put in place by the Federal and Provincial Government as of April 1, 2020. These measures continue to change as the COVID-19 crisis continues to evolve. To fully benefit from the compensation it is recommended that you review this information with your accountant or bookkeeper.

Federal government support for businesses https://www.canada.ca/en/department-finance/economicresponse-plan.html

Wage subsidy – up to 75% for existing employees if sales have decreased by 30% or more

On Friday, March 27, 202 the government introduced a 75% wage subsidy to all qualifying businesses in order to prevent massive layoffs. To be eligible for the wage subsidy, an employer must experience a drop of at least 30% in gross revenues due to COVID-19 in March, April or May when compared to the same month in 2019. The temporary wage subsidy covers 75% of gross T4 wages to a maximum of $847.00 per week per employee. The wage subsidy is based on yearly maximum earnings of $58,700.00. The program will be in place for 12 weeks and is retroactive to March 15, 2020 and ends on June 6, 2020. The federal government is working on a portal which will be available in the next 3-6 weeks to administer this program. Companies in the meantime will need to have the cash flow to meet payroll during this time period. The details for the wage subsidy program when available can be found at:

Wage subsidy – up to 10% all other businesses

The 10% wage subsidy is open to all other businesses that do not qualify for the 75% wage subsidy. 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. For example, a company has five employees earning $16.00/hour or $640/week, over 13 weeks the pay is $8,320.00 per employee. The company would deduct $832.00 per employee from payroll taxes over that time equalling $4,160 in total. The subsidy is equal to 10% of the remuneration you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer. Note: Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer. The wage subsidy is taxable and will need to be reported as income in the year in which the subsidy is received.

Employee EI compensation for reduced work hours https://www.canada.ca/en/employment-social-development/ services/work-sharing.html The EI Work Sharing Program, which provides EI benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers such as COVID-19. Under the EI Work Sharing Program employees agree to work a reduced number of hours per week and are compensated by EI for the reduced hours.

The federal government is extending the eligibility to 76 weeks, easing eligibility requirements, and streamlining the application process. For more information on the EI Work Sharing Program see: Canada Emergency Business Account The Canada Emergency Business Account was announced on March 27th and offers small businesses a $40,000 interest free loan for the first year. For more details contact your bank or see the following link: https://www.canada.ca/en/department-finance/economicresponse-plan.html

Business Credit Availability Program (BCAP) ensuring businesses have access to credit The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and mediumsized businesses. Relief measures include:

● Providing working capital loans of up to $2 million ● Flexible repayment terms, such as postponement of principal payments for up to six months,

● Reduced rates on new eligible loans In order to qualify, contact your bank and they will need to make a referral to BDC https://www.bdc.ca/en/contact_us/pages/default.aspx or EDC. https://www.edc.ca/en/contact-us.html

Flexibility for businesses filing taxes The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that were owed between March 18, 2020 and the end of August. This relief would apply to tax balances due, as well as instalments.

Penalty and interest relief on corporate tax, HST and payroll tax Penalty and interest relief applies to any penalties and interest charges that your company receives on HST, payroll and corporate tax late payments due to extraordinary business circumstances such as COVID-19. To learn more go to: https://www.canada.ca/en/revenue-agency/services/aboutcanada-revenue-agency-cra/complaints-disputes/ cancel-waive-penalties-interest.html

GST/HST and customs duty payments All GST/HST as well as customs duties owing on imported goods are deferred until June 30, 2020. The deferral will apply to GST/HST remittances for monthly, quarterly and annual filers. For GST and customs duty payments for imported goods, deferral will include amounts owing for March, April and May. These amounts were normally due to be submitted to the CRA and the Canada Border Services Agency as early as the end of this month.

Provincial government support for businesses Employer health tax deferrals The provincial government is providing assistance with Employer Health Taxes. Beginning April 1, 2020 and for a period of five months, up until August 31, 2020, the province will not apply any penalties or interest on any late-filed returns or incomplete or late tax payments. Therefore EHT payments from April, May, June and July will not be due until August 31, 2020. In addition employers with annual payrolls of up to $5 million will be exempt from EHT on the first $1 million of total Ontario T4 payroll 2020. This increased EHT tax exemption limit will increase company savings from $9,945 to $19,500 in 2020. The EHT exemption limit will return to $490,000 on January 1, 2021.

Workplace Safety and Insurance Board (WSIB) Businesses covered by the WSIB’s workplace insurance are automatically eligible for the following relief package:

● Schedule 1 employers with premiums owed to the WSIB will be allowed to defer reporting and payments until August 31, 2020.

● The deferral will also apply to Schedule 2 businesses that pay WSIB for the cost related to their workplace injury and illness claims. In addition, no interest will be accrued on outstanding premium payments and no penalties will be charged during this sixmonth deferral period.

Property tax deferrals The provincial government is allowing municipalities to defer property tax payments. As a result, property tax payments are being deferred in all cities. Deferral times differ per city. If you have submitted a series of post-dated cheques to the city to pay your property taxes they will be held for the deferral period. To find out the deferral period have a look at your city’s website or call or email your city councillor to find out the details. In the City of Toronto there is a grace period without penalties for 60 days starting March 16, 2020.

Federal government support for the self-employed

Canada Emergency Response Benefit The Canada Emergency Response Benefit was announced on March 27th and will provide a taxable benefit of $2,000 a month for up to four months. Funding is available for any selfemployed workers who are forced to stop work as a result of COVID-19 and do not have access to paid leave or other income support.

To read the entire federal and provincial government announcements, please see the following links: https://www.canada.ca/en/department-finance/economicresponse-plan.html https://budget.ontario.ca/2020/marchupdate/action-plan.html

Bonny Koabel CPA, CGA is President of AKR Consulting Canada a Mississauga, Ontario firm specializing in GovernmentGrants, Subsidies, Tax Credits, Refunds and Rebates since 2003