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  • COVID-19: Economic relief measures announced to date for businesses

COVID-19: Economic relief measures announced to date for businesses

9 May 2020 1:26 PM | Anonymous


Canada

Business Credit Availability Program 

  • The Business Credit Availability Program (BCAP) is targeted at small and medium-sized businesses. The Government of Canada defines small businesses as companies having less than 99 employees and medium-sized businesses as companies with between 100 and 499 employees.  The BCAP will provide more than $10 billion in support.
  • The program is a collaboration between EDC, the Business Development Bank of Canada (BDC), and private sector lenders. The goal is to provide credit solutions for individual businesses in sectors such as oil and gas, air transportation, and tourism.
  • On April 17, 2020, the Government of Canada announced that the BCAP will be expanded to support medium-sized businesses with larger financing needs, beginning with companies in Canada’s energy sector.

EDC Loan Guarantee for Small and Medium-Sized Enterprises (“SMEs”)

  • EDC will guarantee new operating credit and cash flow term loans that financial institutions extend to small and medium-sized enterprises affected by the impact of COVID-19 up to $6.25 million with 80% guaranteed by EDC. For export sector and domestic companies, the program cap will be a total of $20 billion. This money is to be used for operational expenses only. Statistics Canada defines SMEs as Enterprises with 1-499 employees. For more information about the thresholds, see the 2017 Statistics Canada survey here.
  • This program is now available through various financial institutions and credit unions.

BDC Co-Lending Program for Small and Medium Enterprises

  • The purpose of this program is to provide term loans for operating and liquidity to businesses that were financially viable and generating income prior to the COVID pandemic. The program has three components:
    • loans of up to $312,500 to businesses with revenues of less than $1 million;
    • loans up to $3.125 million for businesses with revenues between $1 million and $50 million;
    • loans up to $6.25 million for businesses with revenues over $50 million.
  • Interest will not accrue for the first 12 months of the loan and the loan will be repayable over 10 years. The financial institutions will be releasing additional information in the coming days.

Canada Emergency Business Account (CEBA)

  • The government announced a $25 billion program that will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced. The program will be implemented by eligible financial institutions in cooperation with EDC.
  • To qualify, small businesses will need to demonstrate they paid between $20,000 and $1,5 million in total payroll in 2019, and operating as of March 1, 2020. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000). If the loan is not repaid by then, the remaining balance will be converted to a three-year term loan at 5 per cent interest.
  • This program is now available at various financial institutions and credit unions.

Canada Revenue Agency (CRA)

Canadian Federal Wage Subsidies

75% wage subsidy 

  • On April 11, 2020, the Bill C-14, which proposed a few improvements to the CEWS, received Royal Assent. Briefly, the CEWS represents a government subsidy paid to eligible employers experiencing a 15% decrease in revenues in March, 2020 and 30% decrease in April and May, 2020.
  • The CEWS provides a payment of up to 75% of the eligible remuneration normally paid by an eligible employer to eligible employees between March 15, 2020, and June 6, 2020 which is the greater of:
    • 75% of remuneration paid, up to a maximum of $847 per week; or
    • The amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s “pre-crisis weekly remuneration” (based on the average weekly remuneration paid to a given employee between January 1 and March 15, 2020 inclusively, excluding any seven-day periods in respect of which the employee did not receive remuneration), whichever is less.

Essentially, the CEWS caps out for employees with annual salary remuneration above $58,700

  • Eligible employers include individuals, taxable corporations, and partnerships consisting of eligible employers, non‑profit organizations and registered charities.
  • There is no overall limit on the CEWS amount an eligible employer can claim, but employers must meet the revenue decrease criteria for each eligible period by comparing monthly 2020 revenue to corresponding monthly 2019 revenue or by comparing with an average of their revenue earned in January and February 2020. Once an employer is found eligible for a specific period, he will automatically qualify for the next period of the program. The non-profit organizations and registered charities are allowed to choose whether or not to include government assistance in revenues for the purpose of applying the revenue decline test, provided that the same approach is maintained throughout the program period. The employers are allowed to measure revenues either on the basis of accrual accounting or cash accounting, provided that the same accounting method is used throughout the program period.
  • Additionally, the government is expanding the CEWS by providing an additional amount to wholly compensate employers for their contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.
  • Applications will open online through the CRA in the coming weeks. Eligible employers can apply for the CEWS through the CRA’s My Business Account portal or a web-based application. Employers must keep records demonstrating their reduced revenues and remuneration paid to employees. On April 21, 2020 the Government of Canada launched a CEWS calculator for employers.
  • 10% wage subsidy 
  • On March 18, 2020, Prime Minister Trudeau announced a “Helping Businesses Keep Their Workers Wage Subsidy” as part of the Economic Response Plan. This program is designed to support businesses that are facing revenue losses and to help prevent lay-offs.
  • On March 25, 2020, the Government of Canada passed Bill C-13, An Act respecting certain measures in response to COVID-19 (Bill C-13) to implement the response plan measures. Framework legislation enacted as part of Bill C-13 provides a federal payroll deduction rebate which is expected to be 10% of remuneration paid by “Eligible employer” to eligible employees between March 18, 2020 and June 19, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer. Assistance received under the wage subsidy reduces the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
  • Eligible employers include individuals, non-profits, charities, Canadian-controlled private corporations (CCPCs) having a business limit in the last taxation year greater than nil (i.e. eligible for the small business deduction), and partnerships, all of the members of which are comprised of the foregoing persons, and must:
    • have an existing business number and payroll program account with the CRA as of March 18, 2020; and
    • pay salary, wages, bonuses, or other remuneration to at least one individual employed in Canada during the applicable period.
  • CCPCs are eligible for the small business deduction if the combined taxable capital employed in Canada of the CCPC and any associated corporations is under $15 million.
  • The Department of Finance has further indicated that associated CCPCs would not be required to share the maximum subsidy of $25,000 per employer. Additionally, since the subsidy operates by allowing an eligible employer to reduce their payroll remittances, the Department of Finance suggested that the if the amount of the subsidy exceeded an eligible employer’s payroll remittances for the applicable period, the employer would be allowed to continue to reduce remittances beyond June 20, 2020, or request the unclaimed amount be paid out to the eligible employer or credited against the eligible employer’s 2021 payroll remittances.

Flexibility for businesses in respect of paying and filing taxes

  • As announced on March 18, 2020, the federal government’s COVID-19 Response Plan contains measures that will allow businesses to defer the payment of any income tax that becomes owing between March 18, 2020, and August 31, 2020, until September 1, 2020. Interest and penalties will not apply or be computed to these unpaid tax balances during this period.
  • This measure will apply to both monthly instalments and year-end tax balances due under Part I of the Income Tax Act (Canada).
  • The deadlines to file certain categories of tax and information returns have been extended:
    • trusts having a taxation year ending on December 31, 2019, may defer filing T3 returns until May 1, 2020;
    • partnerships and their members may defer filing T5013 returns until May 1, 2020;
    • the deadline to file NR4 information returns has been extended to May 1, 2020; and
    • the filing of information returns under Part XVIII and Part XIX of the Income Tax Act may be deferred until September 1, 2020. No interest or penalty will be assessed during this period and no penalty will apply for failure to obtain a self-certification on financial accounts opened before January 1, 2021.
  • Administrative tax actions required of taxpayers by the CRA due after March 18, 2020, can be deferred until June 1, 2020. Such actions include the filing of returns, elections, designations, and information requests.
  • The CRA has also issued the following relief measures:
    • Audits: the CRA will temporarily suspend audit interactions with taxpayers and their representatives. The CRA will also refrain from initiating any post-assessment GST/HST or income tax audits with small or medium-sized businesses for the next four weeks. However, as indicated by CRA, interaction with taxpayers will only be limited to the cases where the legal deadline to reassess a tax return is approaching, and in cases of high risk GST/HST refund claims that require some contact before they can be paid out. While the Government of Canada defines a “small business” as businesses having less than 100 employees and a “medium-sized business” as having between 100-499 employees, the CRA has not yet provided further guidance on the definition of “small or medium sized businesses” in the context of this specific announcement.
    • Collections: No collection activities will be initiated on new debts until further notice, and the CRA undertakes to make flexible payment arrangements available.
    • Objections: Objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service which will continue to be delivered during COVID-19 times of hardship and therefore, there should be no delays associated with the processing of these objections. The deadline to make any objection request has been extended to June 30, 2020.
    • Appeals: All TCC sittings scheduled between March 30, 2020, and May 1, 2020, are cancelled. Canadian Pension Plan and insurability issues under the Employment Insurance Act will only be progressed where such appeals related to cases where EI benefits are pending. These cases will be considered on a priority basis.
    • Appeals of CPP/EI: Appeals in respect of decisions made by the CRA on pensionability issues under the Canada Pension Plan (CPP), and insurability issues under the Employment Insurance Act (EI Act), will only be progressed where such appeals related to cases where EI benefits are pending. These cases will be considered on a priority basis. Other appeals will be continued when normal service resumes but neither the CRA nor the Minister of National Revenue have indicated when this is expected to occur. The court will treat all notices of appeal filed during the court’s closure, and for 60 days thereafter, as including a request to extend the filing deadline due to an inability to file based on exceptional grounds due to the pandemic and the closure of the Court Registry.
    • Requirement to pay (RTP): Banks and employers do not need to comply or remit on existing RTPs.
    • Requests for information (“RFI”): Taxpayers who have received a request for information may wait until further notice before providing this information.
    • Transfer pricing documentation: Requests for contemporaneous documents issued before April 1, 2020, with a deadline of March 18, 2020, or later, are deemed to be cancelled. These requests will be re-issued at a later date and the requested documents must be submitted within three months of the re-issued request.
    • Scientific research and experimental development (“SR&ED”): New reviews or audits are not being undertaken at this time. Ongoing exams and audits will be finalized as soon as possible to help businesses get their credits faster. Applications approved during the current period may be subject to review or audit at a later date to confirm eligibility.
    • Delays: Once the crisis has subsided, there will be a significant backlog for the CRA to deal with, and considerable delays for the foreseeable future.

Deferral of the Goods and Services Tax / Harmonized Sales Tax (GST/HST) remittance and customs duty payments

  • On March 27, 2020, the Government of Canada announced that it would defer to June 30, the due dates of the GST/HST collected by the following persons (including self-employed individuals registered for GST/HST purposes) and for the following periods:
    • Monthly filers for GST/HST collected for the February, March and April 2020 reporting periods;
    • Quarterly filers for the GST/HST collected for the January 1, 2020 through March 31, 2020 reporting period; and
    • Annual filers, for GST/HST returns or instalments are due in March, April or May 2020, for GST/HST collected and owing for their previous fiscal year and for instalments of GST/HST in respect of the filer’s current fiscal year.
  • In a commercial goods importation context, payments owing for customs duties and GST at a rate of 5% on imports are generally due before the first day of the month following the month in which the statements of accounts are issued to the importers of commercial goods. The Government of Canada has also announced, on March 27, 2020, that payment deadlines for statements of accounts for March, April, and May are deferred to June 30, 2020.

Extending the Work-Sharing program

  • The Work-Sharing program is provided for workers who agree to reduce their normal working hours because of developments beyond the control of their employers. The federal government is extending the maximum duration of the Work-Sharing program from 38 to 76 weeks.
  • In addition, eligibility requirements have been eased and the application process has been streamlined.

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