COVID-19 – Canadian Tax and Business News, release #6
Our COVID-19 Canadian Tax and Business News updates are our way of informing our clients, friends and business associates with recent information that may help businesses and individuals while coping with the outcomes from the COVID-19 pandemic.
Our goal is to monitor the news and release relevant information as it becomes available.
“When you’re going thru hell … just keep going “
– Winston Churchill
Bill C-13 An Act respecting certain measures in response to COVID-19
On March 25, 2020, Canada enacted Bill C-13 An Act respecting certain measures in response to COVID-19. The Bill contained various items of key legislation however our focus in this update will be on the Temporary Wage Subsidy and Canada Emergency Response Benefit.
Temporary Wage Subsidy
As discussed in previous instalments of this series, the Federal Government announced on March 18, 2020 that it is providing a three-month temporary wage subsidy for employers of up to $25,000 in an effort to keep individuals on payroll. The subsidy is equal to 10% of renumeration paid between March 18, 2020 and June 20, 2020 but is capped at $1,375 per employee.
The Bill addressed some of the uncertainties surrounding eligibility for the wage subsidy. Previously, the Canada Revenue Agency (CRA) announced that eligible employers only included non-profit organizations, charities and Canadian-controlled private corporations (CCPC). The Bill extended the definition of an eligible employer to include any person (i.e. self-employed individual) or partnership. Additionally, eligible employers must be registered for a CRA payroll number on March 18, 2020 and employ at least one individual in Canada.
The Bill also included additional measures for CCPC’s to qualify. For CCPC’s that employ individuals to qualify, it must have more than a nil small business limit assigned to it in the prior taxation year (i.e. 2019). This is important in the context of an associated group as each associated entity with employees on payroll would need at least $1 of the small business limit assigned to them in 2019. Associated groups with taxable capital over $15 million would not qualify. Furthermore, if 2020 is the first taxation year for the CCPC, some relieving measures are included that create a notional fiscal year ending on March 18, 2020 for purposes of determining whether any of the small business limit would be assigned to them.
For partnerships to qualify, all the members of the partnership must either be an individual, registered charity or a CCPC that meets the criteria addressed above regarding the small business limit and taxable capital considerations.
It is important to note that a trust is not an eligible employer as the Bill specifically excluded them.
Emergency Response Benefit
On March 25, 2020, Prime Minister Trudeau announced the new Canada Emergency Response Benefit (CERB). The CERB will be a taxable benefit that will pay eligible individuals $2,000 per month. Eligibility details included in the bill are highlighted below:
- The individual must be over 15 years of age and a resident of Canada.
- The individual must have at least $5,000 of income from either employment, EI maternity or EI paternity benefits or self-employment income in 2019 or in the previous 12 months before applying. There is no minimum hour requirement like traditional EI benefits.
- The individual must have ceased working for at least 14 consecutive days for reasons related to COVID-19. This wording is quite broad and can be far reaching.
- The individual cannot receive any income from employment, EI, allowances, or other benefits because of pregnancy or adoption during the period. As a result, the CERB cannot be relied upon as an income top-up for reduced wages. It is reserved for individuals who have stopped receiving income payments all together. Employees can still remain employed but cannot receive wages should they wish to qualify.
It should be noted that individuals who voluntarily quit their employment do not qualify. Furthermore, there does not appear to be any legislation on withholding tax so individuals will have to keep in mind the taxes payable in April of 2021 on this money when they file their 2020 income tax return.
Measures Not Included in the Bill
The income tax filing and payment extensions previously announced by the Government were not included in the Bill. However, details are posted on the CRA website and are assumed to be in force and valid despite not being included in the Bill. There has still been no announcement whether further extensions will be provided for partnerships filings which are due either March 31, 2020 or May 31, 2020 and other information returns such as foreign reporting Forms T1134 and T1135. We will continue to keep you posted if any further announcements are made on this.
As we all try to stay safe, we need to remind ourselves business will get back to normal but in the meantime lets all do our part to get to normal as soon as we can. If you have any questions or require further information, don’t hesitate to reach out to us.