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Executive Summaries Apr 8, 2020

COVID-19: Tax and Financial Measures Announced in Response to the Pandemic

Various authorities have implemented aid measures for individuals and businesses aiming to reduce the COVID-19 pandemic’s financial impacts. To help you find a solution that meets your needs, BCF has prepared a summary of the main measures deployed by governments and financial institutions.

Updated April 8, 2020: the changes made can be found hereafter in blue.

Tax Measures

Government officials have announced tax measures that will allow taxpayers to defer payments of taxes and instalments. The objective of such measures is to increase the liquidity of taxpayers during these difficult times.

To facilitate adaptation required by social distancing measures and to ease the burden on taxpayers, authorities have also announced the extension of deadlines for filing tax returns.

In addition to the extension of deadlines, Revenu Québec will also expedite the processing of business tax credit claims and tax refund claims.[1] Revenu Québec will also suspend its audit activities, except in situations involving a risk of fraud. However, in the circumstances of fraud, no contact will be initiated with taxpayers, unless it is necessary for the processing of a refund.[2]

Similarly, the Canada Revenue Agency (“CRA”) has confirmed that it will not contact any small or medium-sized businesses to initiate GST/HST or income tax post-assessment audits in the next four weeks.[3]

With regards to objections to be received on or after 18 March by Revenu Québec and CRA, the deadline is extended to 30 June 2020. The collection measures are also suspended until further notice  and flexible payment arrangements will be available.[4] In addition, unless otherwise noted, administrative income tax actions required of taxpayers by the CRA that are due after March 18, 2020, can be deferred to June 1, 2020. These administrative income tax actions include returns, elections, tax credit applications, fuel tax refund applications, designations and information requests. Payroll deductions payments and all related activities are excluded.[5] Furthermore, the CRA's Liaison Officer service will now be available by telephone to help small business owners understand their tax reporting and payment obligations.[6]

Details of the measures announced are as follows:

However, it is important to note that the payment of other Canadian taxes, including source deductions and non-resident withholding taxes, is not deferred.

Financial Support Measures

To ease the burden on taxpayers and corporations, a number of aid measures are being rolled out. In fact, on March 17, the six largest Canadian banks and Desjardins Group announced that they would offer payment deferrals as well as solutions adapted to the specific situations of their clients who have been financially impacted by the pandemic. Such measures include payment deferrals on mortgages for up to six months as well as the possibility of deferring payments on other credit products for individuals and small businesses.[8]

Extraordinary measures have also been proposed by the federal government[9], and the details relating to the Canada Emergency Wage Subsidy announced on April 1, 2020[10], which are further described below. Such measures will protect Canadian SMEs and their employees, notably through subsidies representing up to 75% of their employees' salaries. The objective is to help businesses maintain their workforce during these uncertain times. These major assistance measures are welcomed and are essential for the sustainability of our economy.

Canada Emergency Response Benefit (CERB)

Canadians in financial difficulty due to the Coronavirus outbreak will be able to get $2,000 a month for up to four months.

CERB would apply to wage earners as well as workers who do not normally have access to employment insurance, including self-employed individuals and contract workers, who  :

  • Residing in Canada, who are at least 15 years old;
  • Who have stopped working because of COVID-19 or are eligible for Employment Insurance regular or sickness benefits[11]:
  • Who had income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
  • Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment income.

Workers who normally have access to employment insurance will also receive this benefit in lieu.

Benefits will be paid every four weeks and will be taxable. It is expected that the amounts will be paid within 10 days of the request.

No applications may be submitted after December 2, 2020.

Source: Government of Canada

The Canada Emergency Wage Subsidy (75%)

The eligible employers are :

  • Individuals, taxable corporations, and partnerships;
  • Non‑profit organizations and registered charities;
  • Public bodies would not be eligible for this subsidy, as well as corporations which does not have tax to pay.

Wage subsidy at a rate of 75% for all eligible employers with a 30% decrease in revenue, regardless of the number of employees.

The 30% decrease in revenue is calculated per month, between the period of March 15 to June 6, 2020, by comparing the income of the given month to that of the same month in 2019 (i.e. March 2020 vs March 2019).

Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.

The subsidy will be capped at $847 a week, per worker.

The government asks businesses to make up the remaining 25%, if possible. The obligation of paying the remaining 25% is not yet determined and further details will follow as to the required measures and steps taken to make up the 25%.

This subsidy of up to 3 months, retroactive to March 15, 2020, will help businesses retain or take over their employees.

Within 3 to 6 weeks, a request will be able to be made electronically through a portal managed by the CRA. A request will have to be submitted every month.

The Canada Emergency Wage Subsidy (75%) is different from the CERB in that its purpose is to maintain employment.

Source: Government of Canada

Goods and Services Tax Credit[12]

A special payment through the GST credit by early May 2020 to provide income assistance to those who need it most.

This measure will double the maximum annual GST credit for the 2019-2020 benefit year.

As a result, the federal government aims to increase the income of individuals benefitting from this measure by almost $400 for single individuals and almost $600 for couples.

This measure will inject over $5.5 billion into the economy.[13]

Source: Government of Canada

Temporary 3-month wage subsidy (10%)

The subsidy will be equal to 10% of wages paid during such period, for a maximum subsidy of $1,375 per employee and $25,000 per employer.

Employers benefitting from this measure will include corporations eligible for the small business deduction as well as non-profit organizations and charities.

Employers who will have qualified for both the Canada Emergency Wage Subsidy (75%) and the Temporary 3-month Wage Subsidy (10%) will receive reduced payments for the Canada Emergency Wage Subsidy (75%).

Source: Government of Canada

Employment Insurance Work-Sharing Program

Provides benefits to workers who agree to reduce their regular work hours, increasing the eligibility of Work-Sharing agreements to 76 weeks, relaxing eligibility requirements and simplifying the application process.

Source: Government of Canada

Canada Employment Insurance Benefits

Employment Insurance sickness benefits provide up to 15 weeks of income replacement to eligible claimants who are unable to work due to COVID-19, to care for a family member suffering from COVID-19, due to quarantine, or who must stay home to care for their children.

Source: Government of Canada - Employment

Temporary Aid for Workers Program - Government of Quebec in partnership with the Red Cross

This program provides financial assistance to meet the needs of employees and self-employed individuals who, due to isolation to counter the spread of the COVID-19 virus, are unable to earn their full work income and who are not eligible for another financial assistance program.

The, tax-free, lump-sum amount to be granted is $573 per week, for a period of 14 days of isolation.

The coverage period for an eligible person could be extended to a maximum of 28 days.

Source: Temporary Aid for Workers Program

Registered Retirement Income Fund

Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25%.

Source: Government of Canada

Montreal – Deferral of the second instalment of municipal taxes

The June 1, 2020 deadline has been extended to July 2, 2020.

Source: Montreal

Quebec City - Deferral of the second instalment of municipal taxes

  • May 4 payment : deferred to August 4;
  • July 3 payment : deferred to September 3;
  • September 3 deferred : deferred to November 3.

Source: Quebec City

Relief measures by Desjardins

Relief measures for businesses : facilitating credit conditions, capital moratorium, deferred payment for Desjardins credit card products and Accord D financing.

Source: Desjardins

Relief measures by the Fonds de solidarité FTQ

The Fonds offers all portfolio companies a six-month deferral on loan payments, including principal and interest.

This measure is intended to alleviate short-term financial pressure for companies in its network, which includes the Fonds régionaux de solidarité FTQ.

This temporary relief will also be implemented by the Fonds locaux de solidarité FTQ, benefitting RCMs and other organizations managing local funds.

Source: FTQ

 

Trade Measures

In order to limit economic uncertainty, the provincial government also announced on March 19, 2020 extraordinary measures, which will tie in with the federal government’s measures. In fact, considering many Quebec businesses are experiencing the global economic slowdown’s repercussions, the provincial government announced $2.5 billion in assistance for businesses facing liquidity issues associated with the COVID-19 pandemic.

These emergency assistance measures will be incorporated into existing programs through Investissement Québec, including through loans and loan guarantees of up to $50,000 for companies from all sectors of activity. Advantageous loan conditions will also be provided to help businesses deal with the pandemic. Repayment terms for existing loans issued by Investissement Québec will also be eased.

Flexibility for Outstanding Loans and Loan Guarantees

Fonds local d'investissement ("FLI") will implement easing measures relating to outstanding loans and loan guarantees.

A three-month moratorium has been introduced for the repayment (principal and interest) of loans already granted by FLI.

Interest accrued during this period will be added to the loan balance. This measure is in addition to the moratorium already in place under most investment policies in effect in the RCMs, which can be as long as twelve months.

Source: Gouvernement du Québec – Ministère de l’Économie et de l’Innovation (available in French only)

Action plan to support businesses and enterprises

Special $5 million fund for emerging and creative initiatives to deal with the pandemic from the City of Montreal.

Source: Montreal

Canada Emergency Business Account

A $40,000 loan, guaranteed by the government, interest-free for the first year.

An amount of $10,000 may be non-refundable, if certain conditions are met.

To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 per cent (up to $10,000).

Source: Government of Canada

Advisory services

BDC offers "Business Continuity Plan and Templates for Entrepreneurs".

Source: BDC

Small Business Loan Offer

Provides entrepreneurs with small business loans of up to $100,000 through a fully online application process.

Source: BDC

Purchase Order Working Capital Loans Offer

Offers purchase order working capital loans to cover up to 90% of a purchase order amount with shorter term financing options.

Source: BDC

Working capital loans of up to $2 million

Working capital loans of up to $2 million with flexible terms and deferral of repayments for up to 6 months for BDC-eligible businesses.

Source: BDC

Deferral of repayments for up to 6 months

Deferral of repayments for up to 6 months, free of charge, for existing BDC clients with a total BDC loan commitment of $1 million or less.

Source: BDC

Rate reduction

BDC offers reduced rates for new eligible loans.

Source: BDC

Concerted Temporary Action Program for Businesses

Investissement Québec offers financing for businesses suffering from a temporary lack of liquidity caused by the pandemic, in the form of a loan guarantee or loan of a minimum value of $50,000.

Source: Program Details (available in French only)

Programme actions concertées pour le maintien en emploi (PACME)

PACME aims to provide direct support to businesses and the self-employed workers by providing grants for human resource training.

Eligible beneficiaries of the program include :

  • Employers
  • Self-employed workers
  • Cooperatives
  • Non-profit organizations

Eligible expenses for the program are :

  • Salary of workers in training for a maximum of $ 25/hour
  • Trainers' fees for a maximum of $ 150/hour
  • Indirect costs for trainers
  • Indirect costs for workers in training
  • Several other costs required for training activities
  • Limit of $ 100,000/business or reduction of the subsidy to 50% if the expenses are between $ 100,000 and $ 500,000

PACME can be combined with all other measures announced by the federal and provincial governments. Ex : If a company benefits from the Canada Emergency Wage Subsidy (75%), the remaining 25% may be reimbursed by PACME.

Duration of the program : Until September 30, 2020, or until the budgetary envelope of $ 100 million has been used up.

Source: Gouvernement du Québec - PACME details (available in French only)

Fondaction - CSN Respite

Deferral, for a period of 3 months beginning March 13, 2020, of loan payments, principal and interest, for all portfolio companies.

Source: Fondaction (available in French only)

Fundraising campaign launched by Facebook

Creation of a US$100 million donation program to help small and medium-sized enterprises (SMEs) around the world whose businesses are compromised by the Coronavirus crisis.

Source: article

Over $10 billion in additional support largely targeted to small and medium-sized businesses

BDC and EDC are working with private sector lenders to coordinate financing solutions for individual businesses, including in specific sectors such as air transportation and tourism as well as the oil and gas sector.

Source: Government of Canada

Farm Credit Canada

Short-term credits for farmers and the agri-food sector to be increased.

Source: Government of Canada

 

For a summary of the measures adopted by the courts, read our article "COVID-19: What You Need to Know About Tax Disputes".

For 25 years, BCF's mission has been to support our local businesses. We understand the issues you face and our Corporate Finance and Taxation team are available to help you benefit from the resources at your disposal to minimize the financial impacts of the COVID-19 pandemic. Please do not hesitate to contact our team for support on the applicability of these newly announced measures.

[1] Nouvelles mesures pour faciliter la vie des citoyens et des entreprises, Revenu Québec   Available in French only.  [2] Mesures d'assouplissement pour les citoyens et les entreprises, Revenu Québec – Available in French only  [3] Canada’s COVID-19 Economic Response Plan :Support for Canadians and Businesses, Department of Finance Canada  [4] Soutien supplémentaire aux entreprises canadiennes pour faire face aux répercussions économiques de la COVID‑19, Ministère des Finances du Canada  [5] Additional Support for Canadian Businesses from the Economic Impact of COVID-19, Governement of Canada  [6] Canada’s COVID-19 Economic Response Plan :Support for Canadians and Businesses, Department of Finance Canada  [7] Revenu Québec : La date limite pour produire et transmettre la déclaration de revenus pour l’année d’imposition 2019 d’un particulier décédé au cours de cette année, mais avant le 1er décembre 2019, est reportée au 1er juin 2020, Revenu Québec – Available in French only  [8] « Les six principales banques canadiennes offrent des sursis de paiement », La Presse, 17 mars 2020.  [9] Canada’s COVID-19 Economic Response Plan :Support for Canadians and Businesses, Department of Finance Canada  [10] The Canada Emergency Wave Subsidy, Department of Finance Canada, April 1, 2020.  [11] If you became eligible for Employment Insurance prior to March 15th, your claim will be processed under the pre-existing Employment Insurance rules. If you became eligible for EI regular or sickness benefits on March 15th or onward, your claim will be automatically processed through the Canada Emergency Response Benefit.  [12] Royal sanction required  [13] Canada’s COVID-19 Economic Response Plan :Support for Canadians and Businesses, Government of Canada

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