Revised April 6, 2020
The following is our revised summary to inform our clients, friends and business associates with recent information and government initiatives that may help businesses and individuals cope with the outcomes from the COVID-19 pandemic. In particular, this version has been updated to include further details of the Canada Emergency Wage Subsidy as well as to reiterate the details of the previously announced 10% wage subsidy by the federal government. While our goal is to monitor the news and release relevant information as it becomes available, it is best to check the relevant government websites to get the most updated information.
Employment Standards Amendment Act (Infectious Disease Emergencies), 2020
Job-protected leave to employees unable to work for the following reasons:
- The employee is under medical investigation, supervision or treatment for COVID-19.
- The employee is acting in accordance with an order under the Health Protection and Promotion Act.
- The employee is in isolation or quarantine.
- The employee is acting in accordance with public health information or direction.
- The employer directs the employee not to work.
- The employee needs to provide care to a person for a reason related to COVID-19 such as a school or day-care closure.
The legislation also makes it clear that an employee will not be required to provide a medical note if they take the leave. The measures are retroactive to January 25, 2020, the date that the first presumptive COVID-19 case was confirmed in Ontario.
Mortgage Payment Deferral
Effective immediately, Bank of Montreal, CIBC, National Bank of Canada, RBC Royal Bank, Scotiabank, TD Bank, and other Canadian financial institutions have announced relief on a case-by-case basis of up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products including credit card payments. For details and applicability, please contact your applicable financial institution.
Employment Insurance Support
For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to stay home to care for children:
- Waiver of the one-week waiting period for those individuals in imposed quarantine that laim Employment Insurance (EI) sickness benefits. This temporary measure is in effect as of March 15, 2020.
- Waiver of the requirement to provide a medical certificate to access EI sickness benefits.
Canada’s COVID-19 Economic Response Plan
Business Financial Support
Canada Emergency Wage Subsidy – Generally, eligible employers will be provided a temporary wage subsidy equal to 75% for remuneration paid from March 15, 2020 to June 6, 2020. Draft legislation has not yet been released for this program, and as such, the draft legislation may make changes to the program from its original announcements.
- Eligibility – Eligible employers include individuals, taxable corporations, and partnerships, as well as non-profit organizations and registered charities. Public bodies such as municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals are not eligible.
- Precondition – Eligible employers must have suffered a drop of at least 30% their revenue. An employer’s revenue for this purpose would be its revenue from its business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.
Employers must also attest that they are doing “everything they can” to pay the remaining 25% of salary but it will not be a requirement. Further clarification will hopefully be provided in the draft legislation.
- Eligible Wage Periods – In establishing a link between the revenue decline and the wage subsidy, there are three eligible wage periods in the calculation of a claim:
- Period 1: For wages paid from March 15 to April 11, the employer will look at year over year revenue declines for the month of March 2019 compared to March 2020.
- Period 2: For wages paid from April 12 to May 9, the employer will look at year over year revenue declines for the month of April 2019 compared to April 2020.
- Period 3: For wages paid from May 10 to June 6, the employer will look at year over year revenue declines for the month of May 2019 compared to May 2020.
- Eligible Remuneration – Eligible Remuneration includes salary, wages, and other remuneration. These are amounts for which employers would generally be required to withhold or deduct amounts to remit to the Receiver General on account of the employee’s income tax obligation. However, it does not include severance pay, or items such as stock option benefits or the personal use of a corporate vehicle or dividends paid to a shareholder.
Any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the 75% Canada Emergency Wage Subsidy in that same period.
- Subsidy Calculation – The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
- 75% of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
- the amount of remuneration paid, up to a maximum benefit of $847 per week or 75% of the employee’s pre-crisis weekly remuneration, whichever is less. No guidance has been provided on how to calculate the “pre-crisis weekly remuneration”. This should be clarified once the draft legislation is released.
Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees. There would be no overall limit on the subsidy amount that an eligible employer may claim.
A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the lower of the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of the lower of $847 per week or 75% of the employee’s pre-crisis weekly remuneration.
Any subsidy received will be taxable income to the employer as income in the year received.
- Application – Eligible employers would be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers must reapply every month. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details about the application process should be made available shortly. The government has indicated it expects to issue subsidy payments in approximately 6 weeks.
- Penalties for Misuse – In order to maintain the integrity of the program, the employer would be required to repay amounts paid under the Canada Emergency Wage Subsidy if they do not meet the eligibility requirements and pay their employees accordingly. Penalties may apply in cases of fraudulent claims. In addition, anti-abuse rules will be proposed to ensure that the subsidy is not inappropriately obtained and to ensure that employees are paid the amounts they are owed.
10% Temporary Wages Subsidy Program – Announced back on March 18, 2020, the Temporary Wages Subsidy Program provides wage subsidies of 10% of remuneration paid during the period from March 18 to June 19, 2020. The legislation indicates that several amounts determining the available subsidy will be prescribed by regulation, and those regulations are not in the draft legislation.
- Eligibility – Employers benefiting from this measure are individuals (but not trusts), Canadian-controlled private corporations (CCPC’s) eligible for the small business deduction, partnerships, as well as non-profit organizations and charities. CCPC’s are only eligible for the subsidy if it has 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. The employer must also have a registered business number and a payroll remittance account on March 18, 2020
Subsidy Calculation – The subsidy will be equal to the least of three amounts, as follows:
- $25,000 for each employer, and CRA has indicated that this amount is per employer, and is not required to be shared between related or associated employers;
- 10% of remuneration paid to eligible employees during the period from March 18, 2020 to June 19, 2020; or
- the number of eligible employees employed during the period from March 18, 2020 to June 19, 2020 multiplied by $1,375.
The CRA clarified that the subsidy can only be applied against income tax withholdings that are to be remitted. An employer cannot reduce remittances of Canada Pension Plan contributions or Employment Insurance premiums.
Any subsidy received will be taxable income to the employer as income in the year received.
- Application – No formal application process is required. Any subsidy to which the employer is entitled is deemed to have been remitted as a payroll remittance for income taxes withheld from the employees’ remuneration. In other words, source deduction remittances for income tax, but not for CPP or EI, can be reduced for the available subsidy, providing an immediate cash flow benefit to the employer.
Access to Credit – Business Credit Availability Program (BCAP) – 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 medium-sized businesses. Under this program, BDC and EDC will enhance their cooperation with private sector lenders to coordinate financing and credit insurance solutions for Canadian businesses. To apply, businesses in need of credit should contact their financial institutions.
Canada Emergency Business Account (NEW) – A new loan program, that will be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC). Loans of up to $40,000 – interest-free for the first year according to the announcement from the Prime Minister – will be provided to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced. 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). Additional details on accessing this program will be available soon.
Loan Guarantee for Small and Medium-Sized Enterprises (NEW) – Export Development Canada is working with financial institutions so that they can issue new operating credit and cash flow term loans of up to $6.25 million to SMEs which will be 80% guaranteed by EDC and to be paid within one year. Businesses should contact their financial institution to determine whether this program is a good fit for their needs.
Co-Lending Program for Small and Medium-Sized Enterprises (NEW) – The Co-Lending Program will bring the Business Development Bank of Canada (BDC) together with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements. Through the Co-Lending Program, eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program. Businesses should contact their financial institution to determine whether this program is a good fit for their needs.
Partnership Returns Deferral – Partnership returns and slips are now deferred until May 1, 2020.
Corporate Tax Deferral – The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts and installments that become owing on or after March 18, 2020 and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.
Deferral of Sales Tax Remittance and Customs Duty Payments – Businesses, including self-employed individuals, may defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports. The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year. 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 Canada Revenue Agency and the Canada Border Services Agency as early as the end of this month.
Audit Suspensions – The Canada Revenue Agency 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. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.
Individual Financial Support
Canada Child Benefit (CCB) – Increasing the maximum annual Canada Child Benefit (CCB) payment for the 2019-20 benefit year by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment.
GST Credit – The federal government will be providing a one-time special payment by early May 2020 to low and modest-income families through the Goods and Services Tax credit (GSTC) which will double the maximum annual GSTC payment amounts for the 2019-20 benefit year. The average boost to income for those benefitting from this measure will be close to $400 for single individuals and close to $600 for couples. Payments will only be sent to those families that are eligible and no applications are required.
Personal Tax Filings & Payments – Filing deadline income tax returns for individuals (but not trusts) are deferred to June 1, 2020 by the Canada Revenue Agency. The new due date for taxes payable related to the 2019 T1 tax filing is now August 31, 2020. For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.
Canada Emergency Response Benefit (CERB) – This new benefit replaces the previously announced Emergency Care Benefit and Emergency Support Benefit by the federal government. On April 6, 2020, the federal government announce further changes to come for the CERB program to account for workers who have had their hours substantially reduced by COVID-19, but who have not yet ceased working. Details of these changes are upcoming. Currently, a taxable benefit of $500 a week for up to 16 weeks will be available to:
- workers who stopped working due to COVID-19 and do not have access to paid leave or other income support;
- workers who are sick, quarantined, or taking care of someone who is sick with COVID-19;
- working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures;
- workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work; and
- wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance;
A “worker” is defined as a person who is at least 15 years of age, who is resident in Canada and who, for 2019 or in the 12-month period preceding the day on which they make an application for CERB, has a total income of at least $5,000 — or, if another amount is fixed by regulation, of at least that amount — from the following sources: (A) employment; (B) self-employment; (C) benefits paid to the person under certain sections of the Employment Insurance Act; and (D) allowances, money or other benefits paid to the person under a provincial plan because of pregnancy or in respect of the care by the person of one or more of their new-born children or one or more children placed with them for the purpose of adoption.
Once it is established, a person is a “worker”, he or she is eligible for the CERB if:
- the worker, whether employed or self-employed, ceases working for reasons related to COVID-19 for at least 14 consecutive days within the four-week period in respect of which they apply for the payment, and the worker does not need to be laid off; and
- they do not receive, in respect of the consecutive days on which they have ceased working,
- subject to the regulations, income from employment or self-employment,
- benefits, pursuant to the Employment Insurance Act,
- allowances, money or other benefits paid to the worker under a provincial plan because of pregnancy or in respect of the care by the worker of one or more of their new-born children or one or more children placed with them for the purpose of adoption, or
- any other income that is prescribed by regulation.
An employed worker would not be eligible if they quit their job voluntarily. The worker is only eligible if he/she meets one of the reasons above. A worker may apply for the CERB even if they are eligible for Employment Insurance regular or sickness benefits.
The CERB application is accessible through a secure web portal. Applicants will also be able to apply via an automated telephone line or via a toll-free number. Canadians would begin to receive their CERB payments within 10 days of application. The CERB would be paid every four weeks and be available from March 15, 2020 until October 3, 2020.
If eligible for the CERB, workers will receive $500 per week, regardless of what they may have been eligible to receive through EI. Canadians who are already receiving EI regular and sickness benefits would continue to receive their benefits and should not apply to the CERB. If their EI benefits end before October 3, 2020, they could apply for the CERB once their EI benefits cease if they are unable to return to work due to COVID-19. Canadians who have already applied for EI or became eligible for EI prior to March 15th will have their claim processed under the pre-existing EI rules. Canadians who are eligible for EI regular and sickness benefits would still be able to access their normal EI benefits, if still unemployed, after the 16-week period covered by the CERB.
Support for Seniors – Reducing the required minimum withdrawals from RRIFs by 25% for 2020 in recognition of volatile market conditions.
Support for Students – 6-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
Ontario’s Action Plan: Responding to COVID-19
Business Financial Support
- Deferral of personal and corporate tax payments for the next 5 months without penalty and interest until September 1, 2020. It should be noted that the Ontario measures include any “provincially administered taxes” and not just income tax.
- Workplace Safety and Insurance Board (WSIB) premiums will also be able to be deferred for 6 months. A lump sum will likely be required by the end of September 2020.
- Employer Health Tax exemption will be temporarily increased to $1 million in 2020. This will provide businesses with immediate relief as they qualify for this exemption. This is expected to save businesses $355 million.
- Proposed Regional Opportunities Investment Tax Credit aimed to support regions lagging in employment growth. The credit will be made available to corporations, but details and eligibility are expected to be announced in the near future.
Individual Financial Support
- To subsidized increased costs from school and daycare closures, parents with children 12 and under will receive $200 per child and $250 per child with special needs.
- Low income seniors will receive double their payments under the Guaranteed Annual Income System for the next 6 months.
- Electricity prices for residential, farm and small business time-of-use customers to be set at the lowest rate, known as the off-peak price, 24 hours a day for 45 days.
- Direct support to families for their energy bills by expanding eligibility for the Low-income Energy Assistance Program (LEAP) and ensuring that their electricity and natural gas services are not disconnected for nonpayment.
- Deferral of payment of education property taxes to school boards to give municipalities further flexibility to provide residents and businesses with property tax deferrals.
- OSAP (student loan) payments suspended until September 30, 2020.
- Emergency childcare services to support parents working on the front line such as healthcare workers, police, firefighters, and correctional officers.
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