COVID-19 Economic Response Plan

May 13, 2020
economic response plan

On March 25, 2020, the federal government enacted Bill C-13, the COVID-19 Emergency Response Act, aimed at stabilizing the economy during the COVID-19 outbreak. The Act provides further details and clarification of the measures announced on March 18, 2020. Since then, additional announcements were made with respect to the federal government’s COVID-19 Economic Response Plan for which legislation has not yet been released. Below is a summary of key measures that impact our industry.

Support for Individuals

Employment insurance

For Canadians without paid sick leave (or similar workplace accommodation) who are ill, quarantined or forced to stay home to care for children, the government is: 

  • Waiving the one-week waiting period for individuals in imposed quarantine who claim Employment Insurance (EI) sickness benefits. This temporary measure is in effect as of March 15, 2020.
  • Waiving the requirement to provide a medical certificate to access EI sickness benefits.

Canada Emergency Response Benefit (CERB)

The CERB replaces the Emergency Care and Emergency Support Benefits originally announced.

The CERB will provide a payment of $2,000 for a four-week period (equivalent to $500 a week) for up to 16 weeks for workers who lose their income as a result of COVID-19. It will be available for Canadians who have lost their job or are facing reduced work hours, including seasonal or regular workers who have exhausted their EI benefits and are unable to find a job because of COVID-19.

The designated online portal started accepting applications on April 6, 2020. According to the Canada Revenue Agency (CRA) website the benefit is available to workers:

  • Residing in Canada, who are at least 15 years old;
  • Who have stopped working because of reasons related to COVID-19 or are eligible for Employment Insurance regular or sickness benefits or have exhausted their Employment Insurance regular benefits or Employment Insurance fishing benefits between December 29, 2019 and October 3, 2020;
  • Who had employment and/or self-employment income of at least $5,000 in 2019 or in the 12 months prior to the date of their application;
  • Who have not quit their job voluntarily.

In addition, according to the CRA website, when submitting the applicant's:

  • First claim, the applicant cannot have earned more than $1,000 in employment and/or self-employment income for 14 or more consecutive days within the four-week benefit period of the claim.
  • Subsequent claims, the applicant cannot have earned more than $1,000 in employment and/or selfemployment income for the entire four-week benefit period of the new claim.

The following conditions also exist:

  • The CERB will be available for employees, contract workers and self-employed workers (i.e., sole proprietorships) regardless of whether they are normally eligible for EI or not.
  • The CERB will be available for each four-week period starting from March 15, 2020 to October 3, 2020, to a maximum of 16 weeks.
  • The CERB received will be taxable to the recipient for 2020.
  • Where the government determines that an individual has received the CERB in error, or received more than what they were entitled to, the erroneous or excess amount will need to be repaid.

More information can be found:

Goods and Services Tax Credit

For low- and modest-income families, the government is providing a one-time special payment by early May through the Goods and Services Tax credit (GSTC). This measure will double the maximum annual GSTC payment amounts for the 2019-20 benefit year. The maximum one-time payment will be $443 for a single individual and $580 for couples.

Canada Child Benefit

For families with children, the government is increasing the maximum annual Canada Child Benefit (CCB) amounts up to $300 per child for the 2019-20 benefit year with their regular May 2020 payment.

Canadian Income Tax Filing and Payment Deadlines

The following deadlines are available on the Canada Revenue Agency (CRA) website:

Taxpayer Filing Deadline Payment Deadline
Individual June 1, 2020 (extended) September 1, 2020 (extended) - includes June 15, 2020 installment
Self-employed June 15, 2020 (unchanged)
Trusts (with Dec. 31, 2019 year-end) May 1, 2020 (extended) September 1, 2020 (extended) – includes June 15, 2020 installment
Trusts (with April or May filing date) June 1, 2020 (extended)
Information trusts (i.e. T1135 Foreign Income Verification Statement) June 1, 2020 (extended) N/A

U.S. Income Tax Filing and Payment Deadlines

The deadline to file 2019 federal U.S. personal tax returns has been extended to July 15, 2020. Taxpayers can also defer federal income tax payments due on April 15, 2020 to July 15, 2020.

Reduction to Registered Retirement Income Fund (RRIF) Minimum Payments for 2020

Required minimum RRIF payments have been reduced by 25% for 2020 to provide flexibility for seniors, and particularly those concerned that they would have to liquidate RRIF assets to meet minimum withdrawal requirements. Locked-in plans are subject to the same tax legislation as registered plans and the changes will also apply to life income funds (LIFs).

Income taxes are withheld at source where amounts are withdrawn from a RRIF in excess of the minimum amount. Under the new rules, investors can choose to withdraw amounts ranging between the reduced minimum and the unreduced minimum (i.e. the amount that would have been the minimum before these rules changed). For example, assume an investor’s RRIF minimum for 2020, before the new rules (i.e. the “unreduced minimum”) was $1,200. The “reduced minimum” is 75% of that amount, or $900. If total RRIF withdrawals for 2020 fall within $900 and $1,200, they will not be subject to withholdings at source.

Investors who have already withdrawn more than the reduced minimum for 2020 are not permitted to re-contribute an amount up to the 25% reduction to their RRIF. Although the recently passed legislation does not allow for this, the government is regularly making announcements and changes to their COVID-19 Economic Response Plan so the ability to re-contribute may become available in the future.

More information can be found:

Canada Emergency Student Benefit (CESB)

On April 22, 2020 the government announced the CESB that will be available to qualifying post-secondary students from May to August 2020. The CESB will be $1,250 per month and $1,750 per month for students with dependents or disabilities. Details and legislation with respect to this announcement, including qualifying criteria, have not been released as of May 5, 2020.

Additional support is available to post-secondary students through a six-month interest-free moratorium on the repayment of Canada Student Loans, changes to the Canada Summer Jobs program, funding for 76,000 new jobs for industries needing support and front-line workers, $291 million in additional grants for graduate students, and payments for volunteer students helping in the fight against COVID-19.

Mortgage default management tools

The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers offer tools to lenders that can assist homeowners, on a case-by-case basis, who may be experiencing financial difficulty. These include payment deferral, loan re- amortization, capitalization of outstanding interest arrears and other eligible expenses and special payment arrangements. The government, through CMHC and other mortgage insurers, is providing increased flexibility for homeowners facing financial difficulties by permitting lenders to allow payment deferral for up to six months.

Other benefits

In addition, the government is proposing targeted help by:

  • Providing $305 million to address immediate needs in First Nations, Inuit, and Métis Nation communities.
  • Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness during the COVID-19 pandemic.
  • Supporting women and children fleeing violence by providing up to $50 million to women’s shelters and sexual assault centres.
  • Providing $100 million to national, regional, and local organizations across Canada to improve access to essential food support.
  • Providing $7.5 million in funding to Kids Help Phone to provide young people with mental health support.
  • Working with provinces and territories to top up the salaries for essential service employees earning less than $2,500 per month.
  • Investing $350 million to support vulnerable Canadians through charities and non-profit organizations that deliver essential services to those in need.
  • Contributing $9 million through the United Way for local organizations to support practical services to Canadian seniors.

Support for Businesses

Temporary wage subsidy

To support businesses and help prevent layoffs, the government will provide eligible employers a temporary wage subsidy for a period of three months (from March 18, 2020 to June 19, 2020). 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. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration; however, remittances relating to CPP and EI will still need to be remitted. Eligible employers benefiting from this measure must employ at least one individual in Canada, have a CRA payroll number on March 18, 2020 and will include:

  • Corporations eligible for the small business deduction
  • Individuals other than a trust
  • Partnerships, all the members of which are described in (i) to (iii) or (v)
  • Non-profit organizations
  • Charities

More information can be found:

Canada Emergency Wage Subsidy

To help Canadians and businesses, the government is proposing to introduce the Canada Emergency Wage Subsidy (CEWS) of 75% for qualifying businesses, for up to three months, retroactive to March 15, 2020. The legislation for the CEWS has not yet been released. However, some of the details released by the government are as follows: 

  • The program will be in place for a 12-week period, from March 15 to June 6, 2020.
  • Eligible employers who suffer a drop in gross revenues of at least 15% in March, 30% in April or 30% in May, would be able to access the subsidy.
  • To measure the decline in revenue, an employer can compare the current month to the same month last year, e.g., March 2020 revenue vs. March 2019 revenue, if applicable, or compare the current month to an average of January and February 2020, e.g., March 2020 revenue vs. the average revenue for Jan/Feb 2020.
  • Where an employer has a choice in how to measure the decline in revenue, they must choose the same method throughout the 12-week period.
  • Eligible employers would include employers of all sizes and across all sectors of the economy, with the exception of public bodies including municipalities and local governments, Crown corporations, wholly owned municipal corporations, public universities, colleges, schools and hospitals.
  • The subsidy amount for a given employee on eligible remuneration paid for the period between March 15 and June 6, 2020 would be the greater of:
    • 75 per cent 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 per cent of the employee's pre-crisis weekly remuneration, whichever is less.
  • A special rule will apply to employees who do not deal at arm's length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of the lesser of $847 per week and 75 per cent of the employee's pre-crisis weekly remuneration. The subsidy would only be available in respect of non-arm's length employees employed prior to March 16, 2020.
  • Eligibility for the CEWS of an employee's remuneration will be available to employees other than those who have been without remuneration for 14 or more consecutive days in the eligibility period, i.e., from March 15 to April 11, from April 12 to May 9, or from May 10 to June 6.
  • For employers that are eligible for both the CEWS and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period.
  • For employers and employees that are participating in a Work-Sharing program, EI benefits received by employees through the Work-Sharing program will reduce the benefit that their employer is entitled to receive under the CEWS.
  • All employers would be expected to at least make best efforts to top up salaries to bring them to pre-crisis levels.
  • Eligible employers will be able to access the CEWS by applying through a CRA online portal starting April 27.
  • The wage subsidy received by an employer would be considered government assistance and be included in the employer's taxable income.

Those organizations that do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the temporary wage subsidy of 10% of remuneration paid as described above. 

More information can be found:

Income Tax Filing and Payment Deadlines

Taxpayer Filing Deadline Payment Deadline
Corporation June 1, 2020 (extended) – for corporations that would otherwise have a filing due date after March 18 and before June 1, 2020 September 1, 2020 (extended) -applies to balances and instalments under Part I of the Income Tax Act due on or after March 18 and before September 1, 2020
Charities December 31, 2020 (extended) – for charities with form T3010 due between March 18 and December 31, 2020 N/A
Partnerships May 1, 2020 (extended) N/A
Payroll Dependant on employer remitter type (unchanged) Dependant on employer remitter type (unchanged)
NR4 Information Return May 1, 2020 (extended) 15th of each month following month non-resident paid (unchanged)
Other Information Returns June 1, 2020 (extended) – for information returns that would otherwise be due after March 18, 2020 and before June 2020 N/A

GST/HST and Income Tax Audits

CRA 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, CRA will temporarily suspend audit interaction with taxpayers and representatives.

GST/HST Filing and Payment Deadlines

The CRA announced that it will allow all businesses to defer, until June 30, 2020, any GST/HST payments that became owing on or after March 27, 2020 and before June 30, 2020. The GST/HST return filing deadline is unchanged; however, the CRA won't impose penalties where a return that was due to be filed between March 27, 2020 and June 30, 2020 is filed by June 30, 2020.

Canada Emergency Business Account (CEBA)

The CEBA will provide loans of up to $40,000 for businesses with 2019 payroll between $20,000 and $1,500,000. Where 75% of the loan is repaid by December 31, 2022, the remaining 25% will be forgiven. The loan is interest-free until December 31, 2022 after which it becomes a five-year term loan at 5% annual interest.

More information can be found:

Business Credit Availability Program (BCAP)

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 medium-sized businesses. BDC is working with financial institutions to co-lend term loans for operational cash flow requirements of up to $6.25 million. EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million.

Canada Emergency Commercial Rent Assistance (CECRA)

The federal government reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19.

The program will provide forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.

The loans will be forgiven if the mortgaged property owner* agrees to reduce the small business tenant’s rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.

Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations.

It is expected that CECRA will be operational by mid-May, and further details will be announced soon. 

More information can be found:

For those property owners who do not have a mortgage, an alternative mechanism will be implemented. Further information will be outlined in the near future.

Other Benefits

  • Providing $287 million to support rural businesses and communities by providing access to capital through the Community Futures Network.
  • Investing $250 million to assist innovative, early-stage companies unable to access other COVID-19 business supports through the Industrial Research Assistance Program (IRAP).
  • Providing $20 million in support for Futurepreneur Canada to continue supporting young entrepreneurs across Canada who are facing challenges due to COVID-19.
  • Providing $675 million for financing support for small and medium-sized businesses unable to access other COVID-19 business support, through Canada’s Regional Development Agencies.
  • Providing $307 million in funding to help small and medium-sized Indigenous businesses, and to support Aboriginal Financial Institutions that offer financing to these businesses.

How We Can Help

Your Assante advisor can help you assess the impact of these proposals on your personal finances or business affairs and show you ways to take advantage of their benefits or ease their impact.

Additional resources

The summary above was originally published on March 19, 2020 following the release of Canada’s COVID-19 Economic Response Plan. It has been updated to reflect relevant changes to these measures as of May 5, 2020. All attempts have been made to include the most relevant information impacting individuals and businesses. However, for further announcements please refer to the federal government website.

This communication is published by Assante Wealth Management (Canada) Ltd. (“AWM”) as a general source of information only.  It should not be construed as providing specific tax, accounting, legal or investment advice, and should not be relied upon as such.  Professional advisors should be consulted prior to acting on the basis of any information provided herein.  AWM and its affiliates will not be responsible in any manner for direct, indirect, special or consequential damages, howsoever caused, arising out of the use of this communication.  

Facts and data provided herein are believed to be reliable as at the date of publication, however AWM cannot guarantee that they are accurate or complete or that they will remain current at all times. 

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