New Loan Programs & Tax Deadline Extensions in Response to COVID-19 [Apr 01, 2020]
April 1, 2020
Canada Emergency Business Account and New Loan Programs for Small Businesses
While these programs are being launched on the fly and details are just beginning to come out, here is what we have as of today for all of our small business clients.
Prime Minister Justin Trudeau announced that the Canadian government will increase its wage subsidy for eligible small businesses to 75% from 10% announced earlier as part of the COVID-19 Economic Response Plan. It will be retroactive to March 15, and will cover the first $58,700 of salary up to a maximum of $847 per week for qualifying businesses up to a period of three months. To qualify, employers must demonstrate that their revenues have fallen by at least 30 per cent due to the COVID-19 pandemic. Details on this are still not certain as to what will constitute a 30% drop. However, the government confirmed that the initial subsidy of 10% will still be available to employers that don’t qualify for the 75% subsidy. During the press conference, he also announced that the Government of Canada is launching a new Canada Emergency Business Account through which banks will offer $40,000 loans which will be interest-free for the first year.
Am I eligible for the 10% Temporary Wage Subsidy?
Eligible employers are:
- Canadian-Controlled Private Corporation (incorporated) eligible to the small business deduction or non-profit organizations, registered charities; and
- Have an existing business number & payroll program account with CRA on March 18; and
- Pay salary, wages, bonuses, or other remunerations to an employee.
For salaries paid from March 18 to June 20, 2020.
How do I calculate the subsidy?
It is a 10% subsidy, so if you have 2 employees that you pay $1,500 each, every two weeks, the subsidy will be $150 * 2 = $300
What is the maximum subsidy I can receive?
Over the 90 days period, the limit is $1,375 per employee and $25,000 per employer
How do I receive the subsidy?
You can reduce your remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy. You will be able to keep a portion of your employees’ income tax instead of giving it all to CRA
For example, if you have two employees for a total bimonthly labor cost of $3,000 and you deduct $700 from their pay for the federal and provincial income tax, you will be able to remit to CRA only $400 and keep the remaining $300 for you as you have a subsidy of $300 (as calculated above).
The calculation is the following: Planed income Tax remittance – 10% subsidy = New Income Tax remittance
You cannot however reduce your remittance of Canada Pension Plan contributions (CPP) or Employment Insurance (EI) premiums.
When can I receive the subsidy?
In the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.
New Loan Programs
Canada Emergency Business Account 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, due to the economic impacts of the COVID-19 virus.
25 percent (up to $10,000) loan forgiveness: Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).
The government has also established Canada Emergency Response Benefit (CERB) that will give eligible Canadians a taxable benefit of $2,000 per month for up to four months.
Eligibility for Canada Emergency Business Account Loan:
To qualify, small businesses and not-for-profits will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.
How to Apply for Canada Emergency Business Account Loan:
Small businesses and not-for-profits should contact their financial institution to apply for these loans.
Federal and Provincial Tax Deferral Support for Canadian Businesses During COVID-19
To support Canadian businesses in the current extraordinary circumstances, the Minister of National Revenue will extend payment deadlines for GST/HST until June 30, 2020 for businesses that would normally be due between March 18, 2020 and June 30, 2020. Therefore, the following payment deadlines have been extended for businesses:
- Monthly filers for amounts collected for the February, March and April 2020 reporting periods;
- Quarterly filers for amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
- Annual filers, whose GST/HST return or instalments are due in March, April or May 2020 for amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.
Federal Tax – Individual and Corporations
Both corporation and individual federal taxes filings and payment deadlines will be extended:
- Individual tax filings have been extended to June 1, 2020 and any payments for balances owing have been extended until September 1, 2020
- Corporations tax filing deadline has been extended to June 1, 2020 if your filing deadline falls between March 18 and June 1, 2020. Otherwise, your normal six-month filing deadline will still apply. Payments (either a balance owing or an installment payment) that were due on or after March 18, will now be extended until September 1, 2020.
Provincial Tax – British Columbia
British Columbia tax filings and payment extensions:
- All tax filings and payments for PST, MRDT, tobacco tax, motor fuel tax and carbon tax have been extended until September 1, 2020
- Businesses that are required to pay Employer Health Tax in BC (businesses that have payroll over $500,00) can now defer their EHT payments until September 30, 2020
Kevin Cox, CPA
KM Cox & Company Inc.