On April 7, 2022, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable, to the House of Commons.

No changes were made to personal or corporate tax rates, nor to the inclusion rate on taxable capital gains. Some highlights include:

• Personal Measures
  • Several proposals target housing affordability. A Tax-Free First Home Savings Account and a refundable Multigenerational Home Renovation Tax Credit will be introduced. Existing home-related tax credits will also be enhanced.
  • Residential real estate sales within a year of purchase will generally be fully taxable, not capital gains and not eligible for the principal residence exemption.
• Business Measures
  • Access to the small business deduction will be enhanced for corporations with taxable capital between $10 million and $50 million.
  • Anti-avoidance measures targeting private corporations attempting to avoid the refundable tax regime for investment income will be introduced.
  • Tax benefits for flow-through shares will be enhanced for critical mineral exploration and removed for oil, gas and coal.
• International Measures
  • Digital platform operators will be required to disclose details of the activities of Canadian participants in the digital economy.
• Sales and Excise Tax
  • All new residential property assignment sales will be subject to GST/HST.
  • An excise tax regime will be introduced for vaping products.
• Retirement Plans
  • The fair market value of RRSP and RRIF assets will be provided to CRA annually.
• Charities Measures
  • The disbursement quota will be increased for many charities.
  • New rules will be introduced to allow charities to work with other organizations to fulfill their charitable objectives.
• Previously Announced Measures
  • Intention to proceed with previously announced measures, such as the immediate expensing CCA provisions, the luxury tax, requirements for electronic interaction with CRA and a full review of the employment insurance system.

The Numbers

The Government’s fiscal position includes the following projected surplus/deficit:

A. Personal Measures

Tax-Free First Home Savings Account (FHSA)

Budget 2022 proposes to create the tax-free FHSA to help first-time home buyers save up to $40,000 for their first home. Contributions to an FHSA would be deductible (like an RRSP), and income earned in an FHSA and qualifying withdrawals from an FHSA made to purchase a first home would be non-taxable (like a TFSA).

The lifetime limit on contributions would be $40,000, subject to an annual contribution limit of $8,000. Unused annual contribution room would not be carried forward. Individuals would also be allowed to transfer funds from an RRSP to an FHSA tax-free, subject to the $40,000 lifetime and $8,000 annual contribution limits.

Withdrawals for purposes other than to purchase a first home would be taxable. However, an individual could transfer funds from an FHSA to an RRSP (at any time before the year they turn 71) or a RRIF on a non-taxable basis. Transfers would not reduce, or be limited by, the individual’s available RRSP room. Withdrawals and transfers would not replenish FHSA contribution limits. Individuals would not be permitted to make both an FHSA withdrawal and a home buyers’ plan withdrawal in respect of the same qualifying home purchase.

If an individual has not used the funds in their FHSA for a qualifying first home purchase within 15 years of opening an FHSA, their FHSA would have to be closed. Any unused funds could be transferred into an RRSP or RRIF or would otherwise have to be withdrawn on a taxable basis.

Eligibility

Individuals eligible to open an FHSA must be at least 18 years of age and resident in Canada. In addition, they must not have lived in a home that they or their spouse owned at any time in the year the account was opened or the preceding four calendar years.

Effective Date

The government would work with financial institutions to allow individuals to open an FHSA and start contributing in 2023.

Home Buyers’ Tax Credit

First-time home buyers can obtain up to $750 in tax relief as a non-refundable tax credit by claiming this credit. Budget 2022 proposes to double the Home Buyers’ Tax Credit amount, such that tax relief of up to $1,500 can be accessed by eligible home buyers. This measure would apply to acquisitions of a qualifying home made on or after January 1, 2022.

Home Accessibility Tax Credit

The Home Accessibility Tax Credit is a non-refundable tax credit that provides relief of up to $1,500 on eligible home renovations (15% of expenses of up to $10,000) to make the dwelling more accessible to seniors or those eligible for the Disability Tax Credit that reside in the property. Budget 2022 proposes to double the annual expense limit to $20,000, such that the maximum non-refundable tax credit would be $3,000. This measure would apply to expenses incurred in the 2022 and subsequent taxation years.

Multigenerational Home Renovation Tax Credit

Budget 2022 proposes a new refundable tax credit to support constructing a secondary suite for an eligible person to live with a qualifying relation. An eligible person would be a senior (65+ years of age at the end of the tax year when the renovation was completed) or an adult (18+ years of age) eligible for the disability tax credit. A qualifying relation would be 18+ years of age and a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person (which includes the spouse or common-law partner of one of those individuals).

This tax credit would provide tax relief of 15% on up to $50,000 of eligible expenditures, providing a maximum benefit of $7,500.

Qualifying Renovation

The renovation must allow the eligible person to live with the qualifying relation by establishing a secondary unit (which must have a private entrance, kitchen, bathroom facilities and sleeping area). The secondary unit could be newly constructed or created from an existing living space that did not already meet the requirements to be a secondary unit. Relevant building permits for establishing a secondary unit must be obtained, and renovations must be completed in accordance with the laws of the jurisdiction in which the eligible dwelling is located.

One qualifying renovation would be permitted to be claimed in respect of an eligible person over their lifetime.

The credit would be claimed in the year that the qualifying renovation passes a final inspection, or proof of completion of the project according to all legal requirements of the jurisdiction in which the renovation was undertaken is otherwise obtained.

Eligible Expenses

Eligible expenses would include the cost of labour and professional services, building materials, fixtures, equipment rentals and permits. Items such as furniture and items that retain a value independent of the renovation (such as construction equipment and tools) would not qualify for the credit.

Goods or services provided by a person not dealing at arm’s length with the claimant would not be eligible unless that person is registered for GST/HST. All expenses must be supported by receipts.

Expenses would not be eligible for this credit if claimed as a medical expense tax credit and/or home accessibility tax credit.

Eligible Claimants

The credit may be claimed by the eligible person, their spouse, or a qualifying relation that resides in or intends to reside in the dwelling within 12 months of the renovation. A qualifying relation that owns the dwelling can also make a claim.

Where one or more eligible claimants claim in respect of a qualifying renovation, the total of all amounts claimed for the renovation must not exceed $50,000.

Eligible Dwelling

An eligible dwelling must be owned by the eligible person, their spouse, or a qualifying relation. Within twelve months of the renovation, the eligible person and the qualifying relation must also ordinarily reside or intend to reside in the property.

Effective Date

This measure would apply for the 2023 and subsequent taxation years, in respect of work performed and paid for and/or goods acquired on or after January 1, 2023.

Residential Property Flipping Rule

The government is concerned that taxpayers are inappropriately reporting gains on the disposition of real estate acquired for resale at a profit. In these cases, the profit is fully taxable as business income (100% taxed), and not a capital gain (50% taxed, and potentially eligible for the principal residence exemption).

Budget 2022 proposes to introduce a new rule that all gains arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be business income.

The new deeming rule would not apply if the disposition related to one of the life events listed below:

• Death: due to, or in anticipation of, the death of the taxpayer or a related person;
• Household addition: due to, or in anticipation of, a related person joining the taxpayer’s household or the taxpayer joining a related person’s household (e.g. birth of a child, adoption, care of an elderly parent);
• Separation: due to the breakdown of a marriage or common-law partnership;
• Personal safety: due to a threat to the personal safety of the taxpayer or a related person, such as the threat of domestic violence;
• Disability or illness: due to a taxpayer or a related person suffering from a serious disability or illness;
• Employment change: for the taxpayer or their spouse or common-law partner to work at a new location or due to an involuntary termination of employment. In the case of work at a new location, the taxpayer’s new home must be at least 40 kms closer to the new work location;
• Insolvency: due to insolvency or to avoid insolvency; and
• Involuntary disposition: a disposition against someone’s will, for example, due to expropriation or the destruction or condemnation of the taxpayer’s residence due to a natural or man-made disaster.

Properties held for more than 12 months, or meeting one of the exceptions noted above, would continue to generate either business income or a capital gain on the disposition, depending on whether the property was acquired for the purpose of resale at a profit (business income) or was acquired for some other purpose (capital gain). While this measure was reflected as a “personal income tax measure,” it is unclear whether the deeming rule will also apply to corporations and other taxpayers.

The measure would apply in respect of residential properties sold on or after January 1, 2023. The government indicates that there will be a consultation when the legislation is drafted.

Labour Mobility Deduction for Tradespeople

Budget 2022 proposes a deduction of up to $4,000/year to recognize certain travel and relocation expenses of workers in the construction industry.

An eligible individual would be a tradesperson or an apprentice who temporarily relocates to enable them to obtain or maintain employment under which the duties performed are temporary in a construction activity at a particular work location. Prior to the relocation, they must also ordinarily reside in Canada, and during the relocation period, at temporary lodging in Canada near that work location.

The temporary lodging must be at least 150 kms closer than the ordinary residence to the particular work location. The particular work location must be located in Canada, and the temporary relocation must be for at least 36 hours. Eligible expenses would include reasonable amounts for:

• temporary lodging for the eligible individual near the particular work location; and
• transportation and meals for the individual for one round trip between the temporary lodging and where the individual ordinarily resides.

The maximum deduction would be capped at 50% of the worker’s employment income from construction activities at the particular work location in the year. Amounts could be claimed in the tax year before or after the year they were incurred, provided they were not deductible in a prior year.

The individual’s ordinary residence must remain available to them during the period that they are in the temporary lodging.

Expenses for which the individual received non-taxable financial assistance could not be claimed. Amounts claimed under this deduction would not be eligible under the existing moving expense deduction and vice versa.

This measure would apply to the 2022 and subsequent taxation years.

Medical Expense Tax Credit (METC) for Surrogacy and Other Expenses

Budget 2022 proposes to expand access to the METC in cases where an individual relies on a surrogate or a donor to become a parent. Medical expenses paid by the taxpayer, or the taxpayer’s spouse or common-law partner, with respect to a surrogate mother or donor would be eligible for the METC, whereas previously they would generally not have been eligible. For example, expenses paid by the intended parent to a fertility clinic for an in vitro fertilization procedure with respect to a surrogate mother or for hormone medication for an ova donor would be eligible for the METC.

Budget 2022 proposes to allow reimbursements paid by the taxpayer to a patient to be eligible for the METC, provided that the reimbursement is for an expense that would generally qualify under the credit. For example, the METC could be available for reimbursements paid by the taxpayer for expenses incurred by a surrogate mother with respect to an in vitro fertilization procedure or prescription medication related to their pregnancy.

Budget 2022 also proposes to allow fees paid to fertility clinics and donor banks to obtain donor sperm or ova to be eligible under the METC. Such expenses would be eligible where the sperm or ova are acquired for use by an individual to become a parent.

All expenses claimed under the METC would be required to be incurred in Canada and in accordance with the Assisted Human Reproduction Act and associated regulations.

These measures would apply to expenses incurred in the 2022 and subsequent taxation years.

Amendments to the Children’s Special Allowances Act and to the Income Tax Act

Budget 2022 proposes several amendments to ensure that the Children’s Special Allowance, the Canada Child Benefit and the Canada Workers Benefit amount for families are appropriately directed in situations involving Indigenous governing bodies. These measures would be retroactive to 2020.

Other Personal Measures

Budget 2022 also proposes a number of measures for individuals for which few details were provided, including the following:

• Dental care would be funded, starting for children under age 12 in 2022, expanding to children under age 18, seniors and disabled individuals in 2023, with full implementation by 2025. Full coverage would be provided for families with under $70,000 of annual income and no coverage would be provided for families with income of $90,000 or more.
• The government intends to continue working towards a universal national pharmacare program, including tabling a Canada Pharmacare bill and working to have it passed by the end of 2023.
• A one-time $500 payment would be made to those facing housing affordability challenges. Timing, eligibility and delivery method are to be announced at a later date.
• The Incentives for Zero-Emission Vehicles program that has offered purchase incentives of up to $5,000 for eligible vehicles since 2019 would be extended until March 2025. Eligibility would be broadened to include more vehicle models, including more vans, trucks and SUVs. Further details will be announced by Transport Canada in the coming weeks.
• Budget 2022 announces the government’s commitment to examine a new alternative minimum tax regime, with details on a proposed approach to be released in the 2022 fall economic and fiscal update.

B. Business Measures

Small Business Deduction

Canadian-controlled private corporations (CCPCs) benefit from the small business deduction (SBD), a reduced corporate tax rate on active business income from the 15% general rate to 9% federally. Each province also has an SBD regime. A “business limit” of $500,000 of annual income (shared between associated corporations) limits eligibility to the SBD federally, and in all provinces except Saskatchewan, which has a $600,000 provincial business limit.

The business limit is reduced for corporations or associated groups which have “taxable capital” in excess of $10 million, with the business limit reduced by $1 for every additional $10 of taxable capital over the $10 million threshold, until it is eliminated where taxable capital equals or exceeds $15 million.

Budget 2022 proposes to reduce the business limit by $1 for every $80 of taxable capital in excess of $10 million, such that the limit will be more gradually reduced, and only eliminated where taxable capital equals or exceeds $50 million. This measure is proposed to apply for corporate taxation years beginning on or after April 7, 2022.

No changes are proposed to the parallel reduction to the business limit where adjusted aggregate investment income exceeds $50,000.

Anti-Avoidance Measures – Corporate Investment Income

In addition to being ineligible for the SBD, investment income (such as interest, royalties, rent and taxable capital gains) earned by CCPCs is subject to a significantly higher corporate tax rate of 38 2/3% (plus provincial tax which, in most provinces, results in a combined tax rate of over 50%). A similar regime (Part IV Tax) applies to portfolio dividends received by CCPCs. This is intended to result in corporate taxes similar to the top personal tax rates.

A portion of this tax is refundable when taxable dividends are paid by the corporation to its shareholders, so that the combined corporate taxes after this refund and personal tax paid by the ultimate individual shareholders is comparable to the tax that would have been paid if the investments had been made personally, rather than corporately.

As these special rules apply only to CCPCs, some planning strategies have been developed where corporations are structured to fall outside CCPC status. These include the use of corporations governed by a foreign country’s corporate legislation, or the issuance of options or voting shares to non-Canadians. A number of taxpayers who have implemented such strategies have been challenged by CRA, with appeals to be heard by the Tax Court of Canada, however such challenges are both time-consuming and costly for the government.

Budget 2022 proposes that private corporations which are not CCPCs, but are factually controlled by one or more Canadian persons, be subject to the same investment income rules as a CCPC. An anti-avoidance rule will also apply this treatment to any corporation falling outside the technical rules, where it is reasonable to consider that one or more transactions were undertaken to avoid these rules. This measure will generally apply to taxation years that end on or after April 7, 2022, with possible deferral where an arm’s length sale pursuant to a written purchase and sale agreement was entered into prior to that date.

Intergenerational Business Transfers

A complex anti-avoidance rule prevents the sale of shares of closely-held corporations by individual shareholders to related corporations from resulting in capital gains, instead causing the seller to realize dividends. In addition to attracting higher taxes than capital gains, dividends are not eligible for the lifetime capital gains exemption (LCGE).

This provision has been a source of frustration for business owners wishing to transition a family business to the next generation, denying them access to the LCGE which would have been available on a similar sale to unrelated parties. On June 29, 2021, legislation (Bill C-208) exempting sales of shares of small business corporations or family farm or fishing corporations from parents to corporations controlled by their children from this provision, allowing the realization of capital gains potentially eligible for the LCGE, was passed into law.

The government had indicated that they were concerned that this legislation could permit transfers beyond genuine intergenerational business successions to benefit from this lower tax cost, a practice commonly referred to as “surplus stripping,” and that further amendments would be made to limit these transactions to their intended purpose.

Budget 2022 reiterates the government’s intention to amend the legislation to restrict these transactions to genuine intergenerational business transfers, while continuing to facilitate legitimate business successions. It announces a consultation by the Department of Finance, with specific mention of the agriculture sector, to close on June 17, 2022. Comments can be sent to intergenerational-transfers-transfertsintergenerationnels@fin.gc.ca. The government indicated that amending legislation would be included in a bill to be tabled in the fall after the conclusion of the consultation process.

Flow-through Shares

Flow-through share agreements allow corporations to renounce or “flow through” specified expenses to investors, who can deduct the expenses in calculating their taxable income. These are common in the resource sector, where they allow certain resource pools to be claimed by investors, rather than the corporations incurring the costs. A Mineral Exploration Tax Credit equal to 15% of specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors also applies to some flow-through shares.

Increased Credit for Critical Minerals

Budget 2022 proposes to introduce a new 30% Critical Mineral Exploration Tax Credit for specified minerals, specifically copper, nickel, lithium, cobalt, graphite, rare earth elements, scandium, titanium, gallium, vanadium, tellurium, magnesium, zinc, platinum group metals and uranium. These minerals are used in the production of batteries and permanent magnets, both of which are used in zero-emission vehicles, or are necessary in the production and processing of advanced materials, clean technology, or semi-conductors. This will effectively double the credit for exploration expenditures related to such minerals.

This enhanced credit would apply to expenditures renounced under eligible flow-through share agreements entered into after April 7, 2022 and on or before March 31, 2027.

Elimination of Flow-through Shares for Oil, Gas and Coal

Budget 2022 proposes to eliminate the flow-through share regime for oil, gas and coal activities. Such expenditures would not be permitted to be renounced to share purchasers under flow-through share agreements entered into after March 31, 2023.

Other Business Measures

Several business measures proposed in Budget 2022 target specific sectors. These include the following:

• Real Estate
  • Budget 2022 announces a federal review of housing as an asset class, including the examination of potential changes to the tax treatment of large corporate players that invest in residential real estate. Further details on the review will be released later in 2022, with potential early actions to be announced before the end of the year.
  • Budget 2022 announces that anti-money laundering and anti-terrorist financing requirements will be extended to all businesses conducting mortgage lending in Canada.
• Green Economy
  • Budget 2022 proposes to launch a new purchase incentive program for medium- and heavy-duty Zero-Emission Vehicles (ZEVs). Transport Canada will work with provinces and territories to develop and harmonize regulations and to conduct safety testing for long-haul zero-emission trucks. Natural Resources Canada will expand the Green Freight Assessment Program, which will be renamed the Green Freight Program, to support assessments and retrofits of more vehicles and a greater diversity of fleet and vehicle types.
  • Budget 2022 announces a consultation with experts to establish an investment tax credit of up to 30%, focused on net-zero technologies, battery storage solutions and clean hydrogen. Further details will be announced in the 2022 fall economic and fiscal update.
  • Air-source heat pumps primarily used for space or water heating acquired and becoming available for use on or after April 7, 2022 will be eligible for inclusion in Class 43.1 or 43.2, special accelerated CCA classes for investments in specified clean energy generation and energy conservation equipment. In addition, the manufacturing of such air-source heat pumps will be included in the definition of eligible zero-emission technology manufacturing or processing activities, eligible for reduced federal tax rates (halved rates for taxation years beginning in 2022 to 2028, then gradually increased to the standard rates, with no reduction for years beginning in 2032 or later).
  • A refundable tax credit for the cost of purchasing and installing eligible equipment used in an eligible carbon capture, utilization and storage (CCUS) project will be implemented. Eligible expenses incurred after 2021 until 2030 would benefit from credits ranging from 37.5% to 60%, with expenditures incurred until 2040 eligible for credits at half of these rates. New capital cost allowance classes at rates of 8% and 20% are also proposed for certain CCUS equipment.
• Business Investment Initiatives
  • Budget 2022 proposes to create the Employee Ownership Trust, a new type of trust to support employee ownership. The government will engage with stakeholders to develop rules for these trusts.
  • Budget 2022 proposes the Canada Growth Fund, an independent public investment vehicle that will invest using a broad suite of financial instruments, with the goal that every dollar invested will attract at least three dollars of private capital. Further details will be announced in the 2022 fall economic and fiscal update.
• Encouraging Innovation
  • Budget 2022 announces an independent federal innovation and investment agency, with further consultation later this year. Support delivered through the innovation and investment agency is expected to enable innovation and growth within the Canadian defence sector and boost investments in Canadian defence manufacturing. Further details will be announced in the 2022 fall economic and fiscal update.
  • Budget 2022 announces a review of the Scientific Research and Experimental Development (SR&ED) program, to assess its effectiveness in encouraging R&D that benefits Canada, and to explore opportunities to modernize and simplify the program. As part of this review, the government will also consider whether the tax system can encourage the development and retention of intellectual property, including seeking views on the suitability of adopting a patent box regime.
• Financial Sector
  • Budget 2022 announces the government’s intention to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security. The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins.
  • A one-time 15% tax on bank and life insurance groups, based on taxable income in excess of $1 billion for taxation years ended in 2021, would be imposed for the 2022 taxation year and payable over five years. For subsequent years, a 1.5% additional tax would apply to income of such corporate groups in excess of $100 million.
  • A new accounting policy requirement, IFRS 17, will require insurers to defer recognition of contract service margins (CSMs) for accounting purposes commencing on January 1, 2023. Budget 2022 proposes that this deferral will not be permitted for income tax purposes. The timing of income inclusions for CSMs for income tax purposes will be set by legislation.
  • Proposed anti-avoidance measures will impact certain hedging and short-selling transactions undertaken by Canadian financial institutions and registered securities dealers.
• Combatting Aggressive Tax Planning
  • Budget 2022 proposes to provide $1.2 billion over five years for CRA to expand audits of larger entities and non-residents engaged in aggressive tax planning; increase both the investigation and prosecution of those engaged in criminal tax evasion; and to expand its educational outreach.
  • The General Anti-avoidance Rule (GAAR) is proposed to be amended to allow CRA to challenge transactions that affect tax attributes (e.g. asset costs, losses carried forward, paid-up capital, capital dividend account) that have not yet become relevant to the computation of tax. This specific measure overrides a 2018 Federal Court of Appeal decision that held that GAAR could only be applied when the tax attribute was utilized to reduce income taxes.

C. International Measures

Digital Platform Operators – Disclosure Requirements

The digital economy (including the sharing and gig economies, and online sellers of goods) continues to grow at a rapid pace. Participants in the digital economy often make use of digital platforms. Many tax authorities are concerned that not all participants are aware of the tax implications of their online activities. In addition, transactions occurring digitally through online platforms may not be visible to tax administrations, making it difficult for CRA to identify non-compliance.

The Organisation for Economic Co-operation and Development (OECD) has developed model rules for reporting by digital platform operators with respect to platform sellers which require the platforms to collect and report relevant information to tax administrations. The model rules provide for the sharing of information between tax administrations so that an online platform would generally need to report the information to only one jurisdiction, and that jurisdiction would then share the information with partner jurisdictions based on the residence of each person earning revenue through the platform. Jurisdictions which have announced their intention to implement such a framework include the European Union, the United Kingdom and Australia.

Budget 2022 proposes to implement the model rules in Canada. They would require reporting platform operators that provide support to reportable sellers for relevant activities to determine the jurisdiction of residence of their reportable sellers and report certain information on them. Reporting platform operators would be entities that make software that runs a platform available for the sellers to be connected to other users, or to collect compensation through the platform.

The measure would generally apply to platform operators that are resident for tax purposes in Canada, and to platform operators that are not resident in Canada or a partner jurisdiction (one that has implemented similar rules and will share data with CRA on Canadian activity) and that facilitate relevant activities by Canadian residents or with respect to rental of real property located in Canada.

Relevant activities would be sales of goods and relevant services including the following:

• personal services outside of an employment relationship (e.g. transportation and delivery services, manual labour, tutoring, data manipulation and clerical, legal or accounting tasks);
• rental of real property (residential or commercial; parking spaces); and
• rental of means of transportation.

Reporting would not be required in respect of sellers that represent a limited compliance risk, including government entities, publicly listed entities, large providers of hotel accommodation (more than 2,000 per year in respect of a property listing) and, with respect to the sales of goods, sellers who make less than 30 sales a year for a total of not more than 2,000 euro.

Reporting platform operators would be required to provide the required disclosures to CRA by January 31 of the year following the calendar year. CRA would automatically exchange information received on sellers resident in partner jurisdictions. Likewise, CRA would receive information on Canadian sellers from partner jurisdictions. This measure would apply to calendar years beginning after 2023, with the first reporting and exchange of information expected to take place in early 2025 with respect to the 2024 calendar year.

Ban on Residential Real Estate Purchases by Non-residents

The government intends to prohibit foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada for a period of two years. This would not apply to refugees and people authorized to come to Canada while fleeing international crises, certain international students on the path to permanent residency or individuals on work permits who are residing in Canada.

Other International Measures

International Tax Reform – Base Erosion and Profit Shifting

Canada is one of 137 members of the OECD/Group of 20 (G20) Inclusive Framework on Base Erosion and Profit Shifting (the Inclusive Framework) that have joined a two-pillar plan for international tax reform agreed to on October 8, 2021. Budget 2022 reiterates Canada’s commitment to the framework, and its intention to implement the Pillar One (intended to reallocate a portion of taxing rights over the profits of the largest and most profitable multinational enterprises to market countries where their users and customers are located) and Pillar Two (intended to ensure that the profits of large multinational enterprises are subject to an effective tax rate of at least 15%, regardless of where they are earned) initiatives.

Budget 2022 sets out the government’s plans for consultation and implementation of these initiatives.

Anti-Avoidance – Interest Stripping

Interest paid from a Canadian resident to a non-arm’s length non-resident is generally subject to a 25% flat withholding tax, reduced under various tax treaties (often to either 10% or 15%; generally to nil where paid to U.S. residents). Budget 2022 proposes measures to address certain arrangements (referred to as interest coupon stripping arrangements) to ensure that this withholding tax is not avoided.

D. Sales and Excise Tax

GST/HST on Assignment Sales by Individuals

An assignment sale in respect of residential housing is a transaction in which a purchaser (an “assignor”) under an agreement of purchase and sale with a builder of a new home sells their rights and obligations under the agreement to another person (an “assignee”). An assignment sale of newly constructed (or substantially renovated) residential real estate made by an individual would generally be taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the agreement. Where there was another primary purpose, such as residing in the property, the assignment sale would generally be exempt.

To provide greater certainty on the status of assignment sales, Budget 2022 proposes to make all assignment sales in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. As a result, the GST/HST would apply to the total amount paid for a new home by its first occupant. Typically, the consideration for an assignment sale includes an amount attributable to a deposit that had previously been paid to the builder by the assignor. That deposit would already be subject to GST/HST when applied by the builder to the purchase price on closing. Budget 2022 proposes that the amount attributable to the deposit be excluded from the consideration for a taxable assignment sale.

The assignor in respect of a taxable assignment sale would generally be responsible for collecting the GST/HST and remitting the tax to CRA. Where an assignor is non-resident, the assignee would be required to self-assess and pay the GST/HST directly to CRA.

The amount of a new housing rebate is determined based on the total consideration payable for a newly-constructed home, which would include the consideration for a taxable assignment sale. Accordingly, these changes may affect the amount of a New Housing Rebate that may be available in respect of a new home.

This measure would apply in respect of any assignment agreement entered into on or after May 7, 2022 (one month after Budget Day).

GST/HST Health Care Rebate

Hospitals can claim an 83% rebate and charities and non-profit organizations can claim a 50% rebate of the GST (or federal component of the HST) that they pay on inputs used in their exempt supplies. The 83% hospital rebate also applies to eligible charities and non-profit organizations that provide health care services similar to those traditionally performed in hospitals.

One of the conditions to be eligible for the expanded hospital rebate is that a charity or non-profit organization must deliver the health care service with the active involvement of, or on the recommendation of, a physician, or in a geographically remote community, with the active involvement of a nurse practitioner.

Budget 2022 proposes to allow the 83% hospital rebate to a charity or non-profit organization that delivers health care service with the active involvement of, or on the recommendation of, either a physician or a nurse practitioner, irrespective of their geographical location.

This measure would generally apply to rebate claim periods ending after April 7, 2022 in respect of GST/HST paid or payable after that date.

Excise Tax on Vaping Products

Budget 2021 announced a consultation on a new excise duty on vaping products. Budget 2022 sets out a taxation framework on vaping products that include either liquid or solid vaping substances (whether or not they contain nicotine), with an equivalency of 1 ml of liquid = 1 gram of solids (excluding those already subject to the cannabis excise duty framework).

A federal excise duty rate of $1 per 2 ml, or fraction thereof, is proposed for the first 10 ml of vaping substance, and $1 per 10 ml, or fraction thereof, for volumes beyond that. If a province or territory were to choose to participate in a coordinated vaping taxation regime administered by the federal government as set out in the budget documents, an additional duty rate would be imposed in respect of dutiable vaping products intended for sale in that participating jurisdiction.

Other Excise Tax Measures

Excise Duty Framework

Budget 2022 proposes several amendments to streamline, strengthen, and adapt the cannabis excise duty framework specifically, as well as other excise regimes, including the following:

• allow licensed cannabis producers to remit excise duties on a quarterly rather than monthly basis, starting from the quarter that began on April 1, 2022 where the licensee’s required excise duty remittances for the four immediately preceding fiscal quarters were less than $1M in excise duties during the four fiscal quarters;
• allow CRA to approve certain contract-for-service arrangements between two licensed cannabis producers to permit the producers to:
  • transfer stamps, and packaged but unstamped products, between them;
  • stamp and enter cannabis products into the retail market that have been packaged by the other producer; and
  • pay the excise duty on cannabis products that were stamped by the other producer.
• amend the penalty provision for lost cannabis excise stamps so that the higher penalty for losing stamps for a province or territory would only apply where the adjustment rate for that jurisdiction is greater than 0%;
• apply the existing cannabis penalty provisions to situations where unlicensed parties illegally possess or purchase cannabis products, and where licensed parties illegally distribute cannabis products;
• exempt holders of a Health Canada-issue Research Licence or Cannabis Drug Licence from the requirement to be licensed under the excise duty regime;
• in respect of spirits, wine, tobacco and cannabis products:
  • add all cancellation criteria for an excise licence, other than a proactive request by a licensee to cancel its licence, to the criteria that CRA may use to suspend an excise licence;
  • remove cash and transferable bonds issued by the Government of Canada, and add bank drafts and Canada Post money orders, to the types of financial security that could be accepted by CRA; and
  • confirm the ability of CRA to carry out virtual audits and reviews of all licensees.

Except where indicated otherwise, the above proposals would be effective only on Royal Assent.

100% Canadian Wine Exemption

Wine that is produced in Canada and composed wholly of agricultural or plant product grown in Canada (i.e. 100% Canadian wine) is presently exempt from excise duties. However, this exemption was challenged at the World Trade Organization (WTO). In accordance with a settlement reached in July 2020, Budget 2022 proposes to repeal the 100% Canadian wine excise duty exemption effective on June 30, 2022.

Low-alcohol Beer

At present, wine and spirits containing no more than 0.5% alcohol by volume (ABV) are exempt from federal excise duty, however beer containing no more than 0.5% ABV is subject to duty. Budget 2022 proposes to eliminate excise duty for beer containing no more than 0.5% ABV, bringing the tax treatment of such beer into line with the treatment of wine and spirits with the same alcohol content. This measure would come into force on July 1, 2022.

E. Retirement Plans

Borrowing by Defined Benefit Pension Plans

Budget 2022 proposes to provide more borrowing flexibility to administrators of defined benefit registered pension plans (other than individual pension plans) for amounts borrowed on or after April 7, 2022.

Reporting Requirements for RRSPs and RRIFs

Budget 2022 proposes to require financial institutions to annually report to CRA the total fair market value of property held in each RRSP and RRIF at the end of the calendar year. This information would assist CRA in its risk-assessment activities regarding qualified investments held by RRSPs and RRIFs. This measure would apply to the 2023 and subsequent taxation years.

F. Charities Measures

Annual Disbursement Quota for Registered Charities

Registered charities are generally required to expend a minimum amount each year for charitable purposes, referred to as the disbursement quota (DQ). Presently, the DQ is set at 3.5% of property not used directly in charitable activities or administration.

Budget 2022 proposes to increase the DQ rate from 3.5% to 5% for the portion of property not used in charitable activities or administration that exceeds $1 million. Budget 2022 also proposes to clarify that expenditures for administration and management are not considered qualifying expenditures to satisfy a charity’s DQ.

Where a charity cannot meet its DQ, it may apply to CRA and request relief. Budget 2022 proposes to amend the existing rule such that CRA will have the discretion to reduce a charity’s DQ obligation for any particular tax year. It also proposes to allow CRA to publicly disclose information relating to such a decision to provide relief.

These measures would apply to charities in respect of their fiscal periods beginning on or after January 1, 2023.

Charitable Partnerships

Budget 2022 proposes to allow a charity to provide its resources to organizations that are not qualified donees, provided that these disbursements further the charity’s charitable purposes and the charity ensures that the funds are applied to charitable activities by the grantee.

To be considered a qualifying disbursement, the charity will need to meet mandatory accountability requirements, including, for example:

• conducting a pre-grant inquiry sufficient to provide reasonable assurances that the charity’s resources will be used for the purposes set out in the written agreement, including a review of the identity, past history, practices, activities and areas of expertise of the grantee;
• monitoring the grantee, which would include receiving periodic reports on the use of the charity’s resources, at least annually and taking remedial action as required; and
• publicly disclosing on its annual information return information relating to grants above $5,000.

In addition, Budget 2022 proposes to require charities to, upon request by CRA, take all reasonable steps to obtain receipts, invoices, or other documentary evidence from grantees to demonstrate amounts were spent appropriately.

Finally, Budget 2022 proposes to prohibit registered charities from accepting gifts, the granting of which was expressly or implicitly conditional on making a gift to a person other than a qualified donee.

These changes would apply as of Royal Assent.

G. Previously Announced Measures

Budget 2022 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

• Legislative proposals relating to the Select Luxury Items Tax Act (a tax on certain automobiles, boats and aircrafts) released on March 11, 2022.
• Legislative proposals released on February 4, 2022 in respect of the following measures:
  • electronic filing and certification of tax and information returns;
  • immediate expensing;
  • the Disability Tax Credit;
  • a technical fix related to the GST Credit top-up;
  • the rate reduction for zero-emission technology manufacturers;
  • film or video production tax credits;
  • postdoctoral fellowship income;
  • fixing contribution errors in registered pension plans;
  • a technical fix related to the revocation tax applicable to charities;
  • capital cost allowance for clean energy equipment;
  • enhanced reporting requirements for certain trusts;
  • allocation to redeemers methodology for mutual fund trusts;
  • mandatory disclosure rules;
  • avoidance of tax debts;
  • taxes applicable to registered investments;
  • audit authorities;
  • interest deductibility limits; and
  • crypto asset mining.
• Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
• Legislative proposals released on December 3, 2021 with respect to Climate Action Incentive payments.
• The income tax measure announced in Budget 2021 with respect to Hybrid Mismatch Arrangements.
• The transfer pricing consultation announced in Budget 2021.
• The anti-avoidance rules consultation announced on November 30, 2020 in the Fall Economic Statement, with an expected paper for consultation over the summer of 2022, and legislative proposals tabled by the end of 2022.
• The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
• Measures confirmed in Budget 2016 relating to the GST/HST joint venture election.

Budget 2022 reiterates the government’s intention to return a portion of the proceeds from the price on pollution to small and medium-sized businesses through new federal programming in backstop jurisdictions (Alberta, Saskatchewan, Manitoba and Ontario). Budget 2022 proposes to provide funds, starting in 2022-23, to Environment and Climate Change Canada to administer direct payments to support emission-intensive, trade-exposed small and medium-sized enterprises in those jurisdictions.

Budget 2022 also reaffirms the government’s intention to revise the Employment Insurance (EI) system, including its support for experienced workers transitioning to a new career and coverage for seasonal, self-employed and gig workers. A long-term plan for the future of EI will be released after consultations conclude. As an interim measure, Budget 2022 proposes to extend previous expansions to EI coverage for seasonal workers.

Notice:

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

New for 2021 Personal Tax

• Ontario Seniors' Home Safety Tax Credit - if eligible and you incurred renovation expenses in order to improve safety and accessibility or assist a senior be more functional or mobile at home, please contact us to discuss and provide receipts
• Climate Action Incentive (CAI) - The Government of Canada has changed the payment method for this previous refundable credit claimed annually on the personal income tax returns to quarterly tax-free payments made through the benefit system starting in July 2022. For couples and families, the taxpayer who is assessed first by the CRA for any taxation year will be the recipient of the CAI payments

New for 2022 Personal Tax

Ontario Staycation Tax Credit:

• The temporary Ontario Staycation Tax Credit is a personal income tax credit for eligible Ontario residents to claim 20% of qualified, short-term accommodation expenses for vacations taken between January 1-December 31, 2022 in Ontario, up to a maximum of $1,000 for an individual and $2,000 for a family. So that translates to a maximum savings of $200 or $400, respectively. Eligibility requires HST be charged on the accommodations. Be sure to keep your receipts!

Other Notable Updates:

• Work from home deductions – as a result of the COVID-19 pandemic, many taxpayers have been working from home. If this applies to you and you have no other employment related expenses, you may be eligible to claim the temporary flat rate of $2/day as working from home deductions, to a maximum of $500 for 2021. No employer documentation is required for this deduction. All you need to provide is the total number of days worked at home in 2021, not including statutory holidays or vacation days
• The 2021 cumulative lifetime capital gains exemption is $892,218
• The Medical expense tax credit has been expanded to allow expenses related to service animals who are specially trained to perform specific tasks for a patient with a severe mental impairment that helps the patient cope with the impairment. Eligible expenses paid include the cost of the animal, the care and maintenance of the animal (food and veterinary care), reasonable travel expenses paid for the patient to attend a school, institution, or other facility that trains in the handling of these animals, and reasonable board and lodging expenses paid for the patient's full-time attendance at a school, institution, or other facility that trains in the handling of such animals
• Individuals who sell their principle residence will have to report the sale on their tax return. Reporting will be required for sales that occur on or after January 1, 2016 but there is likely no tax implications

Planned for 2023

The CRA will start the process of switching to providing a Notice of Assessment electronically to all taxpayers who have their returns electronically filed. The electronic Notice of Assessment will be made available in My Account. In order for you to retrieve your electronic Notice of Assessment, you must be registered for My Account and provide a valid email address. To register or access your My Account, please visit https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html

September 3, 2021

Canada Recovery Hiring Program (CRHP) is the new program that would provide eligible employers with a subsidy of up to 50 per cent of incremental remuneration paid to eligible active employees between June 6, 2021, and November 20, 2021.

Corporations can either apply for CEWS or CRHP, whichever is higher, but not for both.

Eligible employers for CRHP

• Employers eligible for the CEWS would generally be eligible for the hiring subsidy (payroll account on March 15, 2020)
• For-profit corporation would be eligible only if it is a CCPC
• Other eligible employers – Individuals, NPO’s, registered charities and certain partnerships

Eligible Employees for CRHP

• An eligible employee must be employed primarily in Canada by an eligible employer throughout a qualifying period (or the portion of the qualifying period throughout which the individual was employed by the eligible employer)
• The hiring subsidy would not be available for furloughed employees

Incremental Remuneration

• The difference between an employer’s total eligible remuneration paid to eligible employees for the qualifying period and its total eligible remuneration paid to eligible employees for the baseline period (March 14 to April 10, 2021)
• In both the qualifying period and the baseline period, eligible remuneration for each eligible employee would be subject to a maximum of $1,129 per week
• As is currently the case for the CEWS, the eligible remuneration for a non-arm’s length employee for a week could not exceed their baseline remuneration determined for that week

CRA has a FAQ page which answers many questions an applicant may have.

https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-frequently-asked-questions.html

If you have additional questions, please contact us 905-277-9499.

Canada Recovery Hiring Program (CRHP) - Canada.ca

https://www.canada.ca/en/revenue-agency/services/subsidy/recovery-hiring-program.html

On April 19, 2021, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience, to the House of Commons.

No changes were made to personal or corporate tax rates (other than a temporary measure for zero-emission technology manufacturers), nor to the inclusion rate on taxable capital gains.

Some highlights include:

A. Personal Measures

• The Canada Recovery Benefit and related programs will be extended.
• Individuals will have the option to claim a deduction in respect of the repayment of a COVID-19 benefit amount for the year when the benefit was received.
• Access to the disability tax credit will be broadened.

B. Business Measures

• The Canada Emergency Wage and Rent Subsidies (CEWS and CERS) will be extended.
• The Canada Recovery Hiring Program was introduced.
• The ability to immediately expense 100% of many capital asset purchases was introduced.
• The corporate tax rate on zero-emission technology manufacturing will be halved.
• The disclosure requirements for aggressive tax planning and filing positions will be expanded.

C. International Measures

• A 1% tax on the value of vacant or underused real estate owned by non-residents will be implemented.

D. Sales and Excise Tax

• Access to the GST/HST New Housing Rebate will be broadened for co-owners.
• A new tax of up to 10% will apply to the purchase of luxury vehicles, aircrafts or boats.

E. Electronic Filing, Payments and Certification

• Some CRA communications will be undertaken electronically without the taxpayer’s authorization.
• Certain levels of payments will be required to be made electronically.

F. Previously Announced

• Intention to proceed with a number of previously announced measures, such as the accelerated CCA changes for zero-emission vehicles, and expanded disclosure requirements for trusts.

A. Personal Measures

COVID-19 Benefit Amounts – Tax Treatment

Budget 2021 proposes to allow individuals the option to claim a deduction in respect of the repayment of a COVID‑19 benefit amount for the year when the benefit was received, rather than the year in which the repayment was made. This option would be available for benefit amounts repaid at any time before 2023.

For these purposes, COVID-19 benefits would include:

• Canada Emergency Response Benefits (CERB) / Employment Insurance Emergency Response Benefits;
• Canada Emergency Student Benefits (CESB);
• Canada Recovery Benefits (CRB);
• Canada Recovery Sickness Benefits (CRSB); and
• Canada Recovery Caregiving Benefits (CRCB).

Individuals may only deduct benefit amounts once they have been repaid. An individual who makes a repayment, but who has already filed their income tax return for the year in which the benefit was received, would be able to request an adjustment to the return for that year.

Canada Recovery Benefits (CRB)

Budget 2021 proposes the following in respect of CRB:

• The maximum CRB would be extended by 12 weeks to a maximum of 50 weeks. The first four additional weeks will be paid at $500 per week, with subsequent weeks paid at $300 per week. All new CRB claims after July 17, 2021 would receive the $300 per week benefit, which will be available until September 25, 2021.
• The maximum Canada Recovery Caregiving Benefit would be extended by 4 weeks, to a maximum of 42 weeks, paid at $500 per week.
• Legislative amendments would be made providing the authority for additional potential extensions of CRB, EI and related programs until November 20, 2021.

Employment Insurance (EI)

Temporary Measures

Budget 2021 proposes to extend many of the temporary EI measures commenced in 2020, including:

• Maintaining a 420-hour entrance requirement for regular and special benefits, with a 14-week minimum entitlement for regular benefits, and a new common earnings threshold for fishing benefits.
• Simplifying rules around the treatment of severance, vacation pay, and other monies paid on separation.
• Extending the temporary enhancements to the Work-Sharing program such as the possibility to establish longer work-sharing agreements and a streamlined application process.

Other Benefits

• Sickness benefits would increase from 15 to 26 weeks, as of summer 2022.
• Self-employed fishers who submit an EI claim for the winter 2021 fishing benefit period would have extended temporary eligibility for the entire benefit period.

Consultation on long-term changes

Consultations on long-term reforms to EI will be commenced, focusing on the need for income support for self-employed and gig workers; how best to support Canadians through different life events such as adoption; and how to provide more consistent and reliable benefits to workers in seasonal industries.

Disability Tax Credit (DTC)

Budget 2021 proposes several changes which would provide broader access to the DTC. These proposals would apply to the 2021 and subsequent taxation years, in respect of DTC certificates filed on or after Royal Assent.

Mental Functions

The DTC is generally available to individuals who are markedly restricted in their ability to perform a basic activity of daily living due to a severe and prolonged impairment in physical or mental functions. Budget 2021 proposes to expand the definition of mental functions necessary for everyday life to include: attention, concentration, memory, judgement, perception of reality, problem-solving, goal-setting, regulation of behaviour and emotions, verbal and non-verbal comprehension, and adaptive functioning.

Life-Sustaining Therapy

Individuals can qualify for the DTC where they undergo therapies that have a significant impact on everyday life. Under current rules, the therapy is required to be administered at least three times/week for a total duration averaging at least 14 hours a week. Also, only certain types of therapy are allowed to be included in this computation.

To better recognize additional aspects of therapy for this computation, Budget 2021 proposes to:

• expand the types of activities which can be included in the 14 hour per week minimum to include:
•     o medically required recuperation after therapy;
•     o activities related to determining dosages of medication that must be adjusted on a daily basis, or determining the amounts of certain compounds that can be safely consumed;
•     o the time reasonably required by another person to assist the individual in performing and supervising the therapy where the individual is incapable of performing therapy on their own due to the impacts of their disability; and
• reduce the requirement that therapy be administered at least three times each week to two times each week, retaining the requirement that therapy require an average of not less than 14 hours a week.

These proposals would apply to the 2021 and subsequent taxation years, in respect of DTC certificates filed on or after Royal Assent.

Canada Workers Benefit (CWB)

The CWB is a non-taxable refundable tax credit that supplements the earnings of low- and modest-income workers.

Budget 2021 proposes to enhance the CWB by, for example, by increasing the phase-out thresholds for individuals without dependents and families (from $13,194 to $22,944 and from $17,522 to $26,177, respectively in 2021). The phase-out rate is also slightly increased. Corresponding changes would be made to the disability supplement.

Budget 2021 also proposes to introduce a "secondary earner exemption" to the CWB which would allow the spouse or common-law partner with the lower working income to exclude up to $14,000 of their working income in the computation of their adjusted net income, for the purpose of the CWB phase-out.

These measures would apply to the 2021 and subsequent taxation years. Indexation of amounts would continue to apply after the 2021 taxation year, including the secondary earner exemption.

Northern Residents Deductions (NRD)

Budget 2021 proposes to expand access to the travel component of the NRD. Under the current rules, the claim is limited to the amount of employer-provided travel benefits the taxpayer received in respect of travel by that individual. Under the new approach, a taxpayer would have the option to claim, in respect of the taxpayer and each "eligible family member", up to a $1,200 standard amount that may be allocated across eligible trips taken by that individual, allowing individuals with no employment benefits to claim this deduction. For residents of the Intermediate Zone, this effectively becomes a $600 standard amount.

An eligible family member would be an individual living in the taxpayer's household who is the taxpayer’s spouse/common-law partner, their child under the age of 18, or a related individual who is wholly dependent on them for support and is either their parent or grandparent, or dependent by reason of mental or physical infirmity.

Claims would still be limited to the least of this new number, the total expenses paid for the trip and the cost of the lowest return airfare to the nearest designated city.

This measure would apply to the 2021 and subsequent taxation years.

Postdoctoral Fellowship Income

Budget 2021 proposes to include postdoctoral fellowship income in “earned income” for RRSP purposes. This measure would apply in respect of postdoctoral fellowship income received in the 2021 and subsequent taxation years. This measure would also apply in respect of postdoctoral fellowship income received in the 2011 to 2020 taxation years, where the taxpayer submits a request in writing to CRA for an adjustment to their RRSP room for the relevant years.

Defined Contribution Pension Plans – Fixing Contribution Errors

Budget 2021 proposes to provide more flexibility to plan administrators of defined contribution pension plans to correct for both under-contributions and over-contributions. This measure would apply in respect of additional contributions made, and amounts of over-contributions refunded, in the 2021 and subsequent taxation years.

Other Measures

Budget 2021 also announced plans for a wide variety of other programs, including:

• Child Care – Providing new investments totaling up to $30 billion over the next 5 years, and $8.3 billion ongoing for Early Learning and Child Care and Indigenous Early Learning and Child Care, with the goal of providing regulated child care for $10/day on average, within the next five years.
• Student Loans – Extending the waiver of interest accrual on Canada Student Loans and Canada Apprentice Loans until March 31, 2023 and extending the doubling of the Canada Student Grants until the end of July 2023.
• Home Renovation Loans – Providing interest-free loans of up to $40,000 to homeowners and landlords who undertake retrofits identified through an authorized EnerGuide energy assessment. This program will also include funding dedicated to support low-income homeowners and renters including cooperatives and not-for profit owned housing. The program would be available by summer 2021.
• Old Age Security Enhancements – Providing pensioners who will be age 75 and older as of June, 2022 with a one-time additional payment of $500 in August 2021. Budget 2021 then proposes to increase regular OAS payments for pensioners 75 and over by 10% on an ongoing basis as of July 2022.

B. Business Measures

Canada Emergency Wage Subsidy (CEWS)

Extension and Phase-out for Active Employees

Budget 2021 proposes that CEWS will be extended to September 25, 2021, but will start phasing out after July 3, 2021. Only employers with more than a 10% decline in revenues will be eligible for the wage subsidy as of that date. The rates and limits are as follows:

CEWS Base and Top-up Rates, Periods 17 to 20

* The maximum weekly benefit per employee is reached when eligible remuneration paid to the employee for the qualifying period is at least $1,129 per week.

Furloughed Employees

CEWS for furloughed employees would continue to be available to eligible employers until August 28, 2021, ending four weeks earlier than CEWS for active employees. To maintain the alignment of CEWS for furloughed employees with benefits available under EI, Budget 2021 proposes to maintain their weekly wage subsidy at the lesser of:

• the amount of eligible remuneration paid in respect of the week; and
• the greater of:
• o $500; and
• o 55% of pre-crisis remuneration for the employee, up to a maximum subsidy amount of $595.

The wage subsidy relating to the employer’s portion of CPP, EI, the Quebec Pension Plan and the Quebec Parental Insurance Plan in respect of furloughed employees will also remain available.

Reference Periods

The reference periods for determining the revenue decline are as follows:

CEWS Reference Periods, Periods 17 to 20

The approach chosen in the prior periods must be maintained.

Baseline Remuneration

An employer’s entitlement to CEWS in respect of an employee may be affected by their baseline remuneration, also known as pre-crisis remuneration. Absent an election, baseline remuneration is calculated using the period beginning January 1, 2020 and ending March 15, 2020. Budget 2021 proposes to allow an eligible employer to elect to use the following alternative baseline remuneration periods:

• March 1 to June 30, 2019 or July 1 to December 31, 2019, for the qualifying period between June 6, 2021 and July 3, 2021; and
• July 1 to December 31, 2019, for qualifying periods beginning after July 3, 2021.

Requirement to Repay Wage Subsidy – Public Corporations

Budget 2021 proposes to require a publicly listed corporation to repay wage subsidy amounts received for a qualifying period that begins after June 5, 2021 in the event that its aggregate compensation for specified executives during the 2021 calendar year exceeds that of the 2019 calendar year.

Specified executives are the Named Executive Officers whose compensation is required to be disclosed under Canadian securities laws in the annual information circular provided to shareholders, or similar executives in the case of a corporation listed in another jurisdiction.

The amount of the wage subsidy required to be repaid would be equal to the lesser of:

• the total of all wage subsidy amounts received in respect of active employees for qualifying periods that begin after June 5, 2021; and
• the amount by which the corporation’s aggregate specified executives’ compensation for 2021 exceeds that of 2019.

This applies to wage subsidy amounts paid to any entity in the group.

Canada Emergency Rent Subsidy (CERS)

Extension and Phase-out

Budget 2021 proposes that CERS will be extended to September 25, 2021, but will start phasing out after July 3, 2021. Paralleling CEWS, only employers with more than a 10% decline in revenues will be eligible for CERS as of that date. The rates and limits are as follows:

CERS Rate Structure, Periods 10 to 13

Purchase of Business Assets

An applicant must generally have had a payroll account with CRA to be eligible for CEWS. For CERS, a business number is required. For CEWS, a rule was introduced which provides that an eligible entity that purchases the assets of a seller will be deemed to meet the payroll account requirement if the seller met the requirement. Budget 2021 proposes a similar deeming rule that would apply in the context of the rent subsidy, where the seller met the business number requirement. This measure would be effective as of the start of CERS.

Lockdown Support

Budget 2021 proposes to extend lockdown support to September 25, 2021 at a 25% rate (unchanged).

Canada Recovery Hiring Program (CRHP)

Budget 2021 proposes the new CRHP to provide eligible employers with a subsidy of up to 50% of the incremental remuneration paid to eligible employees between June 6, 2021 and November 20, 2021. The higher of CEWS or CRHP could be claimed for a particular qualifying period, but not both.

Eligible Employers

Employers eligible for CEWS would generally be eligible for CRHP. However, a for-profit corporation would be eligible for the hiring subsidy only if it is a Canadian-controlled private corporation (CCPC). Eligible employers (or their payroll service provider) must have had a CRA payroll account open March 15, 2020.

Eligible Employees

An eligible employee must be employed primarily in Canada by an eligible employer throughout a qualifying period (or the portion of the qualifying period throughout which the individual was employed by the eligible employer). CRHP will not be available for furloughed employees. A furloughed employee is an employee who is on leave with pay, meaning they are remunerated by the eligible employer but do not perform any work for the employer. However, an individual would not be considered to be on leave with pay for the purposes of the hiring subsidy if they are on a period of paid absence, such as vacation leave, sick leave, or a sabbatical.

Eligible Remuneration and Incremental Remuneration

The same types of remuneration eligible for CEWS would also be eligible for CRHP (e.g., salary, wages, and other remuneration for which employers are required to withhold or deduct amounts). The amount of remuneration for employees would be based solely on remuneration paid in respect of the qualifying period.

Incremental remuneration for a qualifying period means the difference between:

• an employer’s total eligible remuneration paid to eligible employees for the qualifying period, and
• its total eligible remuneration paid to eligible employees for the base period.

Eligible remuneration for each eligible employee would be subject to a maximum of $1,129 per week, for both the qualifying period and the base period. Similar to CEWS, the eligible remuneration for a non-arm’s length employee for a week could not exceed their baseline remuneration determined for that week. The base period for all application periods is March 14 to April 10, 2021.

CRHP Rates, Periods 17* to 22

*Period 17 of the CEWS would be the first period of the Canada Recovery Hiring Program.

Required Revenue Decline

To qualify, the eligible employer would have to have experienced a decline in revenues. For the qualifying periods between June 6, 2021 and July 3, 2021, the decline would have to be greater than 0%. For later periods, the decline must be greater than 10%.

CRHP Reference Periods, Periods 17 to 22

*Period 17 of the CEWS would be the first period of the CRHP.

Similar to CEWS and CERS, an application for a qualifying period would be required to be made no later than 180 days after the end of the qualifying period.

Immediate Expensing

Budget 2021 proposes to permit the full cost of “eligible property” acquired by a CCPC on or after Budget Day to be deducted, provided the property becomes available for use before January 1, 2024. Up to $1.5 million per taxation year is available for sharing among each associated group of CCPCs, with the limit being prorated for shorter taxation years. No carry-forward of excess capacity would be allowed.

Eligible Property

Eligible property includes capital property that is subject to the CCA rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51. The excluded classes are generally those that have long lives, such as buildings, fences, and goodwill.

Interactions of the Immediate Expensing with Other Provisions

Where capital costs of eligible property exceed $1.5 million in a year, the taxpayer would be allowed to decide which assets would be deducted in full, with the remainder subject to the normal CCA rules. 

Other enhanced deductions already available, such as the full expensing for manufacturing and processing machinery, would not reduce the maximum amount available ($1.5 million).

Restrictions

Generally, property acquired from a non-arm’s length person, or which was transferred to the taxpayer on a tax-deferred “rollover” basis, would not be eligible.

Also, there are several other rules that limit CCA claims that would continue to apply, such as limits to claims on rental losses.

Rate Reduction for Zero-Emission Technology Manufacturers

Budget 2021 proposes a temporary measure to reduce corporate income tax rates for qualifying zero-emission technology manufacturers, halving the tax rate on eligible zero-emission technology manufacturing and processing income to 7.5% on income subject to the general corporate tax rate (normally 15%), and 4.5% where that income would otherwise be eligible for the small business deduction (normally 9%). Provincial taxes would still apply to this income.

For taxpayers with income subject to both the general and the small business corporate tax rates, taxpayers would be able to choose the income on which the rate would be halved. 

No changes to the dividend tax credit rates or the allocation of corporate income for the purpose of dividend distributions are proposed. That is, income subject to the general reduced rate would continue to give rise to eligible dividends and the enhanced dividend tax credit, while income subject to the reduced rate for small businesses would continue to give rise to non-eligible dividends and the ordinary dividend tax credit.

This measure would apply in respect of income from numerous zero-emission technology manufacturing or processing activities listed in Budget 2021, including manufacturing or production of:

• solar energy conversion equipment, excluding passive solar heating equipment;
• wind energy conversion equipment;
• water energy conversion equipment;
• geothermal energy equipment;
• equipment for a ground source heat pump system;
• electrical energy storage equipment used for storage of renewable energy or for providing grid-scale storage or other ancillary services;
• zero-emission vehicles (including conversion of vehicles into zero-emission vehicles);
• batteries and fuel cells for zero-emission vehicles;
• electric vehicle charging systems and hydrogen refuelling stations for vehicles;
• equipment used for the production of hydrogen by electrolysis of water;
• hydrogen by electrolysis of water; and
• solid, liquid or gaseous fuel (e.g., wood pellets, renewable diesel and biogas) from either carbon dioxide or specified waste material, excluding the production of by-products which is a standard part of another industrial or manufacturing process

Manufacturing of components or sub-assemblies will be eligible only if such equipment is purpose-built or designed exclusively to form an integral part of the relevant system. Eligible income would be determined as a proportion of “adjusted business income” determined by reference to the corporation’s total labour and capital costs that are used in eligible activities. 

Feedback on the proposed allocation method can be provided by sending written representations to the Department of Finance Canada, Tax Policy Branch at: ZETM-FTZE@canada.ca by June 18, 2021.

The reduced tax rates would require the corporation to derive at least 10% of its gross revenue from all active businesses carried on in Canada from eligible activities. The reduced tax rates would apply to taxation years that begin after 2021. The reduced rates would be gradually phased out starting in taxation years that begin in 2029 and fully phased out for taxation years that begin after 2031.

Capital Cost Allowance (CCA) for Clean Energy Equipment

Under the CCA regime, Classes 43.1 and 43.2 provide accelerated CCA rates (30% and 50%, respectively) for investments in specified clean energy generation and energy conservation equipment. Budget 2021 proposes to expand Classes 43.1 and 43.2 to include a variety of assets used to generate energy from water, solar or geothermal sources or waste material, or related to hydrogen production or utilization. Accelerated CCA would be available in respect of these types of property only if, at the time the property becomes available for use, the requirements of all Canadian environmental laws, by-laws and regulations applicable in respect of the property have been met.

Classes 43.1 and 43.2 currently include certain systems that burn fossil fuels and/or waste fuels to produce either electricity or heat, or both. Budget 2021 notes that the eligibility criteria for these systems have not been modified since they were first set approximately 25 and 15 years ago, and proposes changes in the eligibility criteria for various assets having significant usage of fossil fuels. 

The expansion of Classes 43.1 and 43.2 would apply in respect of property that is acquired and that becomes available for use on or after Budget Day, where it has not been used or acquired for use for any purpose before Budget Day.

The removal of certain property from eligibility for Classes 43.1 and 43.2, as well as the application of the new heat rate threshold for specified waste-fuelled electrical generation systems, would apply in respect of property that becomes available for use after 2024.

Film or Video Production Tax Credits

Budget 2021 proposes to temporarily extend certain timelines for the Canadian Film or Video Production Tax Credit and the Film or Video Production Services Tax Credit by 12 months (in addition to certain extensions previously announced). These measures would be available in respect of productions for which eligible expenditures were incurred by taxpayers in their taxation years ending in 2020 or 2021.

Mandatory Disclosure Rules

While past Budgets have proposed specific anti-avoidance provisions, Budget 2021 proposes broad-based disclosure requirements for tax strategies considered aggressive by the government. Certain transactions must presently be reported to CRA. The government is consulting on proposals to enhance Canada’s mandatory disclosure rules. This consultation will address:

• changes to the reportable transaction rules;
• a new requirement to report notifiable transactions;
• a new requirement for specified corporations to report uncertain tax treatments; and
• related rules providing for, in certain circumstances, the extension of the applicable reassessment period and the introduction of penalties.

Amendments made as a result of this consultation would not apply prior to January 1, 2022. 

Stakeholders are invited to provide comments on the proposals set out below, as well as on draft legislation and sample notifiable transactions which are expected to be released in the coming weeks as part of the consultation, by September 3, 2021. Comments should be sent to fin.taxdisclosure-divulgationfiscale.fin@canada.ca.

Reportable Transactions

The Income Tax Act contains rules that require that certain transactions entered into by, or for the benefit of, a taxpayer be reported to CRA. Such transactions must meet the definition of an “avoidance transaction” – generally, undertaken for no bona fide purpose other than obtaining a tax benefit – and bear at least two of the following three generic hallmarks:

• A promoter or tax advisor is entitled to fees attributable to the amount of the tax benefit; contingent upon the obtaining a tax benefit; or attributable to the number of taxpayers who participate in the transaction or receive advice from the promoter or advisor regarding the tax consequences of the transaction.
• A promoter or tax advisor requires “confidential protection” with respect to the transaction.
• The taxpayer, or the person who entered into the transaction for the benefit of the taxpayer, obtains “contractual protection” in respect of the transaction, such as:
•     o insurance (other than standard professional liability insurance) or other protection (including an indemnity, compensation or a guarantee) that protects a person against a failure to achieve the expected tax benefit or reimburses any expense, costs (e.g. fees, taxes, penalties, interest) that may be incurred by a person in the course of a dispute in respect of the expected tax benefit from the transaction; or
•     o any form of undertaking under which a promoter or advisor aids in the course of a dispute in respect of the expected tax benefits.

Budget 2021 proposes that only one such hallmark will be required to make a transaction reportable. It also proposes that the definition of “avoidance transaction” for these purposes be broadened to include any transaction where it can reasonably be concluded that one of the main purposes of entering into the transaction is to obtain a tax benefit (even if there are other bona fide non-tax purposes).

The reporting obligation would extend to the taxpayer, any other person involved in procuring a tax benefit for the taxpayer, and a promoter or advisor (as well as certain other persons who are entitled to receive a fee with respect to the transaction). An exception would apply where disclosure would violate solicitor-client privilege.

Notifiable Transactions

Budget 2021 proposes to introduce a category of specific hallmarks known as “notifiable transactions”. The Minister of National Revenue would have the authority to designate, with the concurrence of the Minister of Finance, a transaction as a notifiable transaction. A taxpayer who enters into a notifiable transaction would be required to report the transaction to CRA. The reporting obligation would extend to the taxpayer, any other person involved in procuring a tax benefit for the taxpayer, and a promoter or advisor (as well as certain other persons who are entitled to receive a fee with respect to the transaction). An exception would apply where disclosure would violate solicitor-client privilege.

Notifiable transactions would include both transactions that CRA has found to be abusive and transactions identified as transactions of interest. The description of a notifiable transaction would set out the fact patterns or outcomes that constitute that transaction in sufficient detail to enable taxpayers to comply with the disclosure rule. It would also include examples in appropriate circumstances. Sample descriptions of notifiable transactions will be issued as part of the consultation.

Uncertain Tax Treatments

An uncertain tax treatment is a tax treatment used, or planned to be used, in income tax filings where there is uncertainty over whether the tax treatment will be accepted as being in accordance with tax law. At present, there is no requirement in Canada to disclose uncertain tax treatments. 

Budget 2021 notes that several other countries (e.g. the U.S. and Australia) require disclosure of uncertain tax positions by corporations meeting an asset threshold, and certain other conditions, where either the corporation or a related party has recognized, disclosed or recorded a reserve with respect to that tax position in its audited financial statements. A similar reporting regime is proposed to be implemented in Canada. Canadian public corporations, and those Canadian private corporations that choose to use International Financial Reporting Standards (IFRS), have an existing requirement to identify uncertain tax treatments for financial statement purposes. When such a corporation determines that it is not probable that the taxation authority will accept an uncertain tax treatment, the effect of that uncertainty is reflected in the corporation's financial statements. It is proposed that specified corporate taxpayers be required to report particular uncertain tax treatments to CRA where the following conditions are met:

• The corporation is required to file a Canadian tax return for the taxation year.
• The corporation has at least $50 million in assets. This threshold would apply to each individual corporation.
• The corporation, or a related corporation, has audited financial statements prepared in accordance with IFRS or other country-specific GAAP relevant for domestic public companies.
• Uncertainty in respect of the corporation’s Canadian income tax for the taxation year is reflected in those audited financial statements.

As public corporations are required to use IFRS, they would all be subject to these rules. Private corporations using Accounting Standards for Private Enterprise (ASPE) would not. The reporting requirement would also apply to a corporation that meets the asset threshold if it, or a related corporation, has audited financial statements prepared in accordance with another country-specific GAAP relevant for domestic public corporations.

Reassessment Period

In support of the new mandatory disclosure rules, Budget 2021 proposes that, where a taxpayer has a reporting requirement in respect of a transaction relevant to the taxpayer's income tax return for a taxation year, the normal reassessment period would not commence in respect of the transaction until the taxpayer has complied with the reporting requirement. As a result, if a taxpayer does not comply with a mandatory disclosure reporting requirement for a taxation year, a reassessment of that year in respect of the transaction would not become statute-barred.

Significant penalties would also apply to taxpayers and promoters who fail to file these required disclosures.

Avoidance of Tax Debts

The Income Tax Act has an anti-avoidance rule (Section 160) that is intended to prevent taxpayers from avoiding their tax liabilities by transferring their assets to non-arm’s length persons for insufficient consideration. In these circumstances, the rule causes the transferee to be jointly and severally liable with the transferor for tax debts of the transferor for the current or any prior taxation year, to the extent that the value of the property transferred exceeds the amount of consideration given for the property. Budget 2021 proposes a number of measures to address planning to circumvent this tracing of liability, as well as a penalty for those who devise and promote such schemes. 

The specific proposals would apply to arrangements where:

• a tax debt is deferred until after the year in which the assets are transferred;
• parties cease to be non-arm’s length prior to assets being transferred; or
• the overall result of a series of transactions are not consistent with the values at the time of the transfer.

A penalty would also be introduced for planners and promoters of tax debt avoidance schemes, mirroring an existing penalty in the so-called "third-party civil penalty" rules in the Income Tax Act in respect of certain false statements. The rules would apply in respect of transfers of property that occur on or after Budget Day. Similar amendments would be made to comparable provisions in other federal statutes (e.g., the Excise Tax Act for GST/HST).

Audit Authorities

CRA possesses the authority to audit taxpayers. Budget 2021 proposes amendments to confirm that CRA officials have the authority to require persons to answer all proper questions, and to provide all reasonable assistance, and to require persons to respond to questions orally or in writing, including in any form specified by the relevant CRA official. These measures would come into force on Royal Assent.

Other Measures 

Budget 2021 also announced plans for a wide variety of other programs, including: 

• Employee Ownership Trusts – Engaging with stakeholders to examine what barriers exist to the creation of employee ownership trusts in Canada, and how workers and owners of private businesses in Canada could benefit from the use of employee ownership trusts.
• Federal Minimum Wage – Establishing a federal minimum wage of $15 per hour, rising with inflation, for those workers in the federally regulated private sector. 
  
• Credit Card Transaction Fees – Stakeholder consultations will be undertaken with the expectation to outline detailed next steps in the 2021 Fall Economic Statement.
  
• Support for Businesses to Adopt New Digital Technologies – Investing $1.4 billion over four years to assist small and medium business to access grants and technical support associated with adopting new technologies. 
  
• Regional Relief and Recovery Fund – Extending the application deadline for similar support to the Canada Emergency Business Account (CEBA) offered under the Regional Relief and Recovery Fund and the Indigenous Business Initiative until June 30, 2021. The CEBA application deadline was previously extended to June 30, 2021.
  
• Additional Funding for CRA – Including $330.6 million over five years to invest in cybersecurity measures and $41.7 million over three years to reduce processing time for adjustments to personal tax returns.
  

C. International Measures

Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners

Budget 2021 proposes to introduce this new national 1% tax on the value of vacant or underused real estate owned by non-resident, non-Canadians. The tax would be levied annually beginning in 2022.

All owners of residential property in Canada, other than Canadian citizens or permanent residents of Canada, would be required to file an annual declaration for the prior calendar year in respect of each Canadian residential property they own, starting in 2023.

The requirement to file this declaration would apply irrespective of whether the owner is subject to tax in respect of the property for the year. The owner would be required to report information such as the property address, the property value and the owner’s interest in the property. A claim exemption may be available, for instance, where a property is leased to one or more qualified tenants in relation to the owner for a minimum period in a calendar year. Where no exemption is available, the owner would be required to calculate the amount of tax owing and report and remit it to CRA by the filing due date.

Penalties and interest would also be applicable, and the assessment period would be unlimited.

In the coming months, the government will release a backgrounder to provide stakeholders with an opportunity to comment on further parameters of the proposed tax.

Digital Services Tax (DST)

Budget 2021 proposes to implement a DST. The tax is “intended to ensure that revenue earned by large businesses – foreign or domestic – from engagement with online users in Canada, including through the collection, processing and monetizing of data and content contributions from those users, is subject to Canadian tax”. The DST would apply as of January 1, 2022. A 3% tax is proposed to be imposed on revenues generated from online marketplaces, social media, online advertising, and the sale or licensing of user data. The tax would only apply to businesses with global revenue of €750 million, and Canadian revenue of more than $20 million.

Written representations must be sent by June 18, 2021 to the Department of Finance Canada, Tax Policy Branch at: DST-TSN@canada.ca.

Enhancing Anti-Avoidance Provisions

Budget 2021 proposes measures implementing recommendations of the OECD’s “Base Erosion and Profit Shifting” project focusing on:

• restrictions on the deductibility of interest paid to non-arm’s length foreign entities to a fixed ratio of “tax EBIDTA” (earnings before interest, depreciation, tax and amortization), with exceptions for some CCPCs, and groups of Canadian entities whose aggregate net interest expense does not exceed $250,000; and
• hybrid mismatch arrangements which take advantage of differences in the income tax treatment in different countries, such as situations where the same expense can be deducted in multiple countries, or a deduction is available in one country which is not taxable, within a reasonable period of time, in the other.

These measures will be the subject of draft legislation to be released for consultation in the summer, and would not apply before July 1, 2022.

D. Sales and Excise Tax

GST New Housing Rebate

The GST New Housing Rebate entitles homebuyers to recover 36% of the GST (or the federal component of the HST) paid on the purchase of a new home priced up to $350,000. The maximum rebate is $6,300. The GST New Housing Rebate is phased out for new homes priced between $350,000 and $450,000. There is no GST New Housing Rebate for new homes priced at $450,000 or more. In addition to these price thresholds, several other conditions must be met.

In particular, the purchaser must be acquiring the new home for use as their primary place of residence or as the primary place of residence of a relation (i.e., an individual related by blood, marriage, common-law partnership or adoption, or a former spouse or former common-law partner). Under the current rules, if two or more individuals who are not considered relations for GST New Housing Rebate purposes buy a new home together, all of those individuals must meet this condition – otherwise none of them will be eligible for the GST New Housing Rebate. Budget 2021 proposes to make the GST New Housing Rebate available as long as the new home is acquired for use as the primary place of residence of any one of the purchasers or a relation of any one of the purchasers.

This measure would apply to agreements of purchase and sale entered into after Budget Day. For owner-built homes, the measure would apply where construction or substantial renovation of the residential complex is substantially completed after Budget Day.

Input Tax Credit (ITC) Information Requirements

Businesses can claim ITCs to recover the GST/HST that they pay for goods and services used as inputs in their commercial activities. Businesses must obtain and retain certain information in order to support their ITC claims, such as invoices or receipts.

The information requirements for these documents are graduated, with progressively more information required when the amount paid or payable in respect of a supply equals or exceeds thresholds of $30 or $150. Budget 2021 proposes to increase these thresholds to $100 (from $30) and $500 (from $150).

In addition, under the ITC information rules, either the supplier or an intermediary (i.e., a person that causes or facilitates the making of a supply on behalf of the supplier) must provide its business name and, depending on the amount paid or payable in respect of the supply, its GST/HST registration number, on the supporting documents. However, for the purposes of these rules, an intermediary currently does not include a billing agent (i.e., an agent that collects consideration and tax on behalf of an underlying vendor but does not otherwise cause or facilitate a supply). Instead, the recipient of the supply must obtain the business name and registration number of the underlying vendor. Budget 2021 proposes to allow billing agents to be treated as intermediaries for purposes of the ITC information rules, removing this complexity.

These measures would come into force on the day after Budget Day.

Application of GST/HST to E-commerce

In the Fall Economic Statement 2020, the government proposed a number of changes to the GST/HST system relating to the digital economy, applicable to non-resident vendors supplying digital products or services, shipping goods from Canadian fulfillment warehouses, or facilitating short-term rental accommodation in Canada.

Under the proposals, GST/HST would be required to be collected and remitted by these entities commencing on July 1, 2021. Simplified registration and remittance frameworks would be available to these entities. Budget 2021 proposes amendments to these proposals to take stakeholder feedback into account, including safe harbour rules to protect platform operators who reasonably relied on the information provided by a third-party supplier, and clarifying several aspects of the legislation.

Excise Duty on Vaping Products

Budget 2021 proposes to implement a tax on vaping products in 2022 through the introduction of a new excise duty framework. Feedback from industry and stakeholders on these proposals will be accepted until June 30, 2021 at: fin.vaping-taxation-vapotage.fin@canada.ca.

The new excise duty framework would be similar to existing excise duties on tobacco, wine, spirits, and cannabis products. It would apply to vaping liquids that are produced in Canada or imported and that are intended for use in a vaping device in Canada. These liquids generally contain vegetable glycerin, as well as any combination of propylene glycol, flavouring, nicotine, or other ingredients, all of which must comply with Health Canada regulations. The new duty would apply to these vaping liquids whether or not they contain nicotine. Cannabis-based vaping products would be explicitly exempt from this framework, as they are already subject to cannabis excise duties under the Act.

The proposed framework would impose a single flat rate duty on every 10 millilitres (ml) of vaping liquid or fraction thereof, within an immediate container (i.e., the container holding the liquid itself). This rate could be in the order of $1.00 per 10 ml or fraction thereof. The last federal licensee in the supply chain who packaged the vaping product for final retail sale, including vape shops holding an excise licence, as applicable, would be liable to pay the applicable excise duty.

Registration and licensing would not be required for individuals who mix vaping liquids strictly for their own personal consumption.

Tax on Select Luxury Goods

Budget 2021 proposes to introduce a tax on the retail sale of new luxury cars and personal aircraft priced over $100,000, and boats priced over $250,000, effective as of January 1, 2022. For vehicles, aircraft and boats sold in Canada, the tax would apply at the point of purchase if the final sale price paid by a consumer (not including GST/HST or provincial sales tax) is above the $100,000 or $250,000 price threshold, as the case may be. Importations of vehicles, aircraft and boats would also be subject to the tax.

The tax would apply to:

• Luxury Vehicles – New passenger vehicles typically suitable for personal use, including coupes, sedans, station wagons, sports cars, passenger vans and minivans equipped to accommodate less than 10 passengers, SUVs, and passenger pick-up trucks. It would not apply to motorcycles and certain off-road vehicles, such as all-terrain vehicles and snowmobiles, racing cars (i.e., vehicles that are not street legal and are owned solely for on-track or off-road racing); and motor homes (commonly known as recreational vehicles, or RVs) that are designed to provide temporary living, sleeping, or eating accommodation for travel, vacation, seasonal camping, or recreational use. Off-road, construction, and farm vehicles would fall outside the scope of the tax. Similarly, certain commercial (e.g., heavy-duty vehicles such as some trucks and cargo vans) and public sector (such as buses, police cars and ambulances) vehicles, as well as hearses, would not be subject to the tax.
• Aircraft – New aircraft typically suitable for personal use, including aeroplanes, helicopters and gliders. As a general rule, it would not apply to large aircraft typically used in commercial activities, such as those equipped for the carriage of passengers and having a certified maximum carrying capacity of more than 39 passengers. Smaller aircraft used in certain commercial (such as public transportation) and public sector (police, military and rescue aircraft, air ambulances) activities would also be excluded.
• Boats – New boats such as yachts, recreational motorboats and sailboats, typically suitable for personal use. Smaller personal watercraft (e.g., water scooters) and floating homes, commercial fishing vessels, ferries, and cruise ships would be excluded.
• For vehicles and aircraft priced over $100,000, the amount of the tax would be the lesser of 10% of the full value of the vehicle or the aircraft, or 20% of the value above $100,000. For boats priced over $250,000, the amount of the tax would be the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

The tax would generally apply at the final point of purchase of new luxury vehicles, aircraft and boats in Canada. In the case of imports, application would generally be either at the time of importation (in cases where there will not be a further sale of the goods in Canada) or at the time of the final point of purchase in Canada following importation.

Upon purchase or lease, the seller or lessor would be responsible for remitting the full amount of the federal tax owing, regardless of whether the good was purchased outright, financed, or leased over a period of time. Exports will not be subject to the tax.

GST/HST would apply to the final sale price, inclusive of the proposed tax, so GST/HST would also be payable on this new tax. Further details are to be announced in the coming months.

E. Electronic Filing, Payments and Certification

Budget 2021 proposes a number of measures which would better facilitate CRA’s ability to operate digitally, while also enhancing security.

Notices of Assessment (NOA)

Budget 2021 proposes to provide CRA with the ability to send certain NOAs electronically without the taxpayer having to authorize CRA to do so. This proposal would apply in respect of individuals who file their income tax return electronically and those who use the services of a tax preparer that files their return electronically. Taxpayers who file their income tax returns in paper format would continue to receive a paper NOA from CRA. This measure would come into force on Royal Assent of the enacting legislation.

Correspondence with Businesses

Budget 2021 proposes to change the default method of correspondence for businesses that use CRA's My Business Account portal to electronic only. However, businesses could still choose to also receive paper correspondence. This measure would come into force on Royal Assent of the enacting legislation.

Information Returns – T4A and T5

Budget 2021 proposes to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) and T5 (Statement of Investment Income) information returns to provide them electronically without having to also issue a paper copy and without the taxpayer having to authorize the issuer to do so. This measure would apply in respect of information returns sent after 2021.

Electronic Filing Thresholds

Budget 2021 proposes a number of measures which would limit the ability to file paper returns, including:

• persons or partnerships that file more than 5 (reduced from 50) information returns of a particular type (e.g. T4 or T5 slips) for a calendar year would be required to file them electronically;
• professional tax preparers would be required to file electronically where they prepare more than a total of 5 (reduced from 10) corporate or income tax returns for a calendar year. The exception for trusts would be removed; and
• professional tax preparers that file electronically would only be permitted to file a maximum of 5 (reduced from 10) paper returns of each type per calendar year.

These measures would apply in respect of calendar years after 2021.

The mandatory electronic filing thresholds for returns of corporations under the Income Tax Act, and of GST/HST registrants (other than for charities or Selected Listed Financial Institutions) under the Excise Tax Act would be removed, resulting in most corporations and GST/HST registrants being required to file electronically.

Electronic Signatures

Budget 2021 proposes to allow electronic signatures on certain prescribed forms, as follows:

• T183, Information Return for Electronic Filing of an Individual's Income Tax and Benefit Return;
• T183CORP, Information Return for Corporations Filing Electronically;
• T2200, Declaration of Conditions of Employment;
• RC71, Statement of Discounting Transaction; and
• RC72, Notice of the Actual Amount of the Refund of Tax.

This measure would come into force on Royal Assent of the enacting legislation.

Electronic Payments

Budget 2021 proposes that electronic payments be required for remittances over $10,000 under the Income Tax Act and that the threshold for mandatory remittances for GST/HST purposes be lowered from $50,000 to $10,000. Budget 2021 also proposes to clarify that payments required to be made at a financial institution include online payments made through such an institution. This measure would apply to payments made on or after January 1, 2022.

F. Previously Announced Measures

Budget 2021 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

• Numerous proposals in respect of the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and the Lockdown Support.
• Proposals in respect of temporary adjustments due to COVID-19 to the child care expense and disability supports deductions and the automobile standby charge.
• Proposals released on December 16, 2020 extending timelines in respect of flow-through shares by 12 months.
• Proposals released on December 15, 2020 relating to capital cost allowance claims for purchases of zero-emission automotive equipment and vehicles.
• The anti-avoidance rules consultation and the income tax measures announced in the Fall Economic Statement in respect of registered disability savings plans, employee stock options and patronage dividends paid in shares.
• Measures announced in the 2020 Fall Economic Statement regarding GST/HST relief on face masks and face shields.
• Proposals announced on November 27, 2020 to facilitate the conversion of health and welfare trusts to employee life and health trusts.
• Proposals announced on July 2, 2020 providing relief for deferred salary leave plans and registered pension plans during the COVID-19 pandemic.
• Proposals released on April 17, 2020 to clarify support for Canadian journalism.
• The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
• The income tax measure announced on December 9, 2019 to increase the basic personal amount to $15,000 by 2023.
• The income tax measure announced on August 29, 2019 to clarify the definition of a shared-custody parent.
• Proposals released on July 30, 2019 to implement Budget 2019 income tax measures in respect of multi-unit residential properties, permitting additional types of annuities under registered plans, contributions to specified multi-employer pension plans for older members, pensionable service under an individual pension plan, the allocation to redeemers methodology for mutual funds, character conversion transactions, electronic delivery of requirements for information, the transfer pricing rules, the foreign affiliate dumping rules, and cross-border share lending arrangements.
• Measures released on July 30, 2019 modifying previously enacted measures from the 2018 Fall Economic Statement and Budget 2019, in respect of the accelerated investment incentive, the expensing of the cost of machinery and equipment used in the manufacturing or processing of goods and the cost of specified clean energy equipment, and the expensing of the cost of certain zero-emission vehicles.
• Proposals released on May 17, 2019 and on July 27, 2018 relating to GST/HST.
• Measures announced in Budget 2018 to implement enhanced reporting requirements for certain trusts to provide additional information on an annual basis.
• Measures confirmed in Budget 2016 relating to the GST/HST joint venture election.

February 1, 2021

HASCAP offers government-guaranteed, low-interest loans of up to $1 million. Chains and multiple-location businesses could be eligible for up to $6.25 million.

HASCAP is available to all small and medium sized businesses with revenues decrease of 50% due to pandemic.

Terms of loans:

• low interest with a repayment term of up to 10 years

• up to a 12 month postponement of principal payments

• available until June 30, 2021

To be eligible:

• a year-over-year revenue decline of at least 50% in three months, within the eight months prior to their application;

• have previously applied for either CEWS or CERS; and

• have been financially stable and viable pre-COVID

Applications open: February 1,2021

Contact your primary financial institution to find out more.

Note: You can apply at one financial institution only.

November 25, 2020

CERS would cover part of eligible businesses’ commercial rent or property expenses, starting on September 27, 2020 until June 2021.

This subsidy will provide payments directly to qualifying renters and property owners, without requiring the participation of landlords.

The CERS provides both a base subsidy and, in some cases, a lockdown support amount.

Some of the key points are:

ELIGIBILITY

To be eligible to receive the rent subsidy, you must meet all four of the following criteria - you:

    1. Meet at least one of these conditions:

        a. You had a CRA business number on September 27, 2020.

            You will need to set one up if you qualify under b or c

            OR

        b. You had a payroll account on March 15, 2020, or another person or partnership made payroll remittances on your behalf

            OR

        c. You purchased the business assets of another person or partnership who meets condition 2 above, and have made an election under the special asset             acquisition rules

            OR

        d. You meet other prescribed conditions that might be introduced

            Note: there are no prescribed conditions at this time

    2. Are an eligible business?

        Eligible businesses include:

            a. individuals (other than a trust)

            b. corporations (or trusts)

            c. non-profit organizations

            d. partnerships consisting of eligible employers

    3. Have experienced a drop in revenue?

        • The rate your revenue has dropped is only used to calculate how much subsidy you receive for these periods. There is no minimum revenue drop required to             qualify for the subsidy.

        • Revenue calculation methods available:

            o Calculate revenues under the accrual or cash method

            o And either compare:

                 Monthly revenue year-over year

                 Each month with the average of January and February 2020

            o Once the method is selected you are required to use the same approach for the entire duration of the program.

        • Rate of CERS will depend on the level of revenue decline:

            o Base subsidy

            o And the Top-up subsidy (Lockdown support)

            See CERS rate calculation below.

    4. Have eligible expenses?

        To apply for CERS, you must have a qualifying property. Only certain expenses you pay for qualifying properties are eligible for CERS.

QUALIFYING EXPENSES

Maximum eligible expenses per period

        • $75,000 per business location (base and top-up)

        • $300,000 in total for all locations (including any amounts claimed by affiliated businesses)

            o applies to the base subsidy only

            o there is no maximum for the top-up subsidy

Expenses eligibility criteria

        • Only amounts paid or payable to an arm’s-length party can be included

        • The expense must be in respect of the claim period

        • The expense must be paid or payable under a written agreement in place before October 9, 2020 (or a renewal on substantially similar terms or assignment of             such an agreement)

Eligible Rent Expenses

        • Rent (including rent based on a percentage of sales, profit or similar criteria)

        • Amounts required to be paid or payable by you under a net lease (either to the lessor or a third party). Includes:

            o base rent

            o regular payments for customary operating expenses

            o property and similar taxes

            o regular payments to the lessor for customary ancillary services

Eligible expenses if you own the qualifying property:

        • Property and similar taxes

        • Property insurance

        • Interest on commercial mortgages for the purpose of purchasing real property

            o Your mortgage amount cannot exceed the lesser of:

                 the lowest principal amount secured by one or more mortgages on the property at any time it was acquired

                    OR

                 the cost amount of the property

CERS RATE

Base subsidy rate:  

Top-up (lockdown support) Rate

You can receive a lockdown support amount for certain locations affected by public health restrictions.

If you have a 0% base rent subsidy rate, you cannot claim a top up for any location.

Your CERS top-up (lockdown support) rate is 25% on lockdown, calculated as:

        • 25% (fixed top-up rate)

        • multiplied by days the location was locked down due to the COVID-19 pandemic

        • divided by 28 (the days in the CERS period)

        • equals Your top-up (lockdown support) rate

E.g. If your location was closed for 15 days due to the lockdown.

25% x (15 lockdown days/ 28 days in CERS period) = 13.39%

You can also use the online calculator to find your revenue drop while calculating how much subsidy you may receive.

DEADLINES

Application must be filed no later than 180 days after the end of a claim period.

More details: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy.html

January 21, 2021

Ontario Small Business Support Grant

Applications are open for the new Ontario Small Business Support Grant (up to $20,000), which helps small businesses that are required to close or significantly restrict services under the Provincewide Shutdown effective December 26, 2020.

Eligibility

To receive the grant, a small business must:

    • be required to close or restrict services subject to the Provincewide Shutdown effective 12:01 a.m. on December 26

    • have fewer than 100 employees at the enterprise level

    • have experienced a minimum of 20 per cent revenue decline comparing April 2020 to April 2019 revenues. New businesses established since     April 2019 are also eligible provided they meet the other eligibility criteria

If you meet the eligibility criteria apply for this grant here:

https://www.ontario.ca/page/businesses-get-help-covid-19-costs#section-4

November 23, 2020

Funding Available:

    1. Property Tax and Energy Cost Rebate Grants for businesses that were required to shut down or significantly restrict services due to provincial public health         measures. Provides a rebate to eligible businesses in respect of property taxes and energy bills.

    2. Ontario's Main Street Relief Grant providing up to $1,000 for PPE costs to eligible small businesses across Ontario with 2 to 9 employees

Apply here: https://www.app.grants.gov.on.ca/msrf/#/

Property Tax and Energy Bill Rebates

Eligibility

Support is available for businesses that were required to close or significantly restrict services as a result of provincial modified Stage 2 public health measures announced on October 9, 2020. Going forward, areas categorized as control or lockdown qualify.

- Types of businesses that are eligible for support include:

    • restaurants and bars

    • gyms, facilities for indoor sports and recreational fitness activities

    • performing arts and cinemas

    • bingo halls, gaming establishments, casinos, conference centres and convention centres

    • community centres, multi-purpose facilities, and museums

    • personal care services (with the exception of oxygen bars)

    • racing venues

    • meeting or event space

    • in-person teaching and instruction

- Additional businesses that would become eligible if a region is in lockdown include:

    • retail required to close for in-person shopping

    • shopping malls

    • personal services

    • driving instruction

    • tour and guide services

    • photography services

    • campgrounds

- Businesses will not be eligible if they are:

    • located outside provincial modified Stage 2 or control and lockdown regions

    • within the areas subject to public health restrictions, but were not required to close or significantly restrict services

    • owned by the federal, provincial, or a municipal government, or by a person holding federal or provincial office

What you’ll get

- Eligible businesses could get rebates for:

    • municipal and education property taxes

    • energy costs, including electricity and natural gas (or where natural gas is not available, propane and heating oil)

- Funding will cover the entire length of time that regionally targeted public health restrictions are in place.

What you’ll need to apply

To apply, you will have to submit proof of costs.

    • For property tax rebates, this includes your property tax bills

    • For energy cost rebates, this includes a digital copy of the first energy bill (including electricity, natural gas, propane or other) you received on or after the day         Stage 2 restrictions were put in place in your region. You can also submit other energy bills if your business is heated by propane or heating oil.

Ontario's Main Street Relief Grant

Eligibility

To be eligible, your business must have two to nine employees and be in one of the following sectors:

    • retail

    • accommodation and food services

    • repair and maintenance

    • personal and laundry services

What you’ll get: one-time grants of up to $1,000.

What you’ll need to apply

You will need to submit receipts or proof of costs for PPE purchased since March 17, 2020. This includes:

    • gloves, gowns, face shields, eye protection, masks, sanitizer, sanitizing wipes

    • thermometers, temperature monitors or cameras

    • physical changes, including the installation of hand sanitizer stations and plexiglass dividers

    • signs to guide or inform customers and employees

https://innovation.ised-isde.canada.ca/s/?language=en_CA

For a long time, our firm has been using revenue of $100,000 and $200,000 as a general benchmark for deciding whether or not to incorporate. Below $100,000 not, and above $200,000 yes, and anything in between, it depends. 

Maybe we should amend our old numbers due to inflation, but the choice is more complicated than that. 

TAX ADVANTAGES

    1. More to invest after tax

        Ontario corporations pay tax at 12.5 % on the first $500,000 of income, while personal income at the top tax bracket above $220,000 is taxed at 53 %.

        If you don’t need to spend all your income, the more than 40% in tax savings stays in the corporation and can be used for investment purposes. The fact that         PREC can earn investment income in the Corp either investing in real estate or stock portfolio is a great advantage. 

    2. Possible tax deferral

        Corporations pay tax when earned (the accrual basis) and individuals pay tax when received (cash basis). A corporation can choose its first fiscal year end to be         any date (as long as its within 53 weeks of incorporating). For this reason, having a July or August year-end, allows for the payment of a year-end bonus that         would fall early into the next taxation year personally.

        A corporation is allowed to expense a year-end bonus, which is salary to himself when declared, and pay tax personally when received, as long as paid within 6         months. With a PREC you would receive a salary from your own corporation and receive a T4 for personal tax filing purposes.  

        Another advantage of a summer year end is your accountant will have your year-end done before the end of December, and we may choose to pull some income         forward to the current year if there’s an opportunity to declare income in a lower bracket.

    3. Income splitting

        A spouse, parent or child can own non-voting, non-equity shares and receive dividends which, if they are taxed at a lower rate would reduce the family’s overall         tax.

        There are rules called TOSI introduced recently that are designed to stop this, but the work around for this to be allowed, is the family member must work a         minimum of 20 hours a week.

    4. Holding company

        A holding company owned by the principle is allowed and if desired, income from the active business (PREC) can pay tax free dividends to the holding company,         and eliminate exposure to creditors of the active business. More importantly a holding company for the sale of the business mentioned in point 5 is a big         advantage.

    5. Lifetime Capital gains exemption (currently $883,384)

        The sale of shares of a corporation are eligible for a tax-free capital gain. This would only apply to the agents shares and not the family member(s). The timing of         the sale and the payment can be at different times.

        Sales are usually not done to the succeeding agent but to his holding company (point 4 above). That way the eventual source of funds, would be a tax-free         intercompany dividend from the active company (PREC) to the holding company of the future profits.

        Effectively, the purchase is paid with low tax paid profits (taxed at 12.5 %). This would be more likely used by a broker that had a team.

TAX DISADVANTAGES

        Cost of incorporating and additional accounting fees for corporate filings of $2,000 to $5,000.

August 31, 2020

For the 2020 tax year, the Canada Revenue Agency (CRA) will be introducing additional reporting for the T4 slip, Statement of Remuneration Paid.

How to report employment income during COVID-19 pay periods

For the tax year 2020, in addition to reporting employment income in Box 14 or Code 71, use new other information codes when reporting employment income and retroactive payments in the following periods:

        • Code 57: Employment income – March 15 to May 9

        • Code 58: Employment income – May 10 to July 4

        • Code 59: Employment income – July 5 to August 29

        • Code 60: Employment income – August 30 to September 26

Eligibility criteria for the CERB, CEWS, and CESB is based on employment income for a defined period. The new requirement means employers should report income and any retroactive payments made during these periods.

Example

If you are reporting employment income for the period of April 25 to May 8, payable on May 14, use code 58.

Online via My Business Account

Once you log in, select Manage direct deposit under Payroll:

Sign up through your Financial Institution

Log into your business bank account and you see a banner to enroll for direct deposit from the Canada Revenue Agency (you might have received an email from your bank as well)

You will need to enter your payroll account #: 12345 6789 RP000X

May 14, 2020

Applications open May 15, 2020 via CRA My Account.

IMPORTANT: Sign up for direct deposit through your Financial Institution to get funds faster!

Log into your bank account and you will see a banner to enroll for direct deposit from the Canada Revenue Agency).

For students who expect to complete high school between June 7 to December 31, 2020 – you are eligible for 2 periods only (July 5 to August 1 and August 2 to August 29).

https://www.canada.ca/en/revenue-agency/services/benefits/emergency-student-benefit/cesb-how-apply.html

Benefit:

• The payment will be $1,250/month or $2,000/month with dependents or if you have a disability
• will be made in respect of 4-week periods (May/ June/ July/ August) Deadline: Must apply by September 30, 2020

Deadline: Must apply by September 30, 2020

Conditions:

1. Must have met one of these three conditions:
   • been enrolled, at any time between December 1, 2019 and August 31, 2020, in a post-secondary educational program that leads to a degree, diploma or certificate;
   • graduated from secondary school in 2020, has applied for enrollment in such a post-secondary educational program that is scheduled to begin before February 1, 2021 and plans to enroll in the program if their application is accepted; or
   • is a member of a class of persons that is prescribed by regulation.
2. For reasons related to COVID-19 and whether as an employee or in self-employment, they are unable to work, are seeking work and unable to find it, or are working but are paid less $1,000, during the four-week period for which they apply for the benefit
3. They cannot receive any employment or self-employment income over $1,000, EI benefits, CERB, maternity/paternity benefits, or other prescribed income.

No interest is payable on any amount owing as a result of an erroneous payment or overpayment.

November 25, 2020

For information on the Canada Emergency Rent Subsidy: CLICK HERE

October 13, 2020

CECRA is being replaced with Canada Emergency Rent Subsidy (“CERS”)

New Canada Emergency Rent Subsidy will provide support directly to qualifying tenants and landlords that have been affected by COVID-19.

    • Available retroactively from September 27 and will be available until June 2021

    • To subsidizes up to 65% of eligible expenses incurred by businesses, charities and non-profits that have suffered a revenue drop, on a sliding scale, similar to the        CEWS

    • In addition to the 65% subsidy, a top-up subsidy of 25% will be available for organizations temporarily shut down due to a mandatory public health order issued           by a qualifying public health authority (such as the measures announced for Toronto, Ottawa and Peel).

Further details to follow.

September 24, 2020

Your property owner can now opt-in for the September extension for CECRA.

    • The September extension is based on the existing program parameters for the April, May and June period.

    • You automatically qualify for the September extension without re-assessing a revenue decline for that month, if you are/were eligible for the original period. No       additional documents are required.

    • A written notice will confirm the extension of your Rent Reduction Agreement. Your property owner must notify you in writing that they have requested the      extensions on your behalf.

    • New applicants can apply for up to 5 months of rent assistance (from April through August) all at once. Once the initial application is pre-approved, your       property owner can opt-in for September.

    • This is the final extension of the program.

If your property owner has not yet submitted their application or is still creating it, the deadline to submit new applications is September 30th, 2020.

If your property owner has been approved for rental assistance and wants to opt-in for the extensions only, the deadline to submit the request is October 30th, 2020.

September 10, 2020

CECRA will be extended by one month to help eligible small businesses pay rent for September. Current CECRA application deadlines will also be extended to accommodate this extension.

August 21, 2020

If a property owner has been approved for rental assistance and is requesting the July and/or August extension, the deadline to submit the application is September 14, 2020.

        o The August extension is based on the existing program parameters for the April, May and June period. No new documents are needed to opt-in.  

        o Not all tenants in the original application need to be included in the request for the July and/or August extension.

        o Property owners can only opt-in once and no new tenants can be added.

August 4, 2020

CECRA is extended to August for those tenants approved in the April, May, June and July application.

If a business had an average revenue decline of 70% or more in April, May and June, they are deemed eligible for the additional month of rent relief.

If you have been approved for rental assistance and you are applying for the July and/or August extension, your deadline to submit your application is September 14, 2020.

If you have not yet submitted your application or are still creating it, your deadline to submit new applications that include the July and/or August extension is August 31, 2020.

July 30, 2020

The July Extension Opt-In is Now Available.

If you have previously been approved, you automatically qualify and no additional documents are required. You must log into the portal and opt-in for your impacted tenants.

If you haven’t yet applied for CECRA for small businesses, you can apply for July as part of your entire application. 

May 21, 2020

Application open May 25, 2020.

We aren’t in June yet — should I wait to apply? 

No, you must apply for all 3 months at the same time and all impacted tenants must be included on a single application.

Your tenant can use forecasts for the month of June. The eligibility on the 70% factor will be determined on the average of April, May and then, forecasting June revenues.

Source: https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

May 19, 2020

This program will lower rent by 75% for small businesses that have been affected by COVID-19.
CMHC will provide forgivable loans to eligible commercial property owners.
• The loans will cover 50% of the gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020.
• The property owner will be responsible for no less than half of the remaining 50% of the gross rent payments (paying no less than 25% of the total).
• The small business tenant will be responsible for no more than half of the remaining 50% of the gross rent payments (paying no more than 25% of the total).

Am I eligible?
Tenants: Contact your landlord

Landlords: To qualify for CECRA for small businesses, the property owner must meet the following requirements:

• own commercial real property occupied by one or more impacted small business tenants
• entered into a lease with the eligible tenant on or before April 1, 2020
• entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted small business tenant’s rent by at least 75%. Ensure rent reduction agreement with impacted tenants includes:
• a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds, and
• a declaration of rental revenue included in the attestation Property owners with or without mortgages are eligible to apply.

What is an impacted small business tenant?
Impacted small business tenants are businesses, including non-profit and charitable organizations who:

• pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement),
• generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level), and have experienced at least a 70% decline in pre-COVID-19 revenues Eligible small business tenants who are in sub-tenancy arrangements are eligible To measure revenue loss, small businesses can compare revenues in April, May and June of 2020 to that of the same month of 2019. They can also use an average of their revenues earned in January and February of 2020.

How do I apply?
Application portal to open later this month

What will you need for your application?

1. Attestations:
   a. Tenant or Sub-tenant Attestation – Click Here for Sample
   Each eligible tenant must attest to the meeting the program criteria (see What is an impacted small business tenant).

   b. Property Owner’s Attestation – Click Here for Sample
   Property Owner tenant must attest to the meeting the program criteria (see Am I Eligible?).

2. Agreements:
   a. Rent Reduction Agreement – Click Here for Sample
   Agreement with the eligible tenant to confirm rent reduction based on the program criteria.
   
   b. Forgivable Loan Agreement Property owner must agree to the terms and conditions outlined here.

3. Other Information:
   a. Property information: Property address, Property type, Property tax statement and latest rent roll and number of commercial units
   b. Applicant information: Banking information and Contact details
   c. Tenant information: Tenant contact information, Registered business name, Leased area and monthly gross rent for the period April, May, June 2020

What’s the deadline?
The deadline to apply is August 31, 2020.

Can a property owner whose small business is the only tenant apply?
YES, landlords and tenants who are not at arm’s length will be included in the program as long as there was a valid and enforceable lease agreement in place as at April 1, 2020 and the rent under the lease is at market rates.

How can the property owner use the CECRA funds?
In order of priority, funds can be used for:

1. Reimbursing the tenant for any rent paid above the 25% during the eligible period unless the tenant chooses to apply the previously paid rent against future rent,
2. Any costs and expenses relating directly to the property, including any financing held by the property owner operation and maintenance and repaid obligations (such as common costs of common area maintenance, property taxes, insurance and utilities)

When is the CECRA loan forgiven?
December 31, 2020.

Source: https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

March 8, 2021

January 21, 2021

Recovery Benefits - International Travel
The government indicated that they are changing the eligibility rules so that international travelers who are required to quarantine upon their return to Canada will not be eligible to receive the Canada Recovery Sickness Benefit, the Canada Recovery Caregiving Benefit or the Canada Recovery Benefit during the period of their quarantine. The intended rule is to come into effect retroactively on January 3, 2021.

November 23, 2020

October 27, 2020

The CRA has issued FAQs on:
    1.     Canada Recovery Benefit (CRB)
            https://www.canada.ca/en/services/benefits/ei/cerb-application/transition/questions.html

    2.     Transition to Employment Insurance
            https://www.canada.ca/en/services/benefits/ei/cerb-application/transition/ei-questions.html

Employment benefits

    1)    Commuting

            If an employee is working from home because the regular place of employment is closed, the CRA would not consider the employee to have received a taxable             benefit where the employer pays for, reimburses or provides a reasonable allowance for commuting costs incurred to allow the employee to travel to their             regular place of employment, to, for example, pick up computer equipment or perhaps other office equipment so that they can work from home.  

    2)     Home Office Equipment

            CRA will not consider an employee to have received a taxable benefit where the employer pays or reimburses up to $500 of computer or home office equipment             to enable the employee to carry out their duties. Amounts in excess of $500 must be included as a taxable benefit.  

Disability one-time payment

Deadline to apply for the Disability Tax Credit (DTC): December 31, 2020 extended 

October 13, 2020

September 11, 2020

August 4, 2020

Disability Support

You do not have to apply to receive this payment. The CRA expects to issue the payments beginning this fall.

Non-filer benefit repayments

Filing of 2019 personal tax return prior to September is recommended.
Non-filers will have their estimated payments stop in October and may have to repay what was received in July, August, and September 2020.

CERB:

CERB is set to end September 26, 2020

July 30, 2020

Payment and Interest 
Payment due date for current year individual tax returns (including instalments): extended to September 30, 2020.
No further filing deadline extensions

CRA will be waiving interest on existing tax debts related to: 
    • individual income tax returns from April 1, 2020, to September 30, 2020
    • and from April 1, 2020, to June 30, 2020, for HST returns

June 15, 2020

Disability Support is: 

• one-time, tax-free, non-reportable payment of $600;
• Eligible persons include any who have 
    o     a Disability Tax Credit certificate provided by the Canada Revenue Agency;
    o     Canada Pension Plan disability benefit or Quebec Pension Plan disability benefit; and
    o     disability supports provided by Veterans Affairs Canada;
• if you are eligible for the Disability Tax Credit but have not yet applied, you must apply by September 25, 2020. 
• Seniors who are eligible for the one-time payment to persons with disabilities would receive a total of $600 in special payments.  

June 1, 2020

Canada Emergency Response Benefit:

Maximum number of periods that can be claimed is 6 four-week periods i.e. 24 weeks

Return or repay CERB if you no longer meet the eligibility via: 

• CRA My Account  

• Online Banking:

        o Sign in to your financial institution's online banking service
        o Under "Add a payee" look for an option such as: CRA (revenue) – tax instalment
        o Enter your 9 digit social insurance number (SIN) as the CRA account number

• By mail:
        o Mail a cheque or money order to the CRA:
        o Make the payment out to "Receiver General for Canada"
        o Indicate it is for "Repayment of CERB"
        o Indicate which eligibility period you are repaying
        o Include your Social Insurance Number (SIN) or your Temporary Tax Number (TTN)
        o Mail your payment:

            Revenue Processing – Repayment of CERB
            Sudbury Tax Centre
            1050 Notre Dame Avenue

            Sudbury ON P3A 0C3

April 27, 2020

Pandemic Pay

For front-line workers as part of a temporary pandemic payment to recognize their efforts in the fight against COVID-19 the government is providing:

• Additional $4/hour worked on top of their regular wages
• monthly lump sum payments of $250 for four months to eligible front line workers who work over 100 hours per month pay will be effective for 16 weeks, from April 24, 2020 until August 13, 2020

List of eligible workplaces and workers can be found here: https://www.canada.ca/en/department-finance/economic-response-plan.html

Canada Emergency Student Benefit (CESB)

• would provide support to students and new graduates who are:
  • not be eligible for the Canada Emergency Response Benefit (CERB) or Employment Insurance, or
  • unable to work due to COVID-19.
• benefit would provide $1,250 per month for eligible students or $1,750 per month for eligible students with dependents or disabilities
• benefit would be available from May to August 2020.

More details here: https://www.jarvisryan.com/admin/communications/21

https://www.canada.ca/en/department-finance/economic-response-plan.html April 15, 2020

n/department-finance/economic-response-plan.html

April 15, 2020

Canada Emergency Response Benefit (CERB):

Changes to the eligibility rules to:

• Allow people to earn up to $1,000 per month while collecting the CERB
• Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work because of COVID-19
• Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job because of COVID-19

Note: you must still meet the criteria: you stopped or will stop working due to COVID-19, and:

• You are applying for the first time

For at least 14 days in a row during the 4-week payment period, you do not expect to receive more than $1,000 (before taxes) from employment and self-employment income

• You are re-applying for another period

You do not expect your situation to change during this 4-week period and you do not expect to receive more than $1,000 (before taxes) from employment and self-employment income

A new temporary salary top-up for low-income essential workers:

The Federal government will work with provinces and territories through a new transfer to cost-share a temporary top up to the salaries of low-income workers (those who earn less than $2,500 per month on a full-time basis), that the provinces and territories have deemed essential in the fight against COVID-19.

More details will be released shortly.

April 9, 2020

Canada Emergency Response Benefit

To apply for the Canada Emergency Response Benefit via CRA My Account you do not need a security code.

You do not have to live in Canada to qualify but you have to be a tax resident of Canada

Ontario Child Support

Helping families pay for the extra costs associated with school and daycare closures during the COVID-19 outbreak by providing a one-time payment of $200 per child up to 12 years of age, and $250 for those with special needs, including children enrolled in private schools.

If previously registered for the strike days, this will automatically be paid otherwise have to apply.

Apply here: https://www.ontario.ca/page/get-support-families

April 2, 2020

Other Support Available:

Mortgage: A six- month mortgage deferral program implemented on a case-by-case basis for your primary residence. Contact your bank.

Rent: Discuss alternate arrangements with your landlord, if required. No deferral is mandated however no eviction orders will be issued until further notice.

Property Tax: Payment deferral options vary by municipality, contact your municipality for more information.

Filing and Payment Extension:

2019 tax return: Due June 1, 2020

Any new income tax balances due, or installments, to be deferred until September 1, 2020.

Canada Emergency Response Benefit:

To provide a taxable benefit of $2,000 a month for up to 4 months to:

• workers who must stop working due to COVID19 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.
• wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.

Apply via CRA My Account - Application will be available April 6th with first payment to start 10 days after application via cheque and 3-4 days via direct deposit.

Canada Child Benefit

An extra $300 per child for 2019-2020 - this benefit will be delivered as part of the scheduled payment in May 2020.

Special Goods and Services Tax credit payment

One-time special payment by early May for low- and modest-income families. Up to $400 for single individuals to $600 for couples.

There is no need to apply for this payment. If you are eligible, you will get it automatically.

February 1, 2021

HASCAP (Highly Affected Sectors Credit Availability Program) 

HASCAP offers government-guaranteed, low-interest loans of up to $1 million. Chains and multiple-location businesses could be eligible for up to $6.25 million.

HASCAP is available to all small and medium sized businesses with revenues decrease of 50% due to pandemic.

Terms of loans:

• low interest with a repayment term of up to 10 years

• up to a 12 month postponement of principal payments

• available until June 30, 2021

To be eligible: 
• a year-over-year revenue decline of at least 50% in three months, within the eight months prior to their application; 
• have previously applied for either CEWS or CERS; and
• have been financially stable and viable pre-COVID

Applications open: February 1,2021
Contact your primary financial institution to find out more.

Note: You can apply at one financial institution only.

 December 8, 2020

•  Application deadline: March 31, 2021 (extended)
•  Applications for the additional $20k now available via your bank (if you qualified for the $40K, you can now apply for the additional $20K)

BDC’s Small Business Loan (NEW May 7, 2020)

• Up to $100,000
• New clients and/or existing clients whose total debt with the bank is less than $100,000
• The following eligibility requirements must be met:
  • Based in Canada
  • Generating revenue for at least 24 months
  • Good credit history

Apply here: https://www.bdc.ca/en/financing/business-loans/pages/small-business-loan.aspx

Canada Emergency Business Account (CEBA)

• Up to $40,000
• Interest-free to December 31, 2022
• Repay by Dec 31, 2022 and receive 25% forgiveness
• You will need 2019 payroll of $50,000 to $1,000,000 to qualify.
  UPDATE: You will need 2019 payroll of $20,000 to $1,500,000 to qualify.
• For more information: Click Here | Application are available at your bank

December 29, 2020

Before applying for CEBA 2.0 (extra 20,000) note the following changes:

• Attestation that the business is facing ongoing financial hardship as a result of the COVID-19. 
• An amended agreement is required to be signed which certifies that all expenditures since the beginning of the program are “non-deferrable eligible expenses”, even if the first loan agreement you signed was different.
• Both loans are now combined to be $60,000 and you only get forgiveness if you pay $40,000 on time (by Dec 31,2022). The forgiven amount will be $20,000 in total. If you already repaid the original $40,000 loan, claimed forgiveness, and then borrowed the additional $20,000, you get 50% forgiven once you’ve repaid 50% of the loan.

CEBA – checking status of your application

As of December 14, 2020, a new status-checking website is available:

https://status-statut.ceba-cuec.ca/

October 27, 2020

CEBA forgivable portion of loan of $10,000 should be included in income in the year in which the loan is received. Or elect not to include the forgivable amount in its income by reducing its outlay or expenses. Amounts that are not forgiven can be deducted for the year in which the repayment is made.

CEBA – personal accounts

On October 26, 2020 the government announced that CEBA will be available to businesses that have been operating out of a non-business banking account.

To be eligible, businesses must:

• have been operating as a business as of March 1, 2020;
• successfully open a business account at a bank; and
• meet the other existing CEBA eligibility criteria.

The deadline to apply for CEBA is December 31, 2020.

October 13, 2020

Program expanded to provide an additional interest-free loan of up to $20,000.

Another $10,000 of this new loan would be forgivable, if repaid by December 31, 2022.

The application deadline: extended to December 31, 2020.

More details on this change, including the application process, are expected soon.

September 10, 2020

Deadline for CEBA applications is extended from August 31 to October 31, 2020.

June 26, 2020

Expanded program available June 26, 2020.

June 18, 2020

Expanded program which was to commence June 19, 2020 was put on hold. Updates to come.

May 20, 2020

Program will be expanded to:

• sole proprietors receiving income directly from their businesses
• businesses that rely on contractors
• family-owned corporations that pay employees through dividends rather than payroll

To qualify, these applicants with payroll lower than $20,000 would need:

• have a business bank account
• have a CRA business number, and to have filed a 2018 or 2019 tax return.
• have eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

BDC Co-Lending Program for SMEs

• Business with revenue less than $1M: Up to $312,500
• Business with revenue between $1M - 50M: Up to $3,125,000
• Business with revenue $50M+ -Up to $6,250,000
• Medium-to long-term loans with amortizations up to 20 years.
• The following eligibility requirements must be met:
  • Be an existing Commercial Banking client and it is your primary bank.
  • Canadian business impacted by COVID-19.
  • The program is intended to support bridging businesses’ operating expenses (i.e., payroll, rent, utilities, taxes and other fixed costs), until cash flows resume back to pre-COVID conditions.

Apply via your bank

BDC Working Capital Loans

• Up to $2 million
• Flexible repayment terms such as principal postponement for qualifying businesses

Source: https://www.bdc.ca/en/pages/special-support.aspx

December 29, 2020

• Attestation that the business is facing ongoing financial hardship as a result of the COVID-19.
• An amended agreement is required to be signed which certifies that all expenditures since the beginning of the program are “non-deferrable eligible expenses”, even if the first loan agreement you signed was different.
• Both loans are now combined to be $60,000 and you only get forgiveness if you pay $40,000 on time (by Dec 31,2022). The forgiven amount will be $20,000 in total. If you already repaid the original $40,000 loan, claimed forgiveness, and then borrowed the additional $20,000, you get 50% forgiven once you’ve repaid 50% of the loan.

August 14, 2020

• Filing deadline: January 31, 2021 (extended)
• Period 5 applications open August 17
• CEW is taxable in the period received (deemed received the last day of the period)
• You MUST use either cash or accrual consistently for Period 1 to 9 (no change in methodology permitted)
• You can elect per employee per claim period the optimum baseline:

• If the Period 1 to 4 rules are better for you than the new proposed method of calculation for Periods 5 & 6, you can use the old method instead.

• Employees who are unpaid for 14 or more days can now be included in your calculation
• Use the current period's revenue drop or the previous period's, whichever works in your favour
• Online calculator and template now available: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy/cews-calculate-subsidy-amount.html

Proposed changes for period starting in July to December:

• If in Period 5 & 6 under the period 1 to 4 rules are better for you than the new proposed method of calculation, you can use the old method instead.
• Rate of CEWs will depend on the level of revenue decline:
  • Base subsidy (49% revenue drop)
  • And the Top-up subsidy (50% and over revenue drop)
• Base subsidy rate will be as follows:
  

Example 1: 20% decrease in sales and the employee makes $1,129. Available Base CEWs is $1,129 x 1.20 x 20% = $270.96

Example 2: 50% decrease in sales and the employee makes $1,129. Available Base CEWs is $1,129 x 60% = $677.00.

• Top up Subsidy rate will be as follows:
  • Revenue drop calculated when comparing revenues in the preceding 3 months to the same months in the prior year
  • Top up subsidy CEWs rate: (3-month revenue drop - 50%) x 1.25

• A 70% drop in revenue will result in the maximum base + top-up subsidy
• Combined base and top-up subsidy rates are as follows:

December 29, 2020

Before applying for CEBA 2.0 (extra 20,000) note the following changes:

• Attestation that the business is facing ongoing financial hardship as a result of the COVID-19.
• An amended agreement is required to be signed which certifies that all expenditures since the beginning of the program are “non-deferrable eligible expenses”, even if the first loan agreement you signed was different.
• Both loans are now combined to be $60,000 and you only get forgiveness if you pay $40,000 on time (by Dec 31,2022). The forgiven amount will be $20,000 in total. If you already repaid the original $40,000 loan, claimed forgiveness, and then borrowed the additional $20,000, you get 50% forgiven once you’ve repaid 50% of the loan. 

CEBA – checking status of your application

As of December 14, 2020, a new status-checking website is available:

https://status-statut.ceba-cuec.ca/

December 8, 2020

CEBA forgivable portion of loan of $10,000 should be included in income in the year in which the loan is received. Or elect not to include the forgivable amount in its income by reducing its outlay or expenses.  Amounts that are not forgiven can be deducted for the year in which the repayment is made. 

CEBA – personal accounts

On October 26, 2020 the government announced that CEBA will be available to businesses that have been operating out of a non-business banking account.

To be eligible, businesses must:

-     have been operating as a business as of March 1, 2020;

-     successfully open a business account at a bank; and

-     meet the other existing CEBA eligibility criteria.

The deadline to apply for CEBA is December 31, 2020.

October 13, 2020

September 24, 2020

June 22, 2020

• Step 1: Apply at your financial institution
• Step 2: You will be directed to a CEBA website to provide supporting documentation of the 2020 Eligible Non-Deferrable Expenses and to complete the application.

• The name of your bank;
• Your 9-digit business number; and
• Electronic or paper copies of Receipts / Invoices / Agreements to be uploaded as evidence of your 2020 Eligible Non-Deferrable Expenses.

• Wages and other employment expenses to independent (arm’s length) third parties;
• Rent or lease payments for real estate used for business purposes;
• Rent or lease payments for capital equipment used for business purposes;
• Payments incurred for insurance related costs;
• Payments incurred for property taxes;
• Payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet;
• Payments for regularly scheduled debt service;
• Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower.

Program will be expanded to:
• sole proprietors receiving income directly from their businesses
• businesses that rely on contractors
• family-owned corporations that pay employees through dividends rather than payroll

To qualify, these applicants with payroll lower than $20,000 would need:
• have a business bank account
• have a CRA business number, and to have filed a 2018 or 2019 tax return.
• have eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

https://pm.gc.ca/en/news/news-releases/2020/05/19/prime-minister-announces-expansion-support-workers-and-small

April 16, 2020

Will now be available to businesses with payroll between $20,000 and $1.5 million in 2019.

April 9, 2020

All the banks now have the application available online. Completing the application will take less than a minute. You might have to wait few minutes given the volume of applications.

You will need: Employer payroll account number and Box 14 on your T4 Summary.

April 8, 2020

How to Apply?

ONLY online at your bank's website. Calling your branch will not help. Applications for BMO start April 9th, other banks will be soon/ same.

April 3, 2020

Canadian Emergency Business Account

The CEBA will provide qualifying business customers with access to a $40,000 line of credit with:

• An interest rate of 0% until Dec. 31, 2022
• No minimum monthly principal payments until Dec. 31, 2022
• Principal repayments made at any time
• A $10,000 loan forgiveness is available provided the outstanding balance is fully paid on or before Dec 31, 2022.

Eligibility

Only customers who meet each of the following criteria are eligible for the program:

• The person applying has the ability and authority to bind the organization.
• The organization is an operating business (i.e., not a holding company) in operation on March 1, 2020.
• The organization’s payroll expense in the 2019 calendar year was between $50,000 and $1 million. The customer must provide:
  • The employer account number (15 digits) as reported at the top of the customer's 2019 T4 Summary
  • Employment income reported in Box 14 of the 2019 T4
  • The customer's 2019 T4SUM when requested upon audit

Per the requirements of the program as set out by the Government of Canada, customers will agree to use funds from this loan to pay for operating costs that cannot be deferred, such as payroll, rent, utilities, debt service, insurance and property tax.

Scotiabank will be issuing a bulk email to apply digitally next week as will the other Canadian banks.

Current details from some of the major banks can be found here:

Scotia: https://www.scotiabank.com/ca/en/personal/scotia-support/latest-updates/coronavirus-covid-19/business-banking.htm
CIBC: https://www.cibc.com/en/business/covid-19/emergency-business-account.html
RBC: https://www.rbc.com/covid-19/business.html

July 30, 2020

Corporate tax extension:
Payments date for current tax year (including instalments): extended to September 30, 2020.
No further filing deadline extensions

CRA will be waiving interest on existing tax debts related to:
    • corporate income tax returns from April 1, 2020, to September 30, 2020
    • and from April 1, 2020, to June 30, 2020 for HST returns.

May 26, 2020

Corporations Tax Return -Filing date for current tax year:
• Returns due June 2 – August 31 – filing deadline of September 1, 2020.
• Returns due March 18 and June 1– filing deadline of June 1, 2020 (unchanged).

April 27, 2020

Canada Emergency Commercial Rent Assistance (CECRA)

This program will lower rent by 75% for small businesses that have been affected by COVID-19.

• will provide forgivable loans to qualifying commercial property owners to cover 50% of 3 monthly rent payments that are payable by eligible small business tenants during April, May, and June.
• loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement.
• 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 here: https://www.jarvisryan.com/communications/20

April 16, 2020

New developments:

• Canada Emergency Business Account (CEBA) will now be available to businesses with payroll between $20,000 and $1.5 million in 2019
• Assistance to help small business pay commercial rents for April, May and June in the works. Details to come.

https://www.cbc.ca/news/politics/trudeau-business-supports-premiers-1.5534124

April 8, 2020

• SR&ED Filings are not affected by the filing extensions
• Corporate tax payments for current tax year: extended to September 1, 2020 (balances and installments due on or after March 18 and before September 1, 2020) for PART I tax only.
• If CRA account balances cannot be paid given COVID reasons, CRA will review fairness applications to waive interest on a case-by-case base.

April 4, 2020

EHT:

• Exemption: The Employer Health Tax (EHT) exemption for 2020 from $490,000 to $1 million. The EHT exemption will return to $490,000 on January 1, 2021.
• Tax filing and Remittance deadlines for EHT: remain the same. Relief applies by way of no penalties and interest applicable from April 1 to September 30, 2020

March 31, 2020

Corporate Tax Return – Filing and Payment Extension

Filing date for current tax year: extended to June 1, 2020 (corporations with a due date after March 18 and before June 1, 2020)

Payment date for current tax year: extended to September 1, 2020 (balances and installments due on or after March 18 and before September 1, 2020)

HST – Payment Extension

Payment remittance (including installments) requirement extended to June 30, 2020 for balances due after March 18 and before June 1, 2020.

WSIB - Filing and Payment Extension

Premium reporting and payment deferred to August 31, 2020.

Additionally, the WSIB will cease interest accrual on all outstanding premium payments. They will not charge penalties during this six-month deferral period.

Source: https://www.wsib.ca/en/financialrelief

Canada Emergency Business Account

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.

To qualify, these organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019.

Source: https://www.canada.ca/en/department-finance/programs/financial-sector-policy/business-credit-availability-program.html

March 30, 2020

Temporary Wage Subsidy:

“Businesses and non-profit organizations seeing a drop of at least 30 per cent in revenue due to COVID-19 will qualify for the government's 75 per cent wage subsidy program, Prime Minister Justin Trudeau announced today.

During the daily media briefing outside his residence at Rideau Cottage, Trudeau said the number of people a business employs will not determine its eligibility. Charities and companies big and small will qualify, he said.

For those companies experiencing a decrease in revenues of at least 30 per cent, the government will cover up to 75 per cent of a salary on the first $58,700, which could mean payments of up to $847 a week. The prime minister also encouraged businesses to top up their employee’s wages with the remaining 25 per cent of their salaries.

Trudeau said the wage subsidies will be retroactive to March 15, 2020.

More details of the program will be unveiled later today.”

Source: https://www.cbc.ca/news/politics/trudeau-covid19-business-supports-1.5514558

March 27, 2020

As the changes to the response to COVID-19 are constantly evolving we will continue to keep you posted with updates

1. The government will also guarantee bank loans of up to $40,000 for small businesses
2. HST payments are suspended to June.

September 3, 2021

https://www.blogto.com/eat_drink/2020/03/toronto-pizza-restaurant-washing-all-their-cash-ensure-its-disinfected-customers/

April 9, 2020

To apply for the Canada Emergency Response Benefit via CRA My Account you do not need a security code.

In order to maintain your My Account (which expires without usage in 365 days):

1. Sign up for Paperless Mail and access CRA mail faster
2. Set a reminder to sign into your account every 6 months

April 2, 2020

Accessing the government programs corporately and personally requires a CRA My Account.

You can then access Service Canada’s My Service Canada Account and apply for any applicable social benefits

• CRA My Account: https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html

Once you have proceeded through the registration process, you will be mailed an access or activation code.

If you are also a business owner you will be able to add your business so that you may access it through the CRA My Business Account.

December 8, 2020

Deadline for submitting self identification form (PD27) is December 31, 2020 in order to avoid receiving a discrepancy notice at the end of the year.

For more information on submitting the form, visit: https://www.canada.ca/en/revenue-agency/services/subsidy/temporary-wage-subsidy/tws-reporting.html

April 9, 2020

Am I an eligible employer?

You are an eligible employer if you:

• are a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC);
• have an existing business number and payroll program account with the CRA on March 18, 2020; and
• pay salary, wages, bonuses, or other remuneration to an employee.

Additionally:

• The company must have had a small business deduction limit greater than nil allocated in the prior year

• CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

Separate subsidy per employer (associated employer rules don’t apply).

How much is the subsidy?

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer. Please know payroll must continue and be paid in order to take advantage of this subsidy, if you stop payroll this is not available.

An annual salary of $55,000 per employee will result in getting the maximum benefit.

Owner Payroll:

If you do not get a regular pay cheque this will not work for you. Clients that do lump sum payments should consider going on regular payroll effective immediately until June 20, 2020.

In order for you to take advantage of this subsidy with your personal payroll – your gross payroll paid needs to be $13,750 over March 18, 2020, and June 20, 2020 in order to receive the maximum subsidy of $1,375.

How will I receive the subsidy?

The subsidy is claimed by reducing the tax portion of your monthly remittance. It cannot be applied against the CPP and EI.

When can I start reducing remittances?

You can start reducing your source deduction remittances in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

If you use a payroll service please advise them of your qualification.

How do I calculate the subsidy?

The subsidy is claimed by reducing the income tax portion of your remittance ONLY by the minimum of the 3 amounts:

• Maximum per employer of $25,000
• Fixed rate of 10% of the remuneration paid to eligible employees during the eligible period
• Total number of eligible employees multiplied by a fixed amount of $1,375

NOTE: An eligible employee means the employee must be “employed” on the date of the eligible payment.

For example, if you have 5 employees earning monthly salaries of $4,100 (assumes all are under $55K annually) for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, or $2,050.

Worksheet to calculate subsidy: Click Here

For more information: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html

CANADA’S COVID-19 ECONOMIC RESPONSE PLAN – KEY POINTS FOR BUSINESSES AND INDIVIDUALS

Since the beginning of March, restrictions and measures related to COVID-19 have rapidly escalated. While the first stages focused on public health and safety, in very short order, businesses and personal finances began to be affected. It is clear that these challenges will become worse before they get better. In an effort to combat these effects, the Government of Canada released a series of financial measures in mid-March.

This document summarizes selected government comments up to March 18, 2020.

Individuals

Tax Return Due Date Deferral: The personal tax filing due date will be deferred until June 1, 2020. However, those expecting refunds or benefits (such as the GST/HST credit, Guaranteed Income Supplement and Canada Child Benefit) should file as early as possible. The government release encourages Canadians not to delay their filings in order to ensure their income-tested benefits are accurately computed.

Tax Payment Deferral: Taxpayers may defer, until after August 31, 2020, the payment of income tax amounts that become owing on or after March 18, 2020 (also including installments) and before September 2020. The government documents indicate that payment will be deferred “until after August 31, 2020”, which seems to imply payment will be due on September 1. No interest or penalties will accumulate on these amounts during this period.

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

• Waiving the one-week waiting period for those in imposed quarantine that claim Employment Insurance (EI) sickness benefits, effective March 15, 2020.

• Waiving the requirement to provide a medical certificate to access EI sickness benefits.

• Introducing the Emergency Care Benefit providing up to $900 bi-weekly, for up to 15 weeks (comparable to EI sickness benefit). This benefit would provide income support to:

              - workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for EI sickness benefits;

              - workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an

              elderly parent, but do not quality for EI sickness benefits; and

              - parents with children who require care or supervision due to school closures, and are unable to earn employment

              income, regardless of whether they qualify for EI or not.

Application for the Benefit will be available in April 2020, and require Canadians to attest (and continue to attest every two weeks) that they meet the eligibility requirements. Individuals can apply through CRA’s MyAccount, their My Service Canada Account, or by calling an automated toll-free number not yet released.

Longer-Term Income Support

• An Emergency Support Benefit will provide up to $5.0 billion in support to workers who are not eligible for EI and who are facing unemployment. The individual amounts and process will be disclosed shortly.

• Implementing changes to the EI Work Sharing Program, which provides EI benefits to workers who agree to reduce their normal working hour as a result of developments beyond the control of their employers, by extending the eligibility of such agreements to 76 weeks, easing eligibility requirements, and streamlining the application process.

  
  

Low/Modest Income Individuals

• A one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC) will be made. This will double the maximum annual GSTC payment amounts and result in an average boost to income for those benefiting by close to $400 for single individuals and close to $600 for couples.

• The maximum annual Canada Child Benefit payment amounts would be increased by $300 per child for the 2019-20 benefit year. This will be added to the May, 2020 benefit cheque.

  
  

Canadians Abroad

The Emergency Loan Program for Canadians Abroad will provide the option of an emergency loan to Canadians in need of immediate financial assistance to return home or to temporarily cover their life-sustaining needs while they work toward their return. Each application will be assessed according to their specific situation and needs. This emergency assistance is a repayable loan. Eligible Canadians currently outside Canada and needing help to return home can contact the nearest Government of Canada office (https://travel.gc.ca/assistance/embassies-consulates) or Global Affairs Canada’s 24/7 Emergency Watch and Response Centre in Ottawa at +1 613-996-8885 (collect calls are accepted where available) or email sos@international.gc.ca.

Students

A six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans will be provided.

• Minimum RRIF Withdrawals: The required minimum withdrawals from Registered Retirement Income Funds (RRIFs) will be reduced by 25% for 2020. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.

Businesses

Tax Payment Extension: Businesses may defer, until after August 31, 2020, the payment of income tax amounts that become owing on or after March 18, 2020 and before September 2020. This relief would apply to tax balances due, as well as installments. No interest or penalties will accumulate on these amounts during this period.

Other Payment and Filing Extensions: No comment was made about changing the filing and payments dates for payroll, GST/HST, and other non-income tax items.

CRA Audit Activity: CRA will not contact any small or medium businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the CRA will temporarily suspend audit interaction with taxpayers and representatives.

Liaison Officer Service: The Liaison Officer service is now available over the phone and will be customizing information by ensuring small businesses are aware of any changes such as filing and payment deadlines, proactive relief measures, etc.

Payroll Subsidies: The government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum of $1,375 per employee and $25,000 per employer. Businesses will benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

OTHER FILINGS AND ADMINISTRATION

Trust Filing Due Date Deferral: For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

T3 Slips Submission Date: No specific statement was made regarding the deadline for filing T3 slips reporting income taxable to the trust beneficiaries.

Other Returns: Many taxpayers are required to file other tax and information returns. No mention was made of these, including partnership returns and NR4 reporting slips.

EFILE Signatures**: In order to reduce the necessity for taxpayers and tax preparers to meet in person, effective immediately the CRA will recognize electronic signatures** as having met the signature requirements of the Income Tax Act, as a temporary administrative measure. This provision applies to authorization forms T183 or T183CORP.

Financial Assistance

Individuals: Canada’s large banks have confirmed that this support will include up to a 6-month payment deferral for mortgages, and the opportunity for relief on other credit products. Banks have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness.

Businesses

• The Business Credit Availability Program will allow the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses. The near-term credit available to farmers and the agri-food sector will also be increased through Farm Credit Canada.

• The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action will allow Canada’s large banks to inject $300 billion of additional lending in to the economy.

• For Exporters: The Minister of Finance would now be able to determine the limit of the Canada Account in order to deal with exceptional circumstances. The Canada Account is administered by Export Development Canada (EDC) and is used by the government to support exporters when deemed to be in the national interest.

• Interest Rates: The Bank of Canada cut the prime interest rate to 0.75%. Other banks have also reduced rates.

  
  

Other Funding

• Indigenous Community: $305 million for a new distinctions-based Indigenous Community Support Fund will be provided to address immediate needs in First Nations, Inuit, and Métis Nation communities.

• Homelessness: The Reaching Home initiative will be provided with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak. The funding could be used for a range of needs such as purchasing beds and physical barriers for social distancing and securing accommodation to reduce overcrowding in shelters.

• Domestic Abuse Shelters: Women’s shelters and sexual assault centers will receive $50 million to help with their capacity to manage or prevent an outbreak in their facilities.

  
  

Closing

Many of the measures listed above have only been announced recently (March 18, 2020) and are noted as requiring Royal Assent. In recent public comments, it was indicated that the opposition parties have promised their support to move these measures quickly, therefore, we can presumably expect draft legislation in the short term.

Over the next days and weeks, the specifics on these programs will be released. Most of the details for these initiatives will be released on one of these four webpages:

General: https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection/canadas-reponse.html

CRA: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

Travel: https://travel.gc.ca/assistance/emergency-info/financial-assistance/covid-19-financial-help

Employment and Social Development Canada: https://www.canada.ca/en/employment-social-development/corporate/notices/coronavirus.html

As the situation develops further, there may be additional government measures, or modifications to those already announced.

The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.

No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

CRA now has the ability to withdraw a specified amount from your bank account on the date you specify (April 30th most likely).

To do this, you need to complete in Part G of the T183 form - pre-authorized debit agreement.

You can specify the account for which you prefer the pre-authorized debit to come from on the T183 or select an account the CRA may already have on file for your for direct deposit.

Please note that the CRA requires at least 5 business days to process the PAD. Therefore, if you choose to have your PAD taken from your bank account on April 30th, your return MUST be filed no later than April 24, 2019.