COVID-19 Relief for Corporations
Relief during COVID-19
On March 18, 2020, the Canadian government announced a $27B plan to reduce the economic impact of the COVID-19 outbreak for both individuals and businesses through the Economic Response Plan (“ERP”). An update to the plan was announced on March 27, 2020. The ERP continues to be updated and available on the government’s portal. For our corporate clients, important measures are summarized below.
Support for businesses
To discourage layoffs, the government expanded its EI Work Sharing program, allowing employers to enter into agreements with their employees to reduce working hours supplemented by Employment Insurance (“EI”) payments. These agreements can be drafted for a duration of 76 weeks (up from 38) during the period from March 15, 2020 to March 14, 2021 if your business is experiencing a downturn in activity.
To further discourage layoffs, the government announced a temporary wage subsidy during the first wave of relief measures. An employer must have a payroll account with the CRA and be a Canadian-controlled private corporation (“CCPC”) to be eligible.
The original subsidy was calculated as 10% of remuneration paid from March 18 to June 20, 2020 up to a maximum of $1,375 per employee or $25,000 per employer, whichever is less. Employers could reduce their withholding tax payments to the CRA by the amount of the subsidy in their payroll filings.
On March 27, 2020, the government announced the temporary wage subsidy would be increased to 75% of the remuneration paid, backdated to payroll costs from March 15, 2020, onwards. The government has not yet finalized the mechanics of claiming this subsidy. As soon as more information is available, we will share the results.
The government is providing enhanced business credit availability through the Business Development Bank of Canada (“BDC”). This measure allows businesses to obtain loans (often through your existing financial institution) with discounted interest options, flexible repayment terms, and relaxed qualification criteria.
Another program announced on March 27, 2020, was the Canada Emergency Business Account whereby small businesses and not-for-profit organizations, supported by their existing financial institutions, will be able to apply for interest-free loans of up to $40,000. To qualify, organizations will need to demonstrate that they had between $50,000 and $1M in payroll costs during 2019. If the loan is repaid prior to December 31, 2022, 25% of the original balance will be forgiven. Additional details are expected in the coming weeks.
Moreover, Export Development Canada has announced that it will guarantee bank loans of up to $5M to businesses requiring additional liquidity during this time.
Businesses can defer any corporate income tax payments (including balances due and scheduled instalment payments) until August 31, 2020 for any taxes that are currently owing and those still to be incurred up to September 2020.
Businesses (and self-employed individuals) can also defer any GST/HST and customs duties payments (including balances due and scheduled installment payments) until June 30, 2020. This deferral applies to remittances that would have been due during various periods between January and May, depending on the frequency at which you file your returns.
For the duration of the deferrals, no interest or penalties will accumulate on these amounts.
Furthermore, the CRA will suspend all GST/HST and income tax audits for at least four weeks.
The successful application of the ERP requires awareness of situational nuances to ensure effectiveness and compliance. We’re happy to work with you on determining the best way to ensure your business gets the support that it needs to weather the downturn.