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Alexandre Hunault

LL.M.,Fisc.

Tax Expert

 

Since last March, fiscal measures were implemented by the federal and provincial governments to help workers, employers and other people who have been affected by the COVID-19 pandemic.

These measures have been updated. Here are the latest changes.

Coping with the situation

With a view to the continuation of your professional activities, we have focused on the measures likely to impact you and outlined some of the details. Other elements relating to individuals are also mentioned In any case, feel free to consult your advisor  for explanations as to the value of these measures in your situation.    

FOR SMEs

Measures for small and medium-sized businesses

Temporary subsidy of wages

Temporary employee wage subsidy (and for certain payroll contributions), for companies of all sizes.

Purpose: To keep the employment relationship between employees and businesses intact and facilitate a quick return to business after the crisis. Companies that have already laid off certain employees will have to hire them back to take advantage of the subsidy. So if you had to lay off administrative or technical staff because of the pandemic, it’s in your best interest to re-hire them so that they are available and present when your activities resume, at the end of the crisis.

The wage subsidy has been expanded to include a refund of employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Québec Pension Plan and the Québec Parental Insurance Plan.

Essential condition : update!

For period 1 to 4, the company must have suffered a revenue drop of 30% (or 15% for period 1) related to the COVID-19 pandemic (monthly revenues of 2020 compared to the same period in 2019).

On July 17, 2020, the government decided to extend the CEWS until December 19, 2020. The main changes are to extend eligibility to employers who do not meet the 30% revenue drop threshold for periods 5 to 10. The current subsidy that has two components: a “base” component and a “top-up” component. The maximum combined subsidy can be up to 85% of eligible remuneration, for a maximum weekly benefit of $960.

It should be noted that these new measures target changes to revenue thresholds, subsidy rates and reference periods up to November 21, 2020. No details were given regarding period 10 (from November 22 to December 19, 2020).

Terms and conditions: update!

Changes to revenue thresholds and subsidy rates

The base wage subsidy is established on a sliding scale based on the drop in the employer’s revenue. The top-up subsidy will only be eligible for employers who have experienced an average revenue drop of more than 50% over a three-month period prior to the referred period.

  • These measures are applicable beginning with period 5 (July 5 to August 1, 2020), so that the subsidy will be gradually reduced for the following periods.
  • The base subsidy and the top-up subsidy are calculated on a maximum weekly benefit of $1,129 per employee.
Base subsidy

The base subsidy varies according to the drop in the employer’s revenue according to the following rates:

Subsidy reference periods Subsidy rate (salary reimbursement rate % x $1,129 per employee)

Maximum weekly subsidy/employee
For the year 2020 Loss of revenue
50% and more
Loss of revenue
0 à 49%
Period 5 July 5 to August 1, 2020 60% 1,2 x
% of loss of revenues
Up to $667*
Period 6 August 2 to August 29, 2020 60% 1,2 x
% of loss of revenue
Up to $667
Period 7 August 30 to Sept. 26, 2020 50% 1,0 x
% of loss of revenue
Up to $565
Period 8 Sept. 27 to Oct. 24, 2020 40% 0,8 x
% of loss of revenue
Up to $452
Period 9 Oct. 25 to Nov. 21, 2020 20% 0,4 x
% of loss of revenue
Up to $226
Period 10 Nov. 22 to Dec. 19, 2020 Details to come Details to come Details to come

* 60% of $1129

Transitional rule for the periods of July and August 2020 (periods 5 and 6) – Employers who have suffered a revenue drop of 30% or more, but not more than 50%, may receive the same subsidy rate (75%) as that for which they were eligible under the old rules for period 5 and 6.

REFERENCE PERIODS: CALCULATION METHODS

Top-up subsidy: New

Top-up subsidy

Employers who have suffered an average revenue drop of more than 50% over a period of three months can benefit from a top-up subsidy calculated at a rate varying between 6.25% and 25% (maximum rate).

3-month average revenue drop Top-up Calculation of the top-up subsidy = 1.25X (3-month revenue drop – 50%)
70% or more 25,00% 1,25 x (70% – 50%) = 25,00%
65% 18,75% 1,25 x (65% – 50%) = 18,75%
60% 12,50% 1,25 x (60% – 50%) = 12,50%
55% 6,25% 1,25 x (55% – 50%) = 6,25%
50% or more 0,00% 1,25 x (55% – 50%) = 0,00%

REFERENCE PERIODS: CALCULATION METHODS

Procedure: update!

Employee eligibility

  • Employees who have been without remuneration for 14 consecutive days or more in a given period beginning July 5, 2020 will be eligible for the wage subsidy. These employees were not eligible for the CEWS for periods 1 to 4.
  • The new measures do not apply to employees on temporary layoff.
  • For the purposes of calculating the subsidy for period 5 and the following periods, the wages paid before the crisis to an employee dealing at arm’s length with the employer are no longer considered. Only the wages that will be paid to an employee for the period in question are taken into account.

Procedure

  • The application must be renewed each month for a re-verification of eligibility.
    • A calculator is available to employers on the Canada Revenue Agency website to help employers prepare their application and evaluate the amount of subsidy they can expect to receive.
      Calculator
  • A certain optimization of the programs must be analyzed according to the facts surrounding each situation.

Records to keep:

  • The employer must keep a record of the wages that were paid to its employees before the crisis. It’s important to mention here that this record must contain the wages that were actually paid and not those that were only declared. Beware of government sanctions if the employer is subsequently audited by the Canada Revenue Agency.
  • The records must also contain gross sales for the months of 2019 and 2020where revenues are compared.

Eligibility: No limit on the number of employees.

Retroactivity: This subsidy is retroactive to March 15, 2020.


Non-profit organizations (NPOs) and charities are also eligible for this wage subsidy.

Canada Emergency Commercial Rent Assistance (CECRA): update!
Temporary commercial rent subsidy.

Purpose: To help businesses cover their rent expense for the crisis period during which their revenues are sharply reduced.

On July 31, 2020, the federal government announced that the CECRA would be extended until August 2020. Applicants have until September 14 to present a new request. New applicants must forward their request for the initial three-month period (April, May and June) or for the four-month period (until July) or for the five-month period (until August) before August 31, 2020.

Essential condition: The business (lessee) must have interrupted its activities or suffered a reduction in revenues of at least 70% for a given period.

To calculate the drop in revenues, the business can compare revenues earned in the months concerned in 2020 with the same months in 2019 or, alternatively, with the average of revenues of January-February 2020.

Lessor eligibility criteria:

Lessors must meet certain criteria before applying for the forgivable loan.

  • They declared rental income on either their personal or corporate tax return.
  • The lessor made an agreement to reduce the rent by at least 75% for the period of April to August 2020.
  • For the purposes of this emergency assistance, a small business is defined as follows:
    • It pays up to $50,000 per month in rent.
    • It generates no more than $20 million in gross annual revenues.
    • It has temporarily ceased operations (revenue drop of at least 70%).

The 70% calculation is based on the average gross revenues for the three months of April, May and June. The months of July and August are actually an extension of this program and the company qualifies if it meets the criteria over the first three months.

If the business was not in operation between April and June 2019, the gross revenues for April, May and June 2020 can be compared to the average of revenues for January and February 2020.

Terms and conditions:

  • A forgivable loan will be granted to qualifying owners of commercial properties for the rent of their eligible business tenants from April until August.
  • The forgivable loans will cover 50% of the rent for these months.
  • The forgivable loans can be simply written off if the property owners agree to reduce the rent by 75% for the above-mentioned months. The tenant and the property owner must sign a rent forgiveness agreement specifying that the tenant cannot be evicted during the period covered by the agreement.
  • The small business (tenant) will only have to pay the remaining 25% of the pre-crisis rent.
  • The government will then write off the forgivable loan of 50% if the conditions are met, and the property owner will have to absorb the 25% shortfall.
  • The application deadline is August 31, 2020.

The Government of Quebec announced in July that it would compensate 50% of the losses incurred by lessors, equivalent to an amount corresponding to 12.5% of the total rental income.

BUSINESS FINANCING

Government of Canada
Temporary financing: interest-free loan of $40,000 until December 31, 2022.

Purpose: To enable businesses with liquidity problems to continue their operations. Professionals, whether self-employed or incorporated, have access to this measure and must apply to their chartered bank. Access to this interest-free loan guaranteed by the federal government is available to companies who had a $20,000 to $1,500,000 payroll in 2019.

If a company has a payroll of less than $20,000 and pays its employee/shareholder by dividend, for example, the Canadian government allows this company to be included if it meets the following expanded criteria:

  • It has a business account with a financial institution.
  • It has a business number and a tax return was filed in 2018 or 2019.
  • It reports eligible non-deferrable expenses of at least $40,000. These expenses may include those listed in the Restrictions section below.

Terms and conditions: Of the total loan amount, only $30,000 will have to be repaid if certain conditions are met, namely that the loan is reimbursed before December 31, 2022.

Restrictions: Use of the funds from the loan is now limited to the payment of non-deferrable operational expenses. The government has set out a non-exhaustive list of these expenses:

  • payroll
  • rent
  • utilities
  • insurance
  • property tax
  • regularly scheduled debt service

The government specifically excludes use of the loan to fund:

  • payments or expenses such as prepayment/refinancing of existing indebtedness
  • payments of dividends
  • distributions and increases in management compensation

Government of Québec
Credit of less than $50,000 for working capital. 

Purpose: To enable businesses to meet their short-term liquidity needs.

Terms and conditions:

  • Eligible businesses can come from all sectors and must have been in operation for at least a year. Businesses who are temporarily closed or in a context of maintaining, consolidating or restarting their activities are also eligible.
  • Businesses which are under the protection of the Companies’ Creditors Arrangement Act and the Bankruptcy and Insolvency Act are excluded.
  • The owner will have to submit a request to the business’ MRC.
  • The owner will have to demonstrate that the corporation is short of cash and that it will not be able to meet its commitments to its creditors in the coming weeks.
Corporations – Extension of the tax return filing deadline: New
Tax return filing

Deadline for corporations with a fiscal year-end of May 31, June 30, July 31 or August 31: : September 1, 2020

 

Extension of the tax payment deadline: September 30, 2020

This extension applies to tax balances and instalments due on or after March 18, 2020 and before September 1, 2020.

 

Permission to use an electronic signature (instead of an in-person signature) to avoid meetings with tax professionals.

Feel free to contact your advisor if you have any questions regarding the relevance of these measures in your situation and how you can benefit from them. We understand the reality of professionals and we want to support you in your activities so that you can get through this difficult period with confidence and be ready for the recovery when it occurs. You can count on our teams of experts and the experience and skills of  your advisor.

Complete information is available on the websites of the federal Department of Finance and of Revenu Québec.

CANADA    QUÉBEC

 

Alexandre Hunault, LL.M. Fisc.
Tax Specialist


The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.

 

INDIVIDUALS

EXTENSION OF THE TAX RETURN FILING DEADLINE

New deadline: June 1, 2020 

Deadline for trusts with a December 31 year end: May 1, 2020

Deferral of amounts due: After August 31, 2020 for amounts due now and before September 2020 (tax balances or instalments).

Permission to use an electronic signature (instead of an in-person signature) to avoid meetings with tax professionals.

MINIMUM RRIF AND LIF WITHDRAWALS

Réduction of 25% for 2020.

Purpose: To decrease withdrawals in a period of market turbulence.

Information to follow from our Operations team on the rollout of the measures.

ENHANCEMENT OF SOCIAL PROGRAMS

One-time payment of $300 for OAS recipients and an additional amount of $200 for those who also receive the GIS

GST tax credit : doubled for low-income families.

Canada child benefit: Increase of $300 per child.

In all cases: Special payment in May.

Feel free to contact your advisor if you have any questions regarding the relevance of these measures in your situation and how you can benefit from them. We understand the reality of professionals and we want to support you in your activities so that you can get through this difficult period with confidence and be ready for the recovery when it occurs. You can count on our teams of experts and the experience and skills of  your advisor.

Complete information is available on the websites of the federal Department of Finance and of Revenu Québec.

CANADA    QUÉBEC

 

Alexandre Hunault, LL.M. Fisc.
Tax Specialist


The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.

 

HELP FOR WORKERS

ASSISTANCE PROGRAM – GOVERNMENT OF QUÉBEC

Purpose: To help workers unable to earn an income due to forced isolation to counter the spread of COVID-19

Amount: $573 per week
Duration: 14 days. Can be extended to 28 days if the worker’s state of health justifies it.
Condition: The worker cannot be compensated by their employer, private insurance or employment insurance.

 

EASING OF EMPLOYMENT INSURANCE RULES

Waiving of the mandatory waiting period.

Elimination of the requirement to provide a medical certificate.

Target clientele: People in quarantine who apply for sickness benefits.

Effective date: March 15, 2020.

CANADA EMERGENCY RESPONSE BENEFIT (CERB) – GOVERNMENT OF CANADA

Payment of $2,000 per month (taxable) for up to 28 weeks.

Purpose: To help companies keep their employees on the job for the duration of the crisis, while retaining the ability to quickly resume operations when the situation returns to normal.

Terms and conditions:

  • Application: Beginning April 6, 2020 on a dedicated web portal.

If you have not yet activated your access to My Account on the Canada Revenue Agency website, we strongly advise you to do so now because of the activation period involved. After your first visit, your activation codes will be mailed to you, which will take several days. Avoid delays and activate your access now.

Payment of benefits: First benefits within ten days following the application.
Retroactive to: March 15, 2020.
Frequency: Subsequent benefits paid every four weeks. An application must be made for each period, i.e. four applications in all. The amount subject to change

Eligibility:

  • Canadians who have lost their job, become ill, are quarantined, or are caring for someone with COVID-19.
  • Parents who have to stop working to care for sick children or who have to stay at home due to the closure of schools and daycare centres.
  • Workers who are still employed but receive no income due to a work interruption caused by COVID-19.
  • Employees, contract workers and self-employed workers who are not eligible for employment insurance.
  • Seasonal workers, workers who earn less than $1,000 a month and those whose employment insurance benefits have ended are now eligible. The details will be announced in the next few days.

Conditions :

  • Have earned income of at least $ 5,000 in 2019 or in the 12 months preceding the coming into force of the CERB (excluding eligible dividends). If you are incorporated and you only receive eligible dividends, your company must have paid you a salary of at least $5,000 in the last 12 months or in 2019 for you to be eligible for this benefit. Eligible dividends are normally paid by a Canadian-controlled private corporation (CCPC) which has access to lower tax rates on active business income.
  • Non-eligible dividends are therefore not excluded from this measure and can be included in the above amount of $5,000.
  • Be able to prove that you have had no income for at least two consecutive weeks for a reason related to COVID-19 (except for the equivalent of $1,000 per month).

Exclusions :

  • Professionals who either work for themselves (self-employed worker) or on behalf of their corporation (incorporated self-employed worker). So a notary or an architect, for example, cannot respond to emergency requests and work for their clinic for more than $1,000 per month if they want to maintain their eligibility.

 

Feel free to contact your advisor if you have any questions regarding the relevance of these measures in your situation and how you can benefit from them. We understand the reality of professionals and we want to support you in your activities so that you can get through this difficult period with confidence and be ready for the recovery when it occurs. You can count on our teams of experts and the experience and skills of  your advisor.

Complete information is available on the websites of the federal Department of Finance and of Revenu Québec.

CANADA    QUÉBEC

 

Alexandre Hunault, LL.M. Fisc.
Tax Specialist


The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.

 

OTHER MEASURES

IN YOUR INTEREST
  • Homeowners can defer payments on their CMHC-insured mortgage if they are experiencing financial difficulties. This measure came into force on March 15, 2020.
  • Maintaining of the Canadian policy rate to 0.25% to ease the financial burden on borrowers who have to repay variable-rate loans. This measure is intended to support the financial system and the Canadian economy by maintaining access to credit for individuals and businesses

 


Feel free to contact your advisor if you have any questions regarding the relevance of these measures in your situation and how you can benefit from them. We understand the reality of professionals and we want to support you in your activities so that you can get through this difficult period with confidence and be ready for the recovery when it occurs. You can count on our teams of experts and the experience and skills of  your advisor.

Complete information is available on the websites of the federal Department of Finance and of Revenu Québec.

CANADA    QUÉBEC

 

Alexandre Hunault, LL.M. Fisc.
Tax Specialist


The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. For any questions, don’t hesitate to contact your wealth management advisor or your tax specialist, accountant or legal advisor.

 

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get in touch with one of our advisors