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Alexandre Hunault

LL.M.,Fisc.

Tax Expert

 

Fiscal measures have recently been announced by the federal and provincial governments to help workers, employers and people who may be affected by the COVID-19 pandemic.

 

Please note that these informations are being updated regularly based on Governments’ announcements.

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 three months' wages

Temporary subsidy of three months’ wages for their employees (and for certain payroll contributions), for companies of all sizes.

According to Minister Morneau, the cost of this measure is $71 billion. The enhanced subsidy (payment of 75% of wages) is expected to reduce the cost of the Canada Emergency Response Benefit program to $24 billion for 2020. 

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

The company must have suffered a revenue drop of 30% (15% for March 2020) related to the COVID-19 pandemic (monthly revenues of 2020 compared to the same period in 2019). You can refer to the table below for the dates of the different periods.

The accrual method (billing date) or cash method (payment date) can be used to compare revenues between periods. However, once a method is chosen, the employer must continue to use that method.

Once eligibility for Period 1 is confirmed, Period 2 will automatically be eligible, even if revenues did not decrease during that period. Same situation for Period 2: if it meets the revenue criteria for April 2020, Period 3 will automatically be eligible.

All employers now have the option of using an alternative method of comparing their revenues. They can now compare their revenues earned during a crisis month with the average of their revenues earned in January and February 2020. Employers must stick with the comparison method they choose.

Subsidy eligibility periodRevenue comparison (drop of 30% – 15% for March)
Period 1March 15, 2020 to April 11, 2020March 2020 and:
– March 2019
or
– the average of January and February 2020
Period 2April 12, 2020 to May 9, 2020Eligible for Period 1
or
April 2020 and:
– March 2019
or
– the average of January and February 2020
Period 3May 10, 2020 to June 6, 2020Eligible for Period 2
or
May 2020 and:
– May 2019
or
– the average of January and February 2020
Period 4June 7 to ? (Details to come)

Terms and conditions:

  • Grant can total up to 75% of the salary paid during this period.
  • Maximum annual salary: $58,700. So if an employee earns $58,700, the federal government will grant an amount of $847 per week for this employee.
  • The employer will therefore have to determine if it is able to pay 25% of the employee’s salary for them to receive their full salary. Emphasizing that this program is based on the good faith of taxpayers, the Canadian Minister of Finance said that an employer should make up the other 25% if they are able to do so. Employers who abuse the system will be severely punished.
  • Refund for payroll contributions: for the weeks where the employee was on leave with pay and for which the employer applied for the 75% wage subsidy.
    • If the employee was on leave with pay for only a portion of a week, there will be no refund of payroll contributions.
    • No limit on the refund for the employer’s payroll contributions.
  • However, the subsidy will not be available for a given period if the employee has already been laid off or is without pay for at least 14 days within this period (see the table above for the dates of each period).
    • For example, an employee is laid off by her employer for Period 1 (March 15 to April 11, 2020). More than 14 days after being laid off, she applies for the CERB. This CERB is granted to her for Period 1 and she receives $2,000 for this period.
    • Her employer realizes that the wage subsidy would be more advantageous for her, as well as for its other employees. However, even if this employee agreed to be rehired and paid despite the confinement, her employer will not be able to obtain the wage subsidy for her salary before the end of Period 1 (April 11, 2020).
    • In this situation, the employer should not rehire until the start of Period 2, i.e. April 12, 2020.
    • This exception concerning eligibility of wages for the wage subsidy helps companies proceed going forward and it avoids grey areas.
Terms

Grant can total up to 75% of the salary paid during this period.

  • Maximum annual salary: $58,700. So if an employee earns $58,700, the federal government will grant an amount of $847 per week for this employee.
  • The employer will therefore have to determine if it is able to pay 25% of the employee’s salary for them to receive their full salary. Emphasizing that this program is based on the good faith of taxpayers, the Canadian Minister of Finance said that an employer should make up the other 25% if they are able to do so. Employers who abuse the system will be severely punished.
  • Refund for payroll contributions: for the weeks where the employee was on leave with pay and for which the employer applied for the 75% wage subsidy.
    • If the employee was on leave with pay for only a portion of a week, there will be no refund of payroll contributions.
    • No limit on the refund for the employer’s payroll contributions.
  • However, the subsidy will not be available for a given period if the employee has already been laid off or is without pay for at least 14 days within this period (see the table above for the dates of each period).
    • For example, an employee is laid off by her employer for Period 1 (March 15 to April 11, 2020). More than 14 days after being laid off, she applies for the CERB. This CERB is granted to her for Period 1 and she receives $2,000 for this period.
    • Her employer realizes that the wage subsidy would be more advantageous for her, as well as for its other employees. However, even if this employee agreed to be rehired and paid despite the confinement, her employer will not be able to obtain the wage subsidy for her salary before the end of Period 1 (April 11, 2020).
    • In this situation, the employer should not rehire until the start of Period 2, i.e. April 12, 2020.
    • This exception concerning eligibility of wages for the wage subsidy helps companies proceed going forward and it avoids grey areas.
  • The subsidy will be extended beyond the 3rdperiod, but the details have yet to be disclosed. They should be within the next few days.

Employee related to the employer

The rules differ slightly when an employee is related to the employer, or when the employee is the majority shareholder of the corporation, or is a person related to them

The subsidy will not necessarily be calculated on the amount paid in wages during the crisis. The amount used for the 75% formula will be limited by the lesser of the following amounts:

  • The eligible compensation paid on a weekly basis between March 16 and April 11, 2020 (during the crisis)
  • The eligible compensation that the shareholder paid themselves before the crisis, i.e. the average salary paid during the period January 1, 2020 to March 15, 2020
  • The weekly limit of $847
Procedure

The employer retains or rehires its employees and pays them at least 75% of their normal salary.

  • The employer then applies for a subsidy to reimburse the amount paid (75% of wages). The employer must be prepared to indicate its monthly revenues as mentioned above for its business to qualify (see table).
  • The employer must also be prepared to indicate the salary paid during the months preceding the crisis for each of the employees concerned. An employee must therefore necessarily have received a salary during this period to be eligible for the subsidy.
  • The subsidy application is now available via the Canada Revenue Agency portal for businesses. Payment of the subsidy should be made within two weeks of the application.
  • The first subsidy of 10% of wages paid during the crisis will be automatically applicable and must be subtracted from the 75% subsidy amount applied for. In order to take full advantage of the assistance measures available, be sure to apply for the 10% subsidy on the next source deduction remittance. If the source deduction remittance has already been filed, a document will be made available in the coming weeks which must be completed to obtain the 10%. Note that the 10% subsidy is capped at $1,375 per employee and $25,000 per employer.
  • An employer should ensure that it’s able to access the CRA portal before applying and verify the accuracy and availability of information related to the direct deposit, if necessary.
  • To obtain the subsidy for the initial period (March 16, 2020 to April 11, 2020), the employer will have to demonstrate that its business has experienced a decrease in sales by comparing the revenues for the periods specified in the above table.
  • The application must be renewed each month for a re-verification of eligibility.
  • An incorporated professional could be reimbursed for part of his salary, up to a maximum of $847 per week (before taxes and other source deductions) if they previously paid themself a salary equal to or greater than this amount.
  • They could do the same for the employees of their company. They will also have to decide whether or not to pay the 25% not covered by the subsidy for their employees, in addition to the 75% reimbursement from the government.

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 March, April and May 2019.

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)

Temporary three-month commercial rent subsidy.

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

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

To calculate the reduction in revenues, the business can compare revenues earned in April, May, and June 2020 with the same months in 2019 or, alternatively, with the average of revenues earned over the months of January and February 2020.

Lessor eligibility criteria:

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

  • The property leased to small business tenants must have a mortgage.
  • They declared rental income on either their personal or corporate tax return.
  • 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 or experienced at least a 70% decline in revenues.

N.B.: More detailed information is expected for lessees whose lessor does not have a mortgage on its property.

Terms and conditions:

  • A forgivable loan will be granted to qualifying owners of commercial properties (mortgaged) for the rent of their eligible business tenants during April, May and June.
  • 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
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:

  • The owner must apply to the corporation’s RCM.
  • 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.
  • Details to come.

 Payment deferral on loans and credit products: up to six months

Purpose: The Business Development Bank of Canada, Investissement Québec and the regional development agencies offer different solutions to enable businesses to meet the requirements of their current credit products and to maintain their operations.

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.

Canada Emergency Student Benefit – Government of Canada

Purpose: To help students who can’t find a job (or who earn less than $1,000 per month) during the summer, but who do not qualify for the CERB.

Amount: $1,250 per month

Duration: May, June, July and August 2020

Terms and conditions:

  • Registration beginning May 15 on the dedicated Web portal.
  • If you haven’t registered yet for My Account on the Canada Revenue Agency website, we strongly urge you to do so now because of the activation delays involved. After your first visit, your activation codes will be mailed to you, which will take several days. Avoid delays and activate your account now.
  • In addition, students can do volunteer work and receive compensation in the form of a grant (between $1,000 and $5,000). This government compensation will not be included in the above-mentioned $1,000 limit. A student can therefore receive a $1,250 benefit, earn employment income of less than $1,000 and obtain the special compensation for volunteer work.

    Eligibility:

    • Students must be continuously enrolled, between December 1, 2019 and August 31, 2020, in a post-secondary educational program leading to a diploma or a certificate.
    • They must have graduated from high school in 2020 and have applied for such a post-secondary educational program scheduled to begin before February 1, 2021.
    • Students who apply for the CESB must be actively looking for work to be eligible for the benefit.
    • An application must be made at the beginning of each period if a student has not found a job despite actively looking for one.
      • The government warns that it will make verifications. We advise students to keep a record of the job application processes they have engaged in and the jobs they have applied for.
    • CESB periods
      Periods 1 and 2Not applicable
      Periods 3May 10 to June 6, 2020
      Periods 4June 7 to July 4, 2020
      Periods 5July 5 to August 1, 2020
      Periods 6August 2 to August 29, 2020

      • The government advises students to register with the Job Bank. Among other things, this service helps track job search activities.

    Loans and bursaries: The Québec loans and bursaries program will be enhanced by the injection of federal funds.

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 16 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, they 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
  • Six-month moratorium on interest charges on Canadian student loans currently being repaid by their borrowers.
  • Homeowners can defer payments on their CMHC-insured mortgage if they are experiencing financial difficulties. This measure came into force on March 15, 2020.
  • Lowering 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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