Breakdown of Canada’s COVID-19 Economic Response Plan: what it means for you and your business

We know everyone is concerned about who the shutdowns will affect you and your business. Here is an important breakdown of government funding programs by our expert, Bonny Koabel, president of AKR Consulting Canada in Mississauga, Ont.

On March 18, 2020, the Prime Minister announced a new set of economic measures to help stabilize the economy during this challenging period. These measures, delivered as part of the Government of Canada’s COVID-19 Economic Response Plan, will provide up to $27 billion in direct support to Canadian workers and businesses.

To read the entire Government announcement, please refer to this link https://www.canada.ca/en/department-finance/economic-response-plan.html

Support to Businesses

Helping Businesses Keep their Workers

To support businesses that are facing revenue losses and to help prevent lay-offs, 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 subsidy of $1,375 per employee and $25,000 per employer. Example 5 employees earnings $16.00/hour or $640/week, over 13 weeks the pay is $8,320.00 per employee. Company would deduct $832.00 per employee from payroll taxes over that time equalling $4,160 in total.

Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. 

Longer-Term Income Support for Workers

Implementing 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. This was announced by the Prime Minister on March 11, 2020.

For more information see the Government website at:

https://www.canada.ca/en/employment-social-development/services/work-sharing.html

Ensuring Businesses Have Access to Credit

The Business Credit Availability Program (BCAP) will allow the Business Development Bank of Canada (BDC) and Export Development Canada (EDC) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses

BDC contact information:

https://www.bdc.ca/en/contact_us/pages/default.aspx

EDC contact information:

https://www.edc.ca/en/contact-us.html

Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020.  This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The Canada Revenue Agency will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For the vast majority of businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.

Business Interruption Insurance

Business interruption is meant to cover the costs of any unforeseeable or catastrophic event for example a fire in a building, a flood etc. It does not however cover Pandemics. There may be some changes to Business Interruption coverage effective next week. Therefore contact your Insurance Agent or Broker.

Penalties and Interest Relief

Penalties and Interest Relief applies to any Penalties and Interest charges that your company receives on HST, Payroll and Corporate Taxes late payment due to extraordinary business circumstances such as COVID-19.

To learn more go to:

https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest.html

The application can be found at:

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc4288.html

https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc4288/rc4288-fill-17e.pdf

Support to Canadians

Flexibility on Mortgages Payments

All 5 of the major Canadian banks have put programs in place to allow homeowners to reduce mortgage payments for up to 6 months. The mortgage relief program allows homeowners to pay only the interest, mortgage insurance or property tax portion of the mortgage payment. The principle payment, usually the largest part of the mortgage payment would be deferred 6 months and rolled into your outstanding mortgage. This will result in slightly higher mortgage payments after 6 months.To apply call your bank.

Flexibility for Taxpayers

In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the filing due date for the 2019 tax returns of individuals, including certain trusts.

• For individuals (other than trusts), the return filing due date will be deferred until June 1, 2020.  However, the Agency encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the filing of their return to ensure their entitlements for the 2020-21 benefit year are properly determined.
• For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as instalments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

Temporary Income Support for Workers and Parents

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 individuals in imposed quarantine that claim Employment Insurance (EI) sickness benefits. This temporary measure will be in effect as of 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. This flat-payment Benefit would be administered through the Canada Revenue Agency (CRA) and 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.
• Parents with children who require care or supervision due to school closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.

Application for the Benefit will be available in April 2020, and require Canadians to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility. Canadians will select one of three channels to apply for the Benefit:

1. by accessing it on their CRA MyAccount secure portal;
2. by accessing it from their secure My Service Canada Account; or
3. by calling a toll free number equipped with an automated application process.

Income Support for Individuals Who Need It Most

The Government is proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-20 benefit year, by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment. In total, this measure will deliver almost $2 billion in extra support.

Together, the proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

For more information, see Useful links for COVID-19 financial relief for pizzerias across Canada.

Enjoy listening more than reading? Check out our Canadian Pizza Podcast with Bonny where she gives examples of how a pizzeria can benefit from government programs. Government financial support for small businesses during the COVID-19 pandemic is set to drop on Monday, April 6 at canadianpizzamag.com/topic/podcast.

Bonny Koabel CPA, CGA, is the president of AKR Consulting Canada located in Mississauga, Ont., a firm specializing in government grants, subsidies, tax credits, refunds and rebates since 2003. Bonny has specialized in assisting businesses with obtaining government funding for the past 15 years. Her expertise is working with companies and developing strategies to utilize government funding. Bonny can be reached at bonny@akrconsulting.com or 905-678-6368.