Tax Measures Under Canada’s COVID-19 Economic Response Plan

On March 25, 2020, the Government of Canada passed Bill C-13, An Act respecting certain measures in response to COVID-19 (“Bill C-13”) to implement the Response Plan measures.

The original Response Plan has since been supplemented by measures announced on March 20, 2020 (“Additional Measures to Support Continued Lending to Canadian Consumers and Businesses[11]”), and on March 27, 2020 (“Additional Support for Canadian Businesses from the Economic Impact of COVID-19[12]”).

On April 11, 2020, Bill C-14, A second Act respecting certain measures in response to COVID-19, which enacts the CEWS, received royal assent. The CEWS will be non-cumulative with the existing 10% wage subsidy.

This summary explains the above measures as well as sales tax measures for goods and services tax/harmonized sales tax (“GST/HST”) and provincial sales tax (“PST”) registrants who are directly impacted by COVID-19.

Federal Tax Measures for Canadian Businesses

10% wage subsidy

The Response Plan contains measures to help businesses retain their workers. Framework legislation enacted as part of Bill C-13 created a federal payroll deduction rebate for remuneration an eligible employer pays between March 18, 2020, and June 19, 2020. Eligible employers are individuals, non-profit organizations, registered charities, Canadian-controlled private corporations (“CCPCs”) having a business limit in the last taxation year greater than nil (i.e. eligible for the small business deduction), and partnerships whose members are comprised solely of the foregoing persons. In addition, an eligible employer must:

  • have an existing business number and payroll program account with the Canada Revenue Agency (the “CRA”) as of March 18, 2020; and
  • pay salary, wages, bonuses, or other remuneration to at least one individual employed in Canada during the applicable period.

The new regulations[13] released by the Government of Canada on May 15, 2020, in connection with this 10% wage subsidy provide that the prescribed rate at which the amount of the rebate is to be calculated represents by default 10% of remuneration paid by eligible employers to eligible employees during the applicable period, but eligible employers may elect a lower percentage. Under the new regulations, the maximum “prescribed amounts” are $1,375 per eligible employee and $25,000 per eligible employer. This is consistent with previous statements made by the Government. Assistance received under the wage subsidy reduces the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

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