March 2020

Ontario’s Action Plan to Respond to COVID-19 – Tax Aspects

On March 25, 2020, the Ontario Government announced new tax relief measures in response to the COVID-19 pandemic.

Temporary Increase to Employer Health Tax Exemption

Businesses with less than $5 million in “total Ontario remuneration” currently have an exemption from employer health tax for the first $490,000 of remuneration. Retroactive to January 1, 2020, the exemption will increase to $1 million. Taxpayers who have already paid instalments on the basis of the $490,000 exemption can expect their returns to be corrected.

New Regional Opportunities Investment Tax Credit

The new Regional Opportunities Investment Tax Credit will be a 10 per cent refundable tax credit available to Canadian-Controlled Private Corporations (CCPCs) who make qualifying capital expenditures in Ontario, but only if made outside Ottawa, the Greater Toronto Area and various other regions near the Greater Toronto Area.

Qualifying expenditures are those between $50,000 and $500,000 on property classified, for the purposes of the capital cost allowance rules in the Income Tax Act, under Class 1 or Class 6 (including certain expenditures with respect to eligible commercial and industrial buildings). The credit is only available to the extent that the qualifying investment becomes “available for use” on or after March 25, 2020, as that term is used with respect to the capital cost allowance rules.

Deferral of Certain Taxes and WSIB Premiums

Businesses will also be able to defer certain filing and remittance obligations. These amounts remain owing, but businesses will not have to pay them until August 31.

With respect to WSIB, businesses can defer remitting premiums for the period starting March 25 and ending August 31, 2020, with no penalty or interest. Moreover, interest on outstanding premium payments will not accrue. All employers covered by the WSIB workplace insurance are automatically eligible for the relief.

As mentioned in our recent communication to you, beginning April 1 and up until August 31, 2020, businesses will not incur any penalty or interest if they miss filing or payment obligations for Employer Health Tax, Tobacco Tax, Fuel Tax, Gas Tax, Beer, Wine and Spirits Taxes, Mining Tax, Insurance Premium Tax, International Fuel Tax Agreement, Retail Sales Tax on Insurance Contracts and Benefit Plans and Race Tracks Tax.

Postponed Property Tax Reassessments

The Municipal Property Assessment Corporation (MPAC) normally values properties in Ontario every four years for determining property taxes. This will be postponed until 2021. As a result, property taxes in 2021 will be the same as the valuations in place for 2020.

If you have any questions, please contact your Lipton advisor.

On March 27, 2020, Prime Minister Justin Trudeau made a number of new announcements as outlined below.

The Prime Minister unveiled that the government is going to be increasing the payroll subsidy in an effort to thwart layoffs due to COVID-19. This subsidy will now cover up to 75 percent of salaries, an increase over the original 10 percent subsidy plan.  The wage subsidy will be back-dated to Sunday March 15.  No further details were announced, but are expected on Monday.

The federal government is also introducing the Canada Emergency Business Account (CEBA). The new measure will offer qualifying businesses:

• $40,000 loan from banks, which will be guaranteed
• The loan will be interest-free for the first year
• Under certain conditions, $10,000 of it will be forgivable

The government will also be providing an additional $12.5 billion through Export Development Canada to help small and medium-sized businesses with operational cash flow.

For more details on these topics, please click on the provided link.

GST and HST payments, along with duties and taxes owed on imports, will be deferred until June 30, 2020.

For more details on this topic, please click on the provided link.

For employees who have already been laid off, Trudeau emphasized that the Canada Emergency Response Benefit, which was announced on Wednesday, is still applicable.

If you have any questions, please contact your Lipton advisor.

On March 25, 2020, the Ontario government announced a five-month relief period for Ontario businesses who are unable to file or remit select provincial taxes on time, due to the special circumstances caused by the coronavirus (COVID-19) in Ontario.

This relief period will help businesses around the province focus on supporting the well-being of their employees and their continued operations during this time of uncertainty.

Relief Period Overview

Tax filing and remittance deadlines will remain the same. However, beginning April 1, 2020, penalties and interest will not apply to Ontario businesses that miss any filing or remittance deadline under select provincial taxes. This will continue for a period of five months.

The following provincial taxes are included in the relief period:

Employer Health Tax
Tobacco Tax
Fuel Tax
Gas Tax
Beer, Wine & Spirits Tax
Mining Tax
Insurance Premium Tax
International Fuel Tax Agreement
Retail Sales Tax on Insurance Contracts and Benefit Plans
Race Tracks Tax

Relief is Automatic

If a business is unable to file their return or remittance during the relief period, they do not need to contact or notify the Ministry of Finance. Penalties and interest will be waived automatically for all late returns or remittances by Ontario businesses during the relief period.

Ontario businesses are also not required to provide the Ministry of Finance with information about the impact of COVID-19 on their staff or daily operations during the relief period.

Filing Your Late Return or Remittance

Ontario businesses are required to file any late returns or remittances by the end of the relief period.
The Ministry will continue to review what challenges businesses are experiencing in light of COVID-19 and develop rules around returning to normal accordingly. Any transition plan will be communicated to all tax clients before the relief period ends.

What’s Not Included

The relief period does not include business accounts with outstanding taxes, interest or penalties owing to the government from previous filing periods. Existing debts from before the relief period will continue to accrue interest.

Audit Activity

The government is also temporarily suspending audit interactions with most Ontario business and representatives for the month of April 2020.

If you have any questions, please contact your Lipton advisor.

Temporary Wage Subsidy for Employers – Expanded Definition of ‘Eligible Employer’

As you may be aware, on March 25, 2020 the Federal Government passed the legislation required to implement measures recently announced. Contained in this legislation is an expanded definition of ‘Eligible Employer’ for the purposes of the Temporary Wage Subsidy for Employers that we informed you about last week. The definition of ‘Eligible Employer’ now includes individuals and partnerships whose members include individuals, Canadian-controlled private corporations (CCPC) or charities.

To claim the subsidy, the taxpayer must have an existing business number and payroll account with the CRA as of March 18, 2020 and pay salary, wages, bonuses or other remuneration to an employee. The subsidy is equal to 10% of remuneration paid between March 18, 2020 and June 20, 2020, up to $1,375 per employee to a maximum of $25,000 per employer. A CCPC with taxable capital employed in Canada for the preceding taxation year greater than $15M (calculated on an associated group basis) will not be eligible for the subsidy. Please also note that this $25,000 wage subsidy does not have to be shared between associated corporations.

The subsidy is claimed by the employer by reducing the current remittance of federal, provincial or territorial income tax that is sent to the CRA. The subsidy cannot reduce Canada Pension Plan contributions or Employment Insurance premiums. Employers can claim the subsidy on the first remittance period that includes remuneration paid after March 18, 2020.

The subsidy will be included in the employer’s income for the tax year in which it is claimed. In addition, any employer who claims the subsidy must keep the following information:

• Total remuneration paid between March 18, 2020 and June 20, 2020;
• Federal, provincial, or territorial income tax that was deducted from that remuneration; and
• Number of employees paid in that period.

If you have any questions, please contact your Lipton advisor.

As you may be aware, the CRA has recently extended the personal tax filing deadline to June 1, 2020.

While this allows everyone more time to prepare and file their tax returns, we are urging everyone to send us their tax filing information as soon as possible, preferably in digital format.

So…. Let’s Get Digital!

Delivering your tax information to us digitally is a three-step process: