The 2021 federal budget introduced the underused housing tax which is basically a 1% tax on the value of non-resident, non-Canadian-owned real estate that is considered to be vacant or underused.

This tax was generally aimed at non-residents of Canada, however, there are situations where these rules can also apply to Canadian citizens or Canadian residents. Canadians may not be required to pay the tax but will have to file a return and claim the exemption. Note: there is a separate return that would normally be due on April 30th of every year. For the 2022 calendar year, CRA has extended the deadline to October 31st, 2023.

Please note, there are significant penalties for not filing these returns starting at $5,000 for individuals and $10,000 for corporations, per return, even if there are no taxes payable.

Make sure you have a current will

One more reason to ensure that a) you have a will and b) you have it updated or reviewed every 2 years, or whenever a life event occurs.

Ontario has a major change taking effect January 1, 2022. Please click this link to review a brief description of the changes, then contact your lawyer to make sure you are up to date. 

CRA has confirmed that the forgivable portion of the CEBA loan is a form of government assistance, and as such, you will have to include it as income in the year that the loan is received. That means, if you received the loan in the 2020 taxation year, you would have to include the forgivable portion ($10,000) as income in your 2020 income tax return.

If in 2022, repayment of the loan cannot be made in full, the forgivable benefit will be forfeited and an income deduction would be available under paragraph 20(1)(hh) of the Income Tax Act. If the deduction creates a loss, you would be able to carry back the loss up to 3 prior taxation year ends to recover the income tax paid in the past.

Income Tax reference:  the forgivable portion of CEBA are taxable when received (ITA s. 12(1)(x)), but if and when repaid, are deductible when repaid (ITA s. 20(1)(hh)).

The same principle will apply to the CEBA Expansion for the additional $20,000.

OTHER ISSUES:

If your bank has set up your CEBA loan as a line of credit, it's very important for you to transfer the funds from the line of credit to your operating account. The forgivable 25% is based on the maximum balance of the loan up to December 31, 2020, (at least for the $40,000 loan). If any bank has set up the CEBA loan like a Visa or LOC it will have the same results.

• You own property that generates rental revenue from commercial real property located in Canada.
• You are the property owner of the commercial real property where the impacted small business tenants are located.
• You have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants. (If you do not have a mortgage there will be announcements coming)
• You have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, which will reduce impacted small business tenant’s rent by at least 75%.
• Your rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May, and June 2020.
• You have declared rental income on your tax return (personal or corporate) for tax years 2018 and/or 2019.

CMHC will provide forgivable loans to eligible commercial property owners.

• The loans will cover 50% of the gross rent (gross rent includes TMI) owed by impacted small business tenants during the 3-month period of April, May, and June 2020.
• The property owner will be responsible for covering no less than 25% of the gross rent.
• The small business tenant will be responsible for no more than 25% of the gross rent.

Program details including how funds will be disbursed and how to apply are being finalized and will be available soon.

Still have questions about the CECRA?  1-800-668-2642   This email address is being protected from spambots. You need JavaScript enabled to view it.

The Federal Government has announced that the portal for applying for the CEWS -75% wage subsidy will be open on April 27, 2020.

When you apply for the Canada Employment Wage Subsidy (CEWS), you will be asked to enter amounts such as the number of eligible employees and gross payroll. To get ready, you can determine these amounts and preview your subsidy claim, based on the information you enter. The calculator is a tool to help you estimate the amount of your wage subsidy.

Before you calculate your subsidy, make sure that you are eligible to apply.

After you apply for the wage subsidy, your claim will be subject to verification.

Link to CRA calculator

At first glance, it looks intimidating, however, if you take your time and review each section you will find that it walks you through each step of the process.

The Canada Emergency Business Account (CEBA)

The CEBA provides for an interest-free loan of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.

HOW TO APPLY

Business owners can apply for support from the Canada Emergency Business Account through their banks and credit unions.

Repaying the balance of the loan on or before December 31, 2022, will result in loan forgiveness of 25 percent (up to $10,000).

NEW ELIGIBILITY REQUIREMENTS

• The Borrower is a Canadian operating business in operation as of March 1, 2020.
• The Borrower has a federal tax registration.
• The Borrower’s total employment income paid in the 2019 calendar year was between Cdn. $20,000 and Cdn. $1,500,000.
• The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020, and was not in arrears on existing borrowing facilities.
• The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.
• The Borrower acknowledges its intention to continue to operate its business or to resume operations.
• The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

RESTRICTIONS ON THE USE OF FUNDS

The funds shall only be used pay non-deferrable operating expenses including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

The CERB, eligibility rules have been expanded to:

• Allow people to earn up to $1,000 per month while collecting the CERB.
• Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work as a result of the COVID-19 outbreak.
• Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job or return to work because of COVID-19.

These changes will be retroactive to March 15, 2020. The application portal has been updated to reflect these changes.

Essential workers

The Government of Canada will work with provinces and territories through a new transfer to cost-share a temporary top-up to the salaries of low-income essential workers that the provinces and territories have deemed essential in the fight against COVID-19.

Provinces and territories will be able to provide their low-income essential workers (those who earn less than $2,500 per month), with a top-up.

In order to include more businesses, NPOs, and Charities the Federal Government has announced more refinements to the CEWS.

Eligibility

• For the month of March if your revenue has dropped by at least 15 percent compared to March 2019 you will be eligible for the CEWS. For the months of April and May, the percentage will continue to be 30 percent.
• An alternative method of calculating the decrease in revenue:
  • You have the option of using the average of your January and February 2020 and comparing to March 2020. If March is lower by 15% or more you are eligible.

NOTE: If you choose the alternative method, you must continue to use it for April and May. So April and May will need to be 30% or lower than the average of January and February 2020.

Refund for Certain Payroll Contributions

The Government is proposing to expand the CEWS by introducing a new 100 percent refund for employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.

This refund would cover 100 percent of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees. 

Eligible employers would apply for a refund, as described above, at the same time that they apply for the CEWS.

YOU CAN’T CLAIM BOTH.

If you claim the temporary 10 percent wage subsidy and subsequently find out that you are eligible to claim CEWS you will have to reduce the CEWS claim by the 10% already claimed. You cannot claim both.

 About support for families

While schools and child care centres are closed, parents can apply for direct funding to offset the cost of buying materials to support their children’s learning, while they practice self-isolation and physical distancing.

Eligible parents will receive a one-time per child payment of:

• $200 for children aged 0 to 12
• $250 for children or youth aged 0 to 21 with special needs

This funding can help parents with the costs of workbooks, educational apps, educational subscription services, movies and other tools to support learning at home.

Parents refers to parents, guardians, and caregivers

Eligibility

There is no income cap on this program. All parents are eligible if you have a child who is:

• aged 0 to 12
• aged 0 to 21 with special needs

If you have more than one child, you must submit one application per child.

For more information, please visit 

https://www.iaccess.gov.on.ca/FamilyAppWeb/public/index.xhtml

CANADA EMERGENCY WAGE SUBSIDY

This would provide a 75-per-cent wage subsidy to eligible employers for up to 12 weeks, retroactive to March 15, 2020.

Eligible Employers

Eligible employers would include individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities.

This subsidy would be available to eligible employers that see a drop of at least 30 percent of their revenue (including donations received for NPOs and Charities) for the eligible periods.

Amount of Subsidy

The subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020, would be the greater of:

• 75 percent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
• The amount of remuneration paid, up to a maximum benefit of $847 per week or 75 percent of the employee’s pre-crisis weekly remuneration, whichever is less.

NOTE

A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 percent of the employee’s pre-crisis weekly remuneration.

ELIGIBLE PERIOD       CLAIMING PERIOD                  REVENUE PERIOD

Period 1                     March 15 – April 11             Month of March 2020 vs 2019

Period 2                     April 12 – May 9                   Month of April 2020 vs 2019

Period 3                     May 10 – June 6                  Month of May 2020 vs 2019

How to Apply

• The Canada Revenue Agency’s My Business Account portal

https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html

• A web-based application. (As soon as it is available we will post the link.)
• When applying for the subsidy, employers would be required to attest to the decline in revenue

Accounting / tax treatment

The wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income.

Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

Employers are required to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees.

TEMPORARY WAGE SUBSIDY

See my blog on March 22, 2020

https://entaccountants.com/clients/blog/covid-19-how-to-claim-the-employer-10-wage-subsidy

The CERB provides a taxable benefit of $500 a week for up to 16 weeks. The benefit is available from March 15, 2020, to October 3, 2020. You can apply no later than December 2, 2020. The Benefit is only available to individuals who stopped work as a result of reasons related to COVID-19.

Eligibility

The benefit will be available to workers:

• You have been let go from your job or your hours have been reduced to zero;
• You are in quarantine or sick due to COVID-19;
• You are away from work to take care of others because they are in quarantine, sick due to COVID-19; and/or
• You are away from work to take care of children or other dependents whose care facility is closed due to COVID-19.

• Residing in Canada, who are at least 15 years old;
• Who has stopped working because of COVID-19 and have not voluntarily quit their job;
• Who had an income of at least $5,000 in 2019 or in the 12 months prior to the date of their application; and
• Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment income.

• You cannot quit your job voluntarily.

How to apply

Applications for the CERB will begin the week of Monday, April 6, 2020.

There are two ways to apply:

• Online with CRA My Account

• Here is the link for you to apply for CRA My Account.

https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html

• Over the phone with an automated phone service 1-800-959-2019

After you have set up your account, you will return to the site based on the schedule below. To help with the large amount of traffic CRA is asking you to apply in the following order

• Birthday:
• Jan – March    Apply Monday, April 6
• April – June    Apply Tuesday, April 7
• July – Sept     Apply Wednesday, April 8
• Oct – Dec      Apply Thursday, April 9
• Friday, Saturday and Sunday anyone can apply.

Instructions once you're in your CRA My Account

1. Go to COVID-19: Canada Emergency Response Benefit in the alert banner at the top of the page
2. Select the period you want to apply for
3. Declare that you qualify for the benefit
4. Confirm we have the right payment information

Apply again every 4 weeks

You will need to apply and confirm your eligibility for the Canada Emergency Response Benefit every 4 weeks (to a maximum of 16 weeks) if your situation continues.

Canada Emergency Response Benefit (CERB)

Getting ready to access the CERB

You can apply for the Canada Emergency Response Benefit online on and after April 6, 2020. You can get a head start by setting up your CRA My Account as soon as possible.  When you set up your account and if you sign up for direct deposit you will receive your benefit more quickly.

Here is the link for you to apply for CRA My Account.

https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html

After you have set up your account, you will return to the site based on the schedule below. To help with the large amount of traffic CRA is asking you to apply in the following order

• Birthday:
• Jan – March    Apply April 6
• April – June   Apply on April 7
• July – Sept      Apply on April 8
• Oct – Dec      Apply on April 9

 Temporary wage subsidy

The wage subsidy will be available to any employer if their revenue has decreased by 30 percent as a result of the COVID-19 pandemic, that business will be eligible for the wage subsidy. The federal government has said that it will cover 75 percent of the first $58,700 of income earned, which works out to $847 per week. This subsidy will be retroactive to March 15, 2020. The Prime Minister also advised that the wage subsidy will apply to all non-profit organizations, charities, and companies of all sizes. We anticipate that partnerships and sole proprietors will also be eligible based on Bill C-13 even though the Prime Minister did not mention these employers specifically. More substantive details are expected to be announced at a later date.

Providing small business with wage subsidies

To help businesses keep and rehire workers, the wage subsidy has been increased from 10 percent to up to 75 percent for qualifying businesses, for up to 3 months, retroactive to March 15, 2020.

I expect further changes to the employer and the employee limits, and there is uncertainty as to how to access the funding, as this amount would exceed reasonable income tax remittances.

The New Canada Emergency Business Account

The new Canada Emergency Business Account program will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs.

To qualify, these organizations will need to demonstrate they have paid between $50,000 to $1 million in total payroll in 2019. Repaying the balance of the loan on or before December 31, 2022, will result in loan forgiveness of 25 percent (up to $10,000).

Deferral of Sales Tax Remittance and Customs Duty Payments

Businesses, including self-employed individuals, can defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports.

The deferral will apply to GST/HST remittances for the February, March and April 2020 reporting periods for monthly filers; January 1, 2020, through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of the filer’s current fiscal year.

For GST and customs duty payments for imported goods, the deferral will include amounts owing for March, April, and May.

COVID 19 -Canada Emergency Response Benefit (CERB)

This is a taxable benefit that would provide up to $2,000 a month for up to four months for workers who lose their income as a result of the COVID-19 pandemic. The Emergency Response Benefit (CERB) combines the previously announced “Emergency Care Benefit” and the “Emergency Support Benefits” described in my blog on Tuesday, March 24^th, 2020. The CERB will be administered by CRA through a different system than the EI system.

Qualification criteria

1. Workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for E.I. sickness benefits.
2. 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 E.I. sickness benefits.
3. 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 E.I. or not.
4. Workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19, would also qualify for the CERB
5. At least 15 years of age
6.  A resident in Canada
7. . Have a total income of at least $5,000 from either employment; self-employment and certain EI benefits in 2019 or in the 12-month period preceding the day on which they make an application.

The application process has not yet been announced but will be made available in the first week of April 2020. As soon as it is available I will post the link.

In Addition

If you are already receiving EI regular and sickness benefits, you would continue to receive these benefits & should not apply to the CERB. If your EI benefits end before October 3, 2020, you could apply for the CERB once the EI benefits cease, if you are still unable to return to work due to COVID-19. If you have already applied for EI & your application has not yet been processed, there is no need to reapply.

COVID 19 - Payments due to various Governments Agencies

The question is: When payments are due to CRA and the Ministry of Finance (Ontario) – which ones can I delay?

Before we jump in, we must understand the meaning of “trust funds”. Trust funds mean “holding property or assets on behalf of another person.”

If you collected any funds on behalf of CRA or the Ministry of Finance they are deemed to be Trust Funds. The following deadlines remain unchanged:

CRA TRUST FUNDS

GST/HST:   Due as normal

Payroll Source deductions: Due as normal

COVID 19 Initiatives.

• Individuals - the deadline for filing 2019 personal income tax returns is postponed to June 1, 2020. The Canada Revenue Agency will allow all taxpayers to defer, until September 1, 2020, the payment of any income tax amounts due. No interest or penalties will accumulate on these amounts during this period. Penalties and interest will apply after September 1, 2020.

• Corporations - The Canada Revenue Agency will allow all businesses to defer, until September 1, 2020, the payment of any income tax amounts due. This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period. Penalties and interest will apply after September 1, 2020.

• Trusts - The tax return filing due date is deferred until May 1, 2020, for trusts having a December 31, 2019 year-end.

• Charities – For all charities, the T3010 filing deadline is now December 31. 2020.

•  EHT - The Employer Health Tax exemption for 2020 increases from $490,000 to $1 million.  

• WSIB - The financial relief package allows businesses to defer premium reporting and payments until August 31,  2020.

https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-filing-payment-dates.html

COVID 19 - Are you being socially responsible?             

Our key term these days is ‘social responsibility’. We have a responsibility to ourselves, our families and our community at large to exercise the many precautions as outlined by our governments. This is not only regarding social distancing, but it is also fiscal responsibility. Needless to say, I have been very disappointed in some of the things my colleagues and I have heard from some of my fellow Canadians.

Our Federal and Provincial Governments are doing a remarkable job under the current circumstances by providing support for the people who need it most. People with young families; seniors; students; the vulnerable, but when I hear of various professionals including owners of successful businesses wanting to access support from the initiatives announced by both governments it makes me shudder.

There are many individuals who can’t make their rent and groceries that really need financial help. They have lost their only source of income. Despite what you may think, the Governments do not have an excess of funds to use, the United States is already having a difficult time funding EI claims. The support they are giving comes from the taxes we pay. It is time to look beyond our own circumstances and see this as a time to help those around us.

As Canadians, we need to be socially responsible by being good neighbors. Only claim the support if you really need it, not to beat the system!

Think about it, let us build a country that will make us all proud. Let us help those who need it the most.

Proud Canadian

Rai B. Nandan FCPA, FCGA

The largest number of questions we have received is for clarification of the E.I. measures. We are expecting further clarification from the Federal Government. As of today here is our best understanding:

Employment Insurance -Temporary Laid-off Benefit

This is the regular E.I. benefit that is always available to employees who have been laid off. Employees must have a minimum of 700 insurable hours; a one-week waiting period; the benefit is 55% to a maximum of $573.00 per week to a max of 45 weeks. You can apply prior to the employer issuing an ROE.

Employment Insurance- Sickness/Illness including Quarantine

The employee must have 600 insurable hours. No waiting period. Benefit: 55% to a maximum of $573.00 per week for a maximum of 15 weeks. You can apply prior to the employer issuing an ROE.

Employment Insurance - Emergency Care Benefit

Provides for up to $900 bi-weekly, for up to 15 weeks for employees without sufficient insurable hours. This flat-payment Benefit would be administered through the Canada Revenue Agency (CRA) and provide income support to:

3 categories of individuals:

1. Workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for E.I. sickness benefits.

2. 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 E.I. sickness benefits.

3. 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 E.I. or not.

How to apply for all E.I. Benefits

https://www.canada.ca/en/services/benefits/ei.html

Employment Insurance -Emergency Support Benefit

For the support of workers who are not eligible for E.I. and who are facing unemployment

• Implementing the E.I. Work Sharing Program, which provides E.I. benefits to workers who agree to reduce their normal working hours as a result of developments beyond the control of their employers. The CRA response to COVID 19 has extended the eligibility of such agreements to 76 weeks.

How do Work-Sharing Benefits work?

The program allows employers to temporarily reduce its employee's work schedule, by providing the employee with a portion of their reduced income.

The program is an agreement between 3 parties: 1) Employer; 2) Employee; and 3) Service Canada.

The employer and employee must agree to participate in the WS agreement. The application is then sent to Service Canada.

Who is Eligible?

Eligible employers must:

Have been in business in Canada year-round for at least two years;

Be a private business, a publicly held company, or a not-for-profit organization;

Demonstrate that the shortage of work is temporary and beyond their control, and demonstrate a recent decrease in business activity of approx. 10%;

Eligible employees must:

Be “core employees” (i.e. year-round, permanent full-time or part-time employees, who carry out the everyday functions of normal business);

Be eligible to receive EI benefits i.e. 600 insurable hours, and have paid EI premiums; and, agree to a reduction of their normal working hours and be part of a work-sharing unit.

The unit should not include employees who are necessary for business’ recovery, such as senior management, outside sales representatives etc.

The Federal Government’s special measures recently implemented in light of COVID-19 include:

Waiving the mandatory waiting period;

Support of workers who are not eligible for E.I. and who are facing unemployment.

• For additional information and application see link below:
• https://www.canada.ca/en/employment-social-development/services/work-sharing.html

MARCH 24, 2020

COVID 19 ESSENTIAL SERVICES IN ONTARIO

This morning the Ontario Government released the list of essential workplaces. (Please check the link below for your business). After a review of the list, I believe the Ontario government has done an excellent job of identifying the essential workplaces. However, we must still be vigilant in exercising common sense and social distancing so we can flatten the curve.

ENT CPAs are listed as an essential workplace and as such, we are committed to ensuring that the delivery of accounting and consulting services for our clients will remain our priority.

Our office will remain operational during normal working hours to the best of our ability. ENT CPAs will conduct all meetings with clients by conference call or online video connection where appropriate.

Due to the growing concerns regarding the spread of the Coronavirus and the increased call from the health authorities for social distancing, we have now adopted a “NO CONTACT POLICY” in order to protect our Team, Clients and the community at large.

As a result, our interior door will be locked at all times and visitors may not enter our office. All documents can be dropped off in the vestibule or the lockbox located outside our office entrance.

Alternatively, please use the secure electronic facilities provided on our website:

Client Resources: video conferencing, online support, client secure data transfer.

https://www.ontario.ca/page/list-essential-workplaces

Stay Healthy, practice social distancing.

Rai B. Nandan FCPA, FCGA, TEP, CFP, ACCA (UK), CKA
Managing Partner
ENT CPAs

70 Silton Road, Unit 9, Vaughan, Ontario. L4L 8B9 Tel: 905-265-8400

ENT Vaughan LLP is an independently owned and operated member of the ENT National Cooperative Association. ENT is a registered trademark of ENT National Cooperative Incorporated, used under license

Here is how to claim your rebate.

The 10 % subsidy is available to businesses, not for profits and registered charities that were in existence before March 18^th, 2020 and registered for payroll. The subsidy will be available to the qualified organizations for wages and salaries paid from March 18, 2020, to June 20, 2020.

First, you calculate 10% of the “Gross period payroll” (for the period being reported for March 2020. You have to prorate the amount to only include gross payroll from March 18^th). The 10% can only be deducted from the TAX amount owing to CRA. (Not the EI or CPP). There is no effect on the employee’s pay or deductions. The unclaimed wage subsidy can be deducted in future periods.

You must keep track of the amount of subsidy that applies to each employee to ensure that you do not exceed the maximum of $1,375.00 per employee and no more than the $25,000.00 per employer.

Accounting for the subsidy will be a reduction to the remittance due to CRA and a credit to subsidy income. 

ADDITIONAL INFORMATION FROM CRA

1. What is the Temporary Wage Subsidy for Employers?

The Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA).

2. Which employers are eligible?

You are an eligible employer if you:

• are a non-profit organization, registered charity, or a Canadian-controlled private corporation (CCPC);
• have an existing business number and payroll program account with the CRA on March 18, 2020; and
• pay salary, wages, bonuses, or other remuneration to an employee.

Note: CCPCs are only eligible for the subsidy if their taxable capital employed in Canada for the preceding taxation year, calculated on an associated group basis, is less than $15 million.

The Temporary Wage Subsidy for Employers is limited to the eligible employers listed above.

3. How much is the subsidy?

The subsidy is equal to 10% of the remuneration you pay between March 18, 2020, and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 total per employer.

Associated CCPCs will not be required to share the maximum subsidy of $25,000 per employer.

For example, if you have 5 employees, the maximum subsidy you can receive is $6,875 ($1,375 x 5 employees), even though the per employer maximum is $25,000.

4. How do I calculate the subsidy?

The subsidy must be calculated manually.

For example, if you have 5 employees earning monthly salaries of $4,100 for a total monthly payroll of $20,500, the subsidy would be 10% of $20,500, or $2,050.

5. How will I receive the subsidy?

Once you have calculated your subsidy, you can reduce your current remittance of federal, provincial, or territorial income tax that you send to the CRA by the amount of the subsidy.

Important: You cannot reduce your remittance of Canada Pension Plan contributions or Employment Insurance premiums.

For example, if you calculated a subsidy of $2,050, you would reduce your current remittance of federal, provincial, or territorial income tax by $2,050. You could continue reducing future income tax remittances, up to the maximum of $25,000, for all remuneration paid before June 20, 2020.

6. When can I start reducing remittances?

You can start reducing remittances of federal, provincial, or territorial income tax in the first remittance period that includes remuneration paid between March 18, 2020, and June 20, 2020.

For example, if you are a regular remitter, you can reduce your remittance that is due to the CRA on April 15, 2020.

7. What if subsidies exceed the remittances?

If the income taxes you deduct are not sufficient to offset the value of the subsidy in a specific period, you can reduce future remittances to benefit from the subsidy. This includes reducing remittances that may fall outside of the application period for the wage subsidy (after June 20, 2020).

For example: If you calculated a subsidy of $2,050 on remuneration paid between March 18, 2020, and June 20, 2020, but only deducted $1,050 of federal, provincial, or territorial income tax from your employees, you can reduce a future income tax remittance by $1,000, even if that remittance is in respect to remuneration paid after June 20, 2020.

8. Will the subsidy affect deductions from my employees?

No. You will continue deducting income tax, Canada Pension Plan contributions, and Employment Insurance premiums from salary, wages, bonuses, or other remuneration paid to your employees, as you currently do. The subsidy is only calculated when you remit these amounts to the CRA.

9. What if I don’t reduce remittances during the year?

If you are an eligible employer, but choose not to reduce your payroll remittances during the year, calculate the temporary wage subsidy on remuneration paid between March 18, 2020, and June 20, 2020. You can then ask for the subsidy to be paid to you at the end of the year, or transferred to the next year’s remittance.

10. What books and records do I need to support the subsidy?

You will need to keep information to support your subsidy calculation. This includes:

• the total remuneration paid between March 18, 2020, and June 20, 2020;
• the federal, provincial, or territorial income tax that was deducted from that remuneration; and
• the number of employees paid in that period.

The CRA is currently updating reporting requirements. More information on how to report this subsidy will be released in the near future.

11. Is the subsidy considered taxable income?

Yes. If you receive the subsidy, you have to report the total amount as income in the year in which the subsidy is received.

12. What if my business is closed?

If you did not pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 20, 2020, you cannot receive the subsidy, even if you are an eligible employer

On March 18, 2020, the Federal Government of Canada announced several measures, including extending the filing deadline for 2019 personal tax returns to June 1, 2020, and that any outstanding taxes owed are to be paid by August 31, 2020, without interest or penalties.

So the question arises: Should you delay filing your tax return?

Our recommendation is that you file as normal.

Here are some items to consider:

• No interest or penalties will accumulate on balances owing up until August 31, 2020.
• If you wait to file until the deadline of June 1, 2020, your entitlement for GST and the Child Tax Benefit will not be calculated correctly. So to ensure that your benefit is calculated correctly for the 2020-2021 year we recommend that you file by April 30, 2020.
• If you are expecting a tax refund, the earlier you file the earlier you will get your refund.

As COVID 19 is changing our financial landscape, we at ENT CPAs are proactively working with our clients to ensure that the best decisions are made case by case.

Stay Healthy, practice social distancing.

Rai B. Nandan FCPA, FCGA, TEP, CFP, ACCA (UK), CKA
Managing Partner
ENT CPAs

I have had several calls regarding the initiative that the Federal Government announced on March 18, 2020, regarding mortgages.

“The Government, through CMHC, is providing increased flexibility for homeowners facing financial difficulties to defer mortgage payments on homeowner CMHC-insured mortgage loans. CMHC will permit lenders to allow payment deferral beginning immediately.”

The misunderstanding is that there is a deferral, which simply means that the interest clock keeps ticking. For the most part, the largest portion of our mortgage payment is normally the interest portion. If you make no payments for 6 months the interest for those 6 months will be added to the amount outstanding on the mortgage. When the time comes at renewal be aware that the interest for the 6 months will be added to the amount owing to the institution.

This week the CRA Collections and Verification Branch issued the following:

Employment expenses review – Reversal in Process

Each year, the Canada Revenue Agency reviews a number of returns to ensure that taxpayers are entitled to the claims that they have made, and that amounts claimed have been correctly calculated. These reviews are an important part of our compliance activities to maintain the integrity of, and Canadians' confidence in, Canada’s tax system.

In the fall of 2017, the CRA began reviewing a small percentage of individual tax returns ‎when we detected a trend in the normal course of our regular reviews. The review focused on “other employment expenses” claimed on line 229 of the T1 Individual Income Tax and Benefits Return by shareholder-employees. Based on the feedback we received from industry stakeholders in recent weeks, it became clear that there was confusion among taxpayers, who were the subject of these reviews, as to how they should be claiming “other employment expenses”.

The Canadian tax system is based on self-assessment, which is in turn supported by clear guidelines for taxpayers and their representatives. In this case, the Agency agrees with our industry stakeholders that additional consultation and new guidance products are necessary.

Effective immediately, the Agency will stop reviewing and disallowing “other employment expenses” claimed on line 229 of the T1 Individual Income Tax and Benefits Return by shareholder-employees. We will also reverse those reassessments specific to line 229 already issued during the review period September 1, 2017 to February 10, 2018. Specifically, taxpayers who were major shareholder and owners of a corporation and received a letter from the Special Assessment Program of the Canada Revenue Agency dated between September 1, 2017 and February 10, 2018 indicating that they were reviewed for “other employment expenses” claimed on line 229 of the T1 Individual Income Tax and Benefits Return.

Taxpayers involved in these reviews will be contacted by letter to inform them of this decision.

Consultation will be undertaken with stakeholders in the tax professional community to clarify the requirement of employer certification under Subsection 8(10) of the Income Tax Act as it relates to shareholder-employees. It is expected that clarification will be issued to take effect in the 2019 tax year.

The Agency will issue guidance products on this issue well in advance of any future reviews to allow taxpayers, and their representatives, reasonable time to adjust to their tax filing requirements.

Early this morning I got up to finish some work and turned on the television just in time to see our Canadian Women’s Olympic Hockey team playing against the Russian team who are playing under the Olympic flag. I could not help but be caught up in the excitement and feeling so proud of being a Canadian. I could feel the hairs at the back of my neck begin to stand an edge as I enjoyed the intensity with which our Canadian athletes were playing.

As I reflect on what I believe the Olympics do for us as a nation, it makes us feel proud to see every colour and race themselves as Canadian and feel as one. This is the sort of occasion where we forget about the Canadian economy, the issues in our country, and issues in North America and all the things that make us divided by cities, provinces, languages and economics. It makes me want to advocate for us to have the Olympics on an annual basis, but then again it may lose its lustre.

Having met and worked with two former Olympian medallists for a number of years, I can attest to the dignity and integrity by which they carried themselves, not only as a Canadians, but also a successful business people. Being an Olympian has long lasting impact not only in the lives of those who participate in the games, but also on the lives of those of us who cross paths with them.

Watching the Olympics is one of those events that makes me so extremely proud to be a Canadian.

IT consultants and Independent Consultants working on a contract basis with a corporate business structure should be aware of the personal service business (PSB) rules.

If it was not for the corporation, you would reasonably be considered an employee of the company to which you provide services to. In other words, you are an incorporated employee. This change could have significant implications for your tax obligations. You could lose many of the tax benefits currently available to you.

Impact of Personal Service Business Rules:

The small business deduction is disallowed. All expenses except for salary and benefits would be disallowed. The reassessment would lead to tax penalties. PSB are subjected hefty tax rates.

Canada Revenue Agency uses the following factors in assessing if your corporation is a Personal Service Business (PSB).

Control:

The payer exercises control over how and when you perform your work, and you have to regularly report to your supervisor. If so, this indicates that your corporation will be considered a PSB. If you are financially dependent on your employer this indicates a PSB. This means that your only customer is your current employer, as opposed to having multiple numbers of customers.

Tools & Equipment:

The payer provides you with all the tools & equipment to do your job; this indicates that you are a PSB. Tools & equipment include your computer, software, etc.

Subcontracting Work:

The payer does not allow you to hire subcontractors to complete a project; this indicates that you are a PSB.

Financial Risk:

If the worker has no financial risk, this indicates that your corporation is a PSB. Examples of no financial risk are when the worker is not responsible for any operating expenses, and the worker is hired for an ongoing relationship and not a specific job.

Responsibility for investment and management:

If the worker has no responsibility for investment and management indicates the corporation is a PSB. Examples are a worker that has no investment in their business and is not free to make business decisions impacting their profit and loss.

Opportunity for Profit

If the worker has no opportunity for profit, it indicates that your corporation is a PSB. Example: The worker is not paid on a milestone basis or upon successful completion of the project.

Please read my article on suggestions on dealing with the PSB risk for IT contractors and Independent Consultants.

Advantages:

Separate Legal Entity/ Limited Liability:

Your corporation is a separate legal entity and as such, creditors or legal actions are against the corporation and its assets, not your personal assets. The shareholders of a corporation have a limited liability. Please note shareholders can be legally liable for the corporation's GST/HST and payroll taxes.

Tax Advantages:

If you don't need all the corporation earnings for personal income, you can leave them in the corporation, deferring personal taxes on withdrawals and possibly enjoying a 15.0% preferred tax rate on the first $500,000 of profit in a CCPC.

Your corporation has tax flexibility from which you may personally benefit. If you sell shares in your Canadian-controlled private corporation (CCPC) capital gains will be tax – free up to $813,600.

Disadvantages:

The administration costs are more expensive with a corporation than with a partnership or a sole proprietorship. Administration costs include incorporation costs, annual financial statements and annual corporate income tax return.

Losses in an incorporated business can't be personally claimed.