COVID-19: Federal tax update

Over the recent days, the federal government has provided various updates to the COVID-19 Economic Response Plan. All of these new developments that may be of interest to tax practitioners and taxpayers are summarized below.

CRA allows electronic filing for returns previously paper-filed

If an individual has already filed a 2019 paper return that has not been processed yet, they can file it again online using NETFILE certified tax software. This does not include returns that the software says must be paper-filed or returns that are excluded from electronic filing.

CRA adds more critical services to Business Continuity Plan

Among other crucial objectives, the National COVID-19 Business Continuity Plan outlines the CRA’s prioritization of services. Critical services are defined as services whose compromise in terms of availability or integrity would result in a high degree of injury to the health, safety, security, or economic well-being of Canadians, or to the effective functioning of the Government of Canada. On April 27, the CRA added the following to its list of critical services:

• development and delivery of the new Canada Emergency Student Benefit (“CESB”) and the new Canada Emergency Wage Subsidy (“CEWS”);
• waivers;
• certification of residency;
• comfort letters;
• GST/HST non-resident registrations;
• business number services in support of the CEWS;
• individual T1 post-assessment review programs;
• NR7-R applications for refund of Part XIII tax;
• employer accounts and services (amendments);
• program areas within the Business Compliance Directorate, with a focus on Employer Examination, GST Examination, Employer Compliance Audit, and Trust Compliance National Inventory (“TCNI”) to support activities of the Canada Emergency Wage Subsidy;
• insolvency collections;
• debt management call centres in support of the CERB;
• Advance Pricing Agreement (“APA”), Mutual Agreement Procedures (“MAP”), and Country-by-Country Reporting (“CbCR”);
• Tax Shelter Application Review Program;
• T1134 Form;
• support activities for the CEWS;
• support the delivery of the CEWS by ensuring that adequate resources are available to screen applications from the charitable sector;
• issue GST/HST municipal, charity, and hospital designations and determinations letters;
• conduct verification activities in the Excise program;
• process applications for Qualified Canadian Journalism Organizations (“QCJOs”);
• register new Registered Pension Plans (“RPPs”) and Deferred Profit Sharing Plans (“DPSPs”).

Expanded FAQ for CEWS

Additional questions have been added to the recently-published FAQ pertaining to the Canada Emergency Wage Subsidy. These new questions are:

• 3-1. How does the wage subsidy apply to an eligible employer that is a partnership?
• 5-1. Under the alternative approach can an eligible employer use a daily average instead of a monthly comparison to calculate the percentage decrease in revenue?
• 6-1. Does qualifying revenue include investment revenue, such as interest or dividends from investments in securities?
• 6-2. Is government assistance directly related to the COVID-19 crisis considered an extraordinary item for purposes of calculating the qualifying revenue of an eligible employer?
• 8-1. What is the meaning of the phrase “all or substantially all” in the special rules referred to in questions 8 and 11?
• 8-2. What factors are used to determine if a partnership is not dealing at arm’s length with a partnership of which it is a member?
• 10-1. What is the meaning of the term “affiliated” and “affiliated group” in the special rules referred to in question 10?
• 12-1. Can an eligible employer change their approach used for calculating the qualifying revenue from claim period to claim period?
• 14-1. If an eligible employer rehires an employee or hires a new employee who may have received CERB payments, will the employee be required to repay any or all of the CERB payments?
• 17-1. Are tips included in eligible remuneration?
• 17-2. In an owner-managed corporation, is the salary and dividends paid to the owner-manager considered eligible remuneration for the purpose of the wage subsidy?
• 26-1. How do my biweekly, monthly, or semi-monthly pay periods align with the eligible remuneration paid in respect of each week?
• 26-2. Can I use an average daily wage if my payroll cycle does not align exactly with the wage subsidy claim period or do I have to use an exact daily figure?
• 29. Are there any special T4 reporting requirements for the wage subsidy?

Canada Emergency Student Benefit enacted

Originally announced on April 22, 2020, the Canada Emergency Student Benefit (CESB) will provide $1,250 per month for eligible students or $1,750 per month for eligible students with dependents or disabilities. The benefit will be available from May to August 2020. On May 1, 2020, Bill C-15, Canada Emergency Student Benefit Act, received Royal Assent. Students who are unable to find employment or self-employment due to COVID-19 during the four week period for which they are applying for the CESB will be able to do so starting in May. Further details will be available soon.

Tariff relief for crucial medical supplies

On May 6, 2020, Minister of Finance Bill Morneau announced that the government is waiving tariffs on imports of certain medical goods, including PPE such as masks and gloves. In some instances, these tariffs were as high as 18%.