July 27, 2021
CPA Canada co-hosted this webinar with the CRA focusing on the CRHP. During the webinar, the CRA provides an overview of the program and demonstrates their online CHRP tools and application portal. In addition, the CRA responded to some of the top questions that CPA Canada received on the CRHP.
July 26, 2021
CRA publishes guidance on remission review requests
The CRA has recently published guidance on its existing process for requesting a remission review, including information on:
- when to request a remission review
- how to make a request
- what happens after making a request
For further information, please refer to the CRA’s webpage.
July 23, 2021
Recent CERS rulings
The CRA recently provided some guidance with respect to the Canada Emergency Rent Subsidy (CERS) in two new technical interpretations:
In Technical Interpretation 2020-0872521I, the CRA was asked whether the owner of a qualifying property that operates a hotel, or other similar business, would be considered to use its qualifying property primarily to earn rental income and therefore not eligible to claim the CERS for that qualifying property. While a question of fact, the CRA provides some helpful guidance. The CRA indicates that generally, any income earned from the use or occupation of a property is considered to be rental income. However, where an entity also provides significant additional services that are integral to the success of its ordinary activities, it is the CRA’s position that the operation of that entity would be earning income from the services provided instead of rental income. Finally, in determining whether the qualifying property is used primarily to earn rental income, the CRA confirms that “primarily” generally means more than 50 per cent and that various factors, such as the proportion of time the property is used to earn rental income, or the proportion of space, in relation to the total area of the property that the property is used to earn rental income, may be used.
In 2021-0893621E5, the CRA considers whether contents insurance is included in qualifying rent expense for the purposes of calculating the CERS. The CRA indicates that whether a particular payment for insurance made by an eligible entity in respect of a qualifying period is qualifying rent expense depends on the terms of the relevant insurance contract. Generally, if the insurance is on the qualifying property, then the amount paid for the insurance should be part of qualifying rent expense. In contrast, if the insurance is for content or personal property, then the amount paid for the insurance should not be included in qualifying rent expense.
July 21, 2021
Process for making a bulk taxpayer relief request released
The CRA has recently released guidance on how authorized representatives can make a bulk request for the cancellation of penalties and interest on behalf of multiple taxpayers, for which the request for relief have common reasons or similar facts. The CRA indicates the bulk request can be made with respect to penalties or interest under the Income Tax Act or the Excise Tax Act. When submitting a bulk request, representatives should ensure the following:
- authorization is on file for each taxpayer
- returns have been filed or remittances have been made
- penalties or interest have been charged
Further instructions can be found on the CRA’s webpage.
July 20, 2021
Revised news release: Bill C-208 and inter-generational transfers
The Department of Finance Canada issued a revised news release on July 19 on Bill C-208. The original release caused a significant amount of confusion and many questioned whether Finance Canada could change the coming into force date of the bill. The revised release sets out the federal government’s plans in more detail and the key highlights include:
Confirmation was provided that the bill is the law, and it currently applies as passed by Parliament.
Finance Canada believes that the bill allows for surplus stripping as it could apply where there is no genuine intention to transfer ownership of the business and as such, compromises the integrity of the tax system. In particular, reference is made to converting dividends into capital gains which are taxed at a lower rate. The same risk presumably applies to gains eligible for the capital gains exemption although that is not discussed specifically.
Further draft legislation will be released which will contain more rigorous rules that will deal with issues such as whether the new owners are active in the business. The goal will be to ensure that the rules are not used for “artificial tax planning.”
There will be a consultation on the proposals when they are released.
The final legislation will apply as of the later of either November 1, 2021 or the date of publication of the final draft legislation.
We will continue to monitor this issue and provide an update when there is new information.
Canada Recovery Hiring Program (CRHP) study: Participants needed
The CRA is seeking CPA participants for its CRHP study. The purpose of this study is to evaluate the web content, as well as the online calculator used in the CRHP application process. The study takes approximately 45 minutes. The study will be administered live by a User Experience Specialist and will focus on the CRHP application process to determine if and where participants may encounter/experience challenges.
If you are interested in participating, please take a moment to complete the CRA’s screener survey.
Upon completion of the survey, the CRA will contact selected participants regarding next steps.
July 7, 2021
Submit your questions now: Canada Recovery Hiring Program (CRHP)
CPA Canada is recording a webinar with the CRA focusing on the CRHP. During the webinar, the CRA will provide an overview of the program and demonstrate their online CHRP tools and application portal. In addition, the CRA will respond to some of the top questions that CPA Canada receives on the CRHP.
You can submit your questions on Slido (enter code #949225) until Sunday, July 11, 2021.
A recording of this webinar will be available on this page after July 14, 2021.
Update on Bill C-208: Intergenerational transfers
Bill C-208, which was a private member’s bill aimed at the issue of tax inequity for non-arm’s length intergenerational transfers of a business, received Royal Assent on June 29. When selling a corporation to another arm’s-length corporation, it is generally possible to realize a capital gain and if the shares qualify, a gain eligible for the capital gains exemption. However, if the same shares are sold to a non-arm’s length corporation, such a gain could be deemed to be a dividend under Section 84.1 of the Income Tax Act. Bill C-208 sought to eliminate this inequity.
Bill C-208 changed the rules that apply to non-arm’s length sales so that deemed dividend treatment would not apply if certain conditions are met. As the bill was considered by Parliament, the Department of Finance Canada expressed concerns that the draft changes could allow for inappropriate surplus stripping. Due to this, on June 30, Finance Canada announced that:
“The federal government is committed to facilitating genuine intergenerational share transfers, while preventing tax avoidance that undermines the equity of Canada’s tax system. The government proposes to introduce legislation to clarify that these amendments would apply at the beginning of the next taxation year, starting on January 1, 2022.”
We will continue to monitor this issue and provide more information as it becomes available.
June 30, 2021
GST/HST registration for digital economy businesses now available
On June 29, Bill C-30 (Budget Implementation Act, 2021, No.1) received royal assent and the new GST/HST rules for digital economy businesses will be in effect on July 1. On June 30, the CRA launched its new registration system and is now accepting GST/HST registration requests under these new measures.
New Canada Recovery Hiring Program (CRHP) web page and calculator now available
The online calculator integrates the new CRHP with the Canada Emergency Wage Subsidy (CEWS), automatically showing applicants which subsidy will provide them with more support based on the information they enter. The CRHP web page includes detailed information about eligibility requirements, how payment periods are structured and how the CRHP is calculated.
Eligible employers will be able to apply for the CRHP starting July 7 through My Business Account and Represent a Client. The CRA will begin to issue CRHP payments to eligible employers during the week of July 12.
June 17, 2021
Update on simplified GST/HST registrations
The CRA has updated their webpage to indicate that they will now be opening the simplified GST/HST registration site for digital businesses on June 25, 2021 (previously June 21, 2021).
In addition, we wanted to highlight that the CRA indicates in their guidance that “a person other than the business owner, such as an accountant, lawyer or another company employee, can submit the registration form on behalf of the business.” We confirmed with the CRA that the representative does not need to be authorized to submit a request for registration under this approach. The CRA indicated, however, that after the registration is complete, a representative will have to provide proper authorization for any further communication with the CRA.
June 10, 2021
CRA to open simplified GST/HST registration for digital businesses on June 21, 2021
The CRA has recently updated their webpages relating to the new GST/HST obligations under the proposed measures that were announced by the Government of Canada last fall. The webpages include several tools and resources to help businesses determine if they need to register under the new regime, the options for GST/HST registration, determining place of supply, and what the compliance obligations are. Of note, the CRA has announced that the simplified registration site will open on June 21, 2021.
Lockdown support for closed travel agencies, stores, and food court restaurants
Two recently published technical interpretations, 2020-0873601I7 and 2021-0880401I7, deal with whether various mandated closures would qualify for lockdown support. The scenarios presented to the CRA were:
- a travel agency, which was required to close its office due to lockdown measures in effect in the city where it is located, but employees were able to perform their duties from home
- a retail store located in a shopping mall where a public health order mandates the closure of the store for in-person shopping but may provide sales online or by phone via curbside pick-up or delivery
- a food court restaurant in a shopping mall where a public health order requires the closure of the food court seating area
In its responses, the CRA provides a useful analysis of the various conditions of “public health restriction” under subsection 125.7(1). Of particular note, the CRA indicates that in determining whether a public health restriction requires that some or all of the activities of the eligible entity at the qualifying property are required to cease (i.e., “restricted activities”), the CRA provides that this determination is based on the type of activity rather than the extent to which an activity may be performed, or limits placed on the time during which an activity may be performed.
The CRA also notes that for a particular order to meet the conditions of a public health restriction under subsection 125.7(1), it requires that it is reasonable to conclude that at least approximately 25 per cent of the qualifying revenues of the eligible entity for the prior reference period that were earned from the qualifying property were derived from the restricted activities. The CRA indicates that the entity may have some flexibility in the method it can use to satisfy this condition, provided that it is appropriate for those particular circumstances.
Thus, in the case of a travel agency, if, prior to the closure, clients made in-person visits to the office to arrange travel bookings and in-person visits ceased upon closure of the office as the result of an order or decision, then those activities could be considered restricted activities and this condition could be satisfied. The fact that employees started working from home and started making travel bookings over the phone once the office closed would not preclude this condition from being met. The CRA applies this same rationale for the closed store in the shopping mall but still providing curbside pickup or delivery for its customers (i.e., the in-person shopping could be considered the restricted activity).
For the food court restaurant, where the public seating areas for customers of the restaurant are required to be closed, the CRA indicates that the “sit-down dining” activities could be considered restricted activities, and the fact that take-out service may continue would not preclude the restaurants from having restricted activities related to “sit-down dining”. It is not clear to us how the 25 per cent of revenues condition noted above would be documented in this situation.
Finally, the CRA re-confirms that for the condition that the restricted activities are required to cease for a period of at least one week, there is no requirement this must be within a particular qualifying period.
June 9, 2021
CRA confirms federal SR&ED extension does not apply to British Columbia or Nova Scotia R&D claims
Further to our post on June 8, 2021, the CRA has now published its guidance on the impact of the federal Scientific Research and Experimental Development (SR&ED) extension to provincial R&D claims. The guidance specifically indicates that the federal extension does not apply to the British Columbia Scientific Research and Experimental Development Tax Credit and Nova Scotia Research and Development Tax Credit. As noted in our earlier post, the CRA recommends that affected corporations should file their federal and provincial claim forms without taking into account the federal COVID-19 extension.
June 8, 2021
SR&ED extension to September 1, 2021 for certain corporations
The CRA updated their Scientific Research and Experimental Development (SR&ED) Filing Requirements Policy in November 2020 to reflect legislative changes that had been announced and the extension of SR&ED reporting deadlines because of the COVID-19 pandemic. Appendix A of the policy provides a table which summarizes the CRA’s extensions to SR&ED filing deadlines. Of note, the table in section A.1 indicates that because the T2 filing due date for corporations with taxation year-ends from November 30, 2019, to February 29, 2020 were extended to September 1, 2020, the federal SR&ED reporting deadlines for these tax years have been extended to September 1, 2021. The CRA has reconfirmed that these due dates still apply.
We asked the CRA to confirm how this extension would apply to provincial and territorial research and development (R&D) credits. The CRA has indicated that in general, for provinces where the wording in their respective tax Acts for their R&D reporting deadline does not rely on the filing due date, the deadlines for the provincial R&D credit are not extended. The CRA recommends that such taxpayers should file their federal and provincial claim forms without taking into account the federal COVID-19 extension.
For provinces administered by the CRA that have the same or similar wording in their provincial income tax Acts, such as “12 months (or one year) after the taxpayer’s filing due date,” the CRA stated that the deadline to file for these R&D tax credits is extended in the same way as the extended federal SR&ED reporting deadline.
Please see the CRA’s Summary of provincial and territorial research and development (R&D) tax credits for further information on the deadlines that apply for each province or territory administered by the CRA.
We understand that the CRA will be publishing guidance on this issue on their website shortly and we have suggested that they confirm the due dates that apply in each province or territory.
June 3, 2021
Details of the New Canada Recovery Hiring Program and extension of business support programs released
On June 2, the Government of Canada released backgrounders providing details on the Canada Recovery Hiring Program, as well as on the extension and changes to the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs as announced in the 2021 federal budget. It appears that the details contained in the backgrounders are consistent with what was in the budget documents.
May 27, 2021
CRA publishes new technical interpretations on COVID-19 relief programs
The CRA continues to publish technical interpretations providing additional guidance related to the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS):
Owner-manager remuneration and CEWS
In CRA technical interpretation 2020-0865791I7(E), the CRA was asked to comment on whether certain amounts paid or credited by an eligible entity to an eligible employee, who is an owner-manager, are considered eligible remuneration for purposes of CEWS in a number of different scenarios.
The CRA confirmed that salary and wages paid to an owner-manager retroactively in respect of a week during a qualifying period can generally be considered eligible remuneration for purposes of the CEWS to the extent that the eligible remuneration reflects the actual amount paid in respect of the particular claim period. However, in the situation where an owner-manager’s salary expense is reflected by journal entry only, with a corresponding credit to the shareholder account, the CRA appears to indicate that such salaries and wages are not considered eligible remuneration. Finally, if the corporation pays the salaries and wages to an owner-manager which are then immediately returned to the eligible employer as either a shareholder loan or capital contribution, the amounts will not qualify as eligible remuneration for purposes of the CEWS.
We will be following up on the CRA’s comments with respect to remuneration credited to a shareholder loan account to clarify whether the comments relate to the specific situation in the interpretation or the practice of crediting salary amounts to a shareholder loan account more generally.
Claiming a lesser CEWS amount possible
In CRA technical interpretation 2020-0850231E5 (E), the CRA was asked whether an eligible entity can submit a CEWS application for a lesser amount than that determined by the formula in the Income Tax Act. The CRA indicated that since the Act calculates the subsidy amount for an eligible employee in respect of a week in the qualifying period, the qualifying entity has discretion to claim a lesser amount in its application by excluding any employees from the CEWS calculation under the Act.
Rent paid for a boat slip may qualify for CERS
Technical interpretation 2021-0875571I7(E) deals with whether a boat slip is considered real or immovable property such that rental expenses for the boat slip qualify for CERS. The CRA provides general comments and indicates that the taxpayer should look to common law principles (or the Civil Code of Quebec if the property was located in Quebec) to determine whether a particular property, such as a boat slip, would be considered real or immovable property.
CRA publishes guidance on how to tell if you’ve been contacted by the CRA
On May 26, 2021 the CRA published guidance that could help your clients determine whether they have been contacted by a legitimate CRA agent. To help protect your clients from scams, it’s important that they know when and how the CRA might contact them, especially as personal income tax return verifications resume.
May 25, 2021
CERS online calculator fixed for lockdown support
The CRA has made changes to the CERS online calculator regarding the calculation of lockdown support. See our April 14, 2021 posting for further details on the issue with the calculator. The CERS webpage now clarifies that if a lockdown period is one week or longer, a business may qualify for lockdown support even if the minimum lockdown period of one week overlaps two different claim periods.
The CRA notes that if the CERS calculator was used on or before May 20, 2021, it may not have accurately calculated lockdown support if the lockdown period overlapped two or more claim periods.
CRA publishes new technical interpretations on COVID-19 relief programs
The CRA has recently published a number of technical interpretations providing some new guidance related to the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS):
Guidance on “qualifying property” for CERS
In CRA technical interpretation 2020-0870041I7 (E), the CRA is asked whether the determination of a qualifying property depends on its legal title. The CRA was also asked whether a property that contains a self-contained domestic establishment (SCDE) can be a qualifying property for the purposes of the CERS.
The CRA concludes that while the legal title of a property may be relevant in determining whether a particular property is a qualifying property, it is not necessarily the case that a qualifying property of an eligible entity will always conform to its legal title. As such, a single legal title may, depending on the circumstances, contain more than one qualifying property. Similarly, a particular property may be a “qualifying property” for more than one eligible entity.
On SCDEs, the CRA indicates that the definition of qualifying property excludes property that is a SCDE used by the eligible entity. However, in some situations, a particular property may include a portion that is subject to the SCDE exclusion in the definition of qualifying property. In such a case, the fact that a part of a property is excluded may not, depending on the circumstances, preclude the remaining part of the property from being a qualifying property.
Rent on barber/hairdresser chairs may be eligible for CERS
In Technical Interpretation 2020-0869981I7 (E), the CRA indicates that where a barber or hairdresser (the “Stylist”) rents or leases space, a chair, or both, from the owner of a barbering or hairdressing establishment (the “Salon”), the rent may be claimed as a “qualifying rent expense” for the purposes of the CERS. The CRA provides that since the “chair rent” is rent for the use of, or right to use, an area within the salon that is real or immovable property such that it is capable of being a qualifying property, it may be a qualifying rent expense for the stylist, provided all of the conditions in the definition of qualifying rent expense are met. The CRA notes that this is a question of fact that must be determined by considering all of the circumstances of a particular situation, including the particular written agreement between the stylist and the landlord.
Business interruption insurance proceeds is qualifying revenue for CEWS
Technical Interpretation 2020-0852571I7 (E) deals with whether amounts received by an eligible entity from a business interruption insurance policy is included in an entity’s qualifying revenue for purposes of the CEWS. The CRA indicates that since an entity would typically acquire business interruption insurance to replace lost revenue when the entity is unable to carry on its ordinary activities, insurance proceeds would generally be included in qualifying revenue and would not be considered an extraordinary item. The CRA wass also asked where such insurance proceeds are included in revenue in a prior period, and are based on a gross revenue benchmark less cost of sales, whether an eligible entity can determine their qualifying revenue for the particular prior reference period based on the insurance proceeds plus a notional amount to represent what their revenue would have been during this period had they been able to operate. The CRA indicates that, since only amounts resulting in an inflow of cash, receivables or other consideration are included in qualifying revenue, therefore, an eligible entity would not be able to gross up their qualifying revenue by a notional amount.
May 18, 2021
Reminder: Upcoming CERS and CEWS deadlines
Given the significant workload this past year for practitioners, it is possible to lose sight of deadlines that are arising for two key COVID-19 programs – The Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS). These deadlines are unlike most others in terms of what day they fall on and the implications of missing a deadline. Therefore, we wanted to provide you with a summary to help you track these key dates.
A CEWS and CERS application must be filed no later than 180 days after the end of a claim period. The deadline to amend your application or increase the claim amount is also 180 days after the end of the claim period. Reductions can be requested after the deadline. The CRA also announced that they would allow certain late-filed claims and amendments – see the April 21 post “CRA announces they will accept certain late-filed CEWS and CERS applications” below. Note that we recommended to both the CRA and Finance Canada that the CRA should be allowed to use powers similar to those under the Taxpayer Relief program for late-filed CERS and CEWS claims.
*CEWS claim periods 1 to 8 and CERS claim period 1 are closed.
May 10, 2021
CRA publishes guidance on new digital economy GST/HST measures
As of July 1, 2021, digital economy businesses may have GST/HST obligations under proposed measures that were announced by the Government of Canada last fall. To help affected businesses prepare for their new compliance obligations, the CRA has launched a new webpage which includes a questionnaire to help businesses determine if they need to register under the new regime, as well as instructions and examples.
The federal government had announced in the 2021 federal budget that the CRA will work closely with businesses to assist them in meeting their obligations. The CRA notes on their webpage that where the affected businesses and platform operators show that they have taken reasonable measures but are unable to meet their new obligations for operational reasons, the CRA will take a practical approach to compliance and exercise discretion in administering these measures during a 12-month transition period, starting July 1, 2021.
May 7, 2021
Update on discussions with the CRA on 2020 tax returns
As discussed in our April 27 update, while we are disappointed with the federal government’s decision to not provide an extension for personal tax returns, we are continuing our discussions with the CRA on issues related to personal tax returns and tax deadlines. Issues discussed with the CRA include the following:
We recommended that the CRA provide clear guidance on situations where relief will be provided for late-filed T1 returns through the Taxpayer Relief Program. Also, the process for requesting relief should be as simple as possible on the assumption that the number of requests for relief will be larger than normal. Some specific suggestions include:
- Determine whether there are situations where “proactive relief” could be provided by the CRA without an application made by the taxpayer, such as for those taxpayers who have filed on time in prior years. Such an approach could also be used for smaller amounts.
- For tax preparers, to the extent that proactive relief is not available, allow them to submit a list of relief requests to streamline the process.
- Look for other ways to simplify and speed up the process.
CRA verification processes
We asked the CRA to keep in mind that many incomplete T1 returns may have been filed since no extension was allowed and that it should expect that it will take more time to finalize these returns through T1 adjustments. We also reminded the CRA that other significant deadlines are approaching on June 15 for T1s for the self-employed (and spouses/partners) and June 30 for T2s for corporations with a calendar year end. Consequently, the workloads of many firms remain high. With this in mind, we asked the CRA to delay verification work until after June 30 where possible.
Corporate tax return deadlines
On corporate tax returns, the province of Quebec has announced that relief similar to that provided to individuals is not planned and we assume the same will be true federally for T2 returns. Since relief for corporations will likely need to come through the Taxpayer Relief Program, we will discuss how this program will be administered for late-filed corporate tax returns with the CRA.
Finance publishes explanatory notes for the 2021 budget bill
Finance Canada has recently updated their website to include the explanatory notes for the proposals included in Bill C-30 (which includes certain Budget 2021 measures and other previously announced measures).
May 3, 2021
Government introduces Bill C-30
On April 30, 2021, the federal government introduced Bill C-30, an Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021, and other measures. As mentioned in our previous post, this bill contains some of the measures introduced in the 2021 federal budget, as well as some other previously announced measures.
April 30, 2021
Government tables Notice of Ways and Means Motion to implement certain 2021 budget proposals and other measures
On April 28, 2021, a Notice of Ways and Means Motion (NWMM) was tabled to implement some of the proposals included in the 2021 federal budget. It also includes a number of other previously announced measures, such as:
- changes to the tax treatment of employee stock options
- GST/HST measures on e-commerce supplies
- temporary adjustments to the automobile standby charge to take into account COVID-19
- changes to the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs
For further details, please see the NWMM.
April 27, 2021
Update on April 30 filing deadline for personal tax returns
As April 30 draws nearer, the federal government has not announced an extension or other general relief. As we discussed previously on this page, we have communicated the need for such action in a number of ways to the federal government and at different levels for several months. Others, including the federal opposition and the Quebec government, also asked the Government of Canada for an extension or an advance waiver of penalties and interest. The issue also has been addressed in the media, in emails from members to their MPs, and in an online petition. We will continue to communicate with the CRA, including discussions on providing efficient and timely relief in the event that penalties are charged.
For self-employed individuals and their partners, the filing deadline remains June 15 and amounts owing are due April 30.
As stated on its website, the CRA intends to charge taxpayers a late-filing penalty if they file their 2020 tax return after April 30, 2021 and there is unpaid tax at that time. The penalty is five per cent of the balance owing for 2020, plus one per cent of the balance owing for each full month the return was filed after April 30, 2021, to a maximum of 12 months. A higher penalty applies if a return was late-filed in the prior three years. Interest will also be charged on unpaid amounts subject to the one-year relief program available to certain taxpayers. As the website for that program states, this relief does not apply to late-filing penalties. We understand that the penalty and interest assessment process is automated for the most part.
Relief can be provided under the taxpayer relief program. However, as individual applications are required, we have started to communicate with the CRA specifically on finding alternatives to reverse penalties and interest that are charged, and to do so as quickly as possible while minimizing the work that needs to be done by taxpayers and their advisors.
While we are disappointed with the federal government’s decision, we are committed to continuing to work with the CRA and Finance Canada in relaying ongoing concerns and providing relevant and timely updates as new information becomes available.
CRA provides examples for their guidance on international income tax issues
The CRA has updated their Guidance on International Income Tax Issues Raised by the COVID-19 Crisis with a number of examples that help to provide further clarification on how they will manage administrative relief for cross-border workers in respect of their 2020 Canadian income tax obligations. Many of the added examples are consistent with the questions we posed to the CRA and highlighted in our April 21, 2021 news posting, “CRA provides additional guidance on cross border tax issues.”
Reporting COVID-19 benefit repayments on 2020 personal tax returns
As you may be aware, the 2021 federal budget included a proposal to allow individuals to claim COVID-19 benefit repayments as a deduction in either the year they received the benefit or the year they repaid it. This option would be available for benefit amounts repaid at any time before 2023, including benefits received in 2020. We asked the CRA to confirm how repayments of 2020 benefits in 2021 should be handled.
The CRA has confirmed that if a taxpayer makes a repayment in respect of 2020 benefits in 2021 prior to filing their 2020 return, they can claim the deduction on line 23200 (other deductions). Alternatively, an adjustment to their 2020 return can be requested later once the repayment is made, provided that the repayment occurs before 2023. The CRA notes that they will hold any adjustment requests in abeyance until the proposed legislation receives Royal Assent.
April 21, 2021
CRA announces they will accept certain late-filed CEWS and CERS applications
On April 21, 2022, the CRA added questions 26-01 and 26-02 on their CEWS FAQ page. The CRA has provided guidance on the circumstances where it will accept late-filed amended or original CEWS applications.I
n addition, the Canada Emergency Rent Subsidy (CERS) webpage has been updated to reflect that the CRA will also accept late-filed CERS claims under the same circumstances as provided for late-filed CEWS applications. Please review the CRA’s CEWS FAQs and CERS webpage for further details.
CRA provides additional guidance on cross border tax issues
CPA Canada submitted a list of questions to the CRA which were gathered from members relating to our April 1 update of the CRA’s Guidance on International Income Tax Issues Raised by the COVID-19 Crisis. The questions have been reviewed and the CRA has provided responses to us which we are able to share. It is unclear at this time whether these questions and answers will be posted on the CRA website.
April 19, 2021
On April 19, 2021, Deputy Prime Minister and Minister of Finance Chrystia Freeland tabled Canada’s federal budget. Read CPA Canada’s Federal Budget Tax Highlights to learn about the most important tax changes announced this year.
April 16, 2021
Status of discussions with the federal government on the personal tax deadline
With the announcement of filing relief in Quebec, we have again been communicating to the federal government on the urgent issues surrounding the April 30 personal tax deadline. To provide you with more information and background on the steps we have taken, we have produced a short video to bring you up to date.
April 15, 2021
Quebec announces personal tax return relief
On April 15, Quebec’s Finance Minister announced relief for personal tax returns. According to the news release (available in French only), Revenu Quebec will provide flexibility and, in particular, returns can now be filed on or before May 31 without the application of a late filing penalty. Also, interest will not be charged on balances owing during May.
Although the federal government has still not provided relief and the April 30 federal deadline still stands, we will continue to communicate with the federal government, including the offices of the Minister of Revenue and Finance. We will be in touch with them again given the developments in Quebec, with the hope that they will follow Quebec’s announcement.
April 14, 2021
Issue with CERS calculator and lockdown support
It has come to our attention that there is an inconsistency in the way the CERS calculator is computing lockdown support amounts. In particular, the issue of concern arises when a lockdown period spans two qualifying periods.
The definition of “public health restriction” in subsection 125.7(1) states that the business must be in lockdown for a period of at least one week. While not totally clear, our interpretation is that the one-week period does not have to be fully within the qualifying period for which a claim is being made. Accordingly, a one-week period that straddles the end of one qualifying period and the beginning of another may still satisfy the requirement and a claim can be made in both periods. The CRA has confirmed with us that this is also their interpretation.
Unfortunately, the CERS calculator currently does not reflect this interpretation. Currently, the calculator only allows a lockdown support amount where the lockdown period within the claim period is at least seven days.
The CRA is aware of this inconsistency and has indicated they will be updating the calculator to address this situation shortly.
April 12, 2021
Update on tax deadlines
We wanted to provide you with an update on our activities with the federal government on the issue of tax deadline relief since our last update on March 30. We recognize the significance of this issue in terms of the public interest. It impacts Canada’s professional accountants, tax preparers and Canadian taxpayers, and this is why CPA Canada has been actively discussing deadlines and/or tax relief with senior government officials for several months.
Concerns around the pandemic have heightened since our last report and Ontario in particular has instituted a stay-at-home order that will apply beyond the April 30 T1 deadline. We have received more feedback from many of you and we have, once again, raised these concerns with CRA officials. For those of you in Ontario, be assured that we explained the significant issues that a stay-at-home order creates for tax preparation services. Reading your notes has highlighted the gravity of the professional and personal issues you are facing, and we had been hoping for some good news.
Unfortunately, it appears that our efforts to obtain generalized deadline relief will be unsuccessful despite what we believe is a clear need for many firms and the taxpayers they serve. If relief was needed last year, then it is difficult to understand why it is not needed again this year, especially for those of you in areas with heightened variant risks and case counts.
The relief sought could have been in the form of an actual deadline extension or broad administrative relief for penalties and interest. Both were used last year for T1 returns and either approach would have been effective this year. We had also suggested a more modest time period for the relief this year when compared with what was allowed last year. We believe that such a request is both reasonable and in the public interest.
We will provide more information as it becomes available.
April 9, 2021
Computing qualifying revenues for businesses claiming the CERS and CEWS
During the CRA Roundtable (2021-0879631C6 E) at the Tax Executives Institute (TEI) Virtual Midyear Conference, the CRA was asked a number of questions. In one question, the CRA was asked whether an eligible entity would have to compute its qualifying revenue using the same approaches and elections for both the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rental Subsidy (CERS). The CRA confirmed that an eligible entity would have to calculate its revenue reduction for both subsidies using the same rules (i.e., the same elections and approaches) that are applicable to the qualifying period.
The CRA provided an example where Corporation A and Corporation B, both eligible entities, are members of an affiliated group and have jointly elected that the qualifying revenue of the affiliated group be determined on a consolidated basis under paragraph 125.7(4)(b) for qualifying period 9 for purposes of the CEWS. This election apparently allowed Corporation A to apply for the CEWS for its employees. Corporation B did not apply for the CEWS for qualifying period 9 but wishes to apply for the CERS for period 2 (the corresponding qualifying period for CERS). Since Corporation A and Corporation B have jointly elected that the qualifying revenue of the affiliated group be determined on a consolidated basis for that qualifying period, the consolidated amount must be used as the qualifying revenue by Corporation B in determining its revenue reduction for the CERS.
April 1, 2021
International income tax guidance updated
On April 1, the CRA revised its Guidance on International Income Tax Issues Raised by the COVID-19 Crisis. In particular, Section IV. and V. have been updated to reflect current submission guidelines. Also, Section VII. has been added to provide further guidance on individual income tax residency, permanent establishment, and cross-border employment income.
Prior to this release, CPA Canada had highlighted some of the key practical issues that the federal government’s travel restrictions would place on taxpayers—particularly with respect to individuals—to the CRA. We will be reviewing the supplement and will continue to discuss any new or outstanding issues with the CRA.
CRA launches dedicated hotline for new digital economy GST/HST measures
The CRA has informed us that effective March 31, 2021, they have launched a dedicated GST/HST hotline and generic email address for businesses that are affected by the proposed new GST/HST digital economy measures. These businesses and their representatives are encouraged to contact the CRA at the numbers and dedicated email address below, should they have any technical enquiries on the proposed measures or should they require assistance navigating the simplified GST/HST registration, reporting and remittance framework.
Canada and the U.S.: 1-833-585-1463 (toll-free)
Elsewhere: 1-613-221-3154 (collect calls are accepted)
March 30, 2021
Discussions with the CRA on tax deadline relief continues
We continue to communicate with the CRA on the need for tax deadline relief with a focus on the April 30 deadline for personal tax returns. We also understand that many of you are concerned about the June 30 deadline for corporate tax returns for corporations that have a December 31 year end.
Since our last update on February 23, the IRS has announced extensions in the U.S. and we have heard from more members of small and medium-sized firms that they urgently need help. We are also very concerned about the emerging third wave of the pandemic based on recent statistics and news. We have communicated these concerns to the CRA, plus the hardships we know many of you are facing in respect of your businesses and personal lives.
While communicating the specific issues, we have focused on two key themes. First, the impact of tax deadlines are obviously much different when you are working to help a large group of clients meet their tax obligations compared to a taxpayer meeting their own. Second, our members are an integral part of the Canadian tax system and have been in the front lines helping businesses apply for programs such as the CEWS, the CERS and CEBA, along with the other services they continue to provide to taxpayers. This is a significant undertaking for many firms and it comes at a time when many are operating at a reduced capacity.
We will provide more information as it becomes available.
March 24, 2021
Reminder: Upcoming CERS and CEWS deadlines
Given the significant workload this past year for practitioners, it is possible to lose sight of deadlines that are arising for two key COVID-19 programs – The Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS). These deadlines are unlike most others in terms of what day they fall on and the implications of missing a deadline. Therefore, we wanted to provide you with a summary to help you track these key dates.
Please note that the first deadline is also 180 days after the end of the claim period.
*CEWS claim periods 1 to 6 are closed and claims cannot be submitted, amended or increased.
March 23, 2021
Deadline for CEBA applications extended to June 30
On March 22, the federal government announced that the deadline for new Canada Emergency Business Account (CEBA) applications is being extended from March 31 to June 30, 2021. This deadline extension applies to any new applications for CEBA loans of $60,000 or to new applications from businesses that have already received the $40,000 loan and intend to apply for the additional $20,000.
March 18, 2021
CRA publishes further guidance on the Canada Emergency Wage Subsidy (CEWS)
The CRA recently published two new technical interpretations that provide some further guidance relating to the CEWS.
Business assets acquired during a reference period: In technical interpretation 2020-0870981E5(E), the CRA addresses a situation where the business assets are acquired during a reference period and whether a proration is necessary when determining qualifying revenue. Assuming the election under paragraph 125.7(4.1)(e) is being made and the acquirer is claiming the CEWS, the acquirer will include the vendor’s revenue from the acquired assets in the current reference period (along with its own). Similarly, the vendor’s revenue from the acquired assets for the prior period will be added to the acquirer’s revenue for that period. There is no proration for either calculation and these amounts will be excluded from the vendor’s revenue for CEWS purposes. Also, where both the vendor and the acquirer have eligible remuneration during the current reference period, they can both claim the CEWS if they otherwise qualify.
Eligible remuneration and outsourced staff: In technical interpretation 2020-0856781E5 (E), the CRA provides guidance on the implications to CEWS in scenarios between an outsource staffing company and their clients. The CRA indicates that generally, a staffing company’s staff are employees of the staffing company and not that of its client. Therefore, a payment made by the client to a staffing company would not be considered eligible remuneration paid to an eligible employee of the client for CEWS purposes. The CRA is also asked to comment on the implications of the situation where the outsource staffing company has received the CEWS and the client receiving the staffing services has received an offsetting discount for the subsidy received. For the client, the discount offered by the outsource staffing company should not, in and by itself, reduce the amount of its eligible remuneration for the wage subsidy.
IRS extends the U.S. filing deadline for individuals to May 17
The U.S. Treasury Department and Internal Revenue Service announced on March 17 that the U.S. federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.
On the personal tax deadline for Canada, we are continuing to discuss the issue with the CRA.
March 17, 2021
Specific instructions for regaining access to Represent a Client
With the most recent CRA lockdown of online accounts, we have summarized how you can regain access to Represent a Client (RAC). Note that it appears that representatives may be able to regain access to RAC quickly (full access to My Account or My Business Account may be delayed).
There are two ways to log into RAC – using a CRA username and password or using Sign-In Partner credentials (which makes use of your username and password for the sign-in partner to access CRA portals). Some may have set up both methods to log in, and in that case, they can continue to access RAC using the Sign-in Partner approach.
For those that have only used a CRA username and password and have been locked out, there are two ways to regain access:
1. CRA Username and Password (Option 2 on the CRA RAC login page)
To regain access for this sign-in option, you will need the following information:
- the eight-character alphanumeric access code, which is on your most recent Notice of Assessment
- your postal code on file with the CRA
If you have this required information, follow the “CRA register” link under Option 2 and enter your access code and postal code. You will then need to create a CRA user ID and password, and then provide answers to some security questions to create a new CRA credential. Be sure to create a username and a strong password that you have not used anywhere else.
If you cannot access your latest notice of assessment because you have not saved it remotely, you may still be able to get access through a Sign-In Partner (even if you have not used this approach in the past).
2. Using a Sign-In Partner (Option 1 on the CRA RAC login page)
The other approach to regain access is to set yourself up so you can log in through a Sign-In Partner, such as your bank or other financial institution. For this approach, you will need the following information:
- social insurance number
- date of birth
- postal code
- an amount related to a line on your most recent tax return on file with the CRA (the line numbers used rotate)
According to instructions received from the CRA, you should register to use the Sign-in Partner on the My Account page using Option 1. You will then use your Sign-in partner user ID and password to login into My Account. As part of that process, you will be asked to enter the information above to verify your identity.
Although your access in My Account will be limited until a code arrives in the mail, you should be able to log into RAC using the Sign-in Partner approach.
Finally, although many prefer to use a CRA username and password when accessing RAC, you may want to set up the Sign-in Partner approach for use in the future so you have another option for RAC access.
March 15, 2021
CRA locks down 800,000 accounts
As first announced in the media on March 12, the CRA has locked down approximately 800,000 online accounts. According to the CRA, affected individuals will be contacted either by email or by letter with instructions depending on the communications option that users have selected.
More information is available on the following CRA pages:
- CRA user ID and password has been revoked – Canada.ca
- Accounts locked on February 16 – Canada.ca (there is information on the March 12 lock down despite the title)
We are in contact with the CRA and will pass on more information as it becomes available.
March 11, 2021
COVID-19 benefits and T4As: What to do if there’s a mistake
The CRA has published some guidance on what to do if there is an error found on a 2020 T4A slip issued to you or your client. These errors could include repayments made in 2020 for a COVID-19 benefit that is not reflected on the slip, or a repayment has not been made but the income reported on the slip has been reduced by some other amount. There may even be situations where an individual receives a T4A, but they did not apply for COVID-19 emergency and recovery benefits.
The CRA is encouraging individuals (or their advisors) to contact the CRA immediately about any errors on T4As and indicates that CRA agents are prioritizing the resolution of such issues. Recognizing it may be difficult to get through to a CRA call agent during this busy time, the CRA indicates that individuals can use information they have on hand to estimate the income they received, and any income tax withheld from COVID-19 emergency and recovery benefit payments, and file T1 returns using that information. If needed, the CRA will reassess these returns after the T4A is corrected and an amended or cancelled T4A is issued.
Due to the workloads that many firms are and will be facing, we did point out to the CRA that following up on individual slips may not be practical. We also stressed the importance of following up with taxpayers where the T4A amount does not agree with the T1 amount before taking any action to reassess.
March 9, 2021
CRA’s dedicated telephone service for income tax service providers
The CRA has sent out a communication reminding practitioners of their Dedicated Telephone Service (DTS) for small and medium income tax service providers. The service connects income tax professionals with experienced CRA officers from the Income Tax Rulings Directorate who will be able to help with general, interpretative issues of the Income Tax Act. Firms with 50 partners or fewer can register for the service. For further information, visit the CRA’s DTS web page.
March 4, 2021
CRA provides guidance on definition of “qualifying rent expense” for Canada Emergency Rent Subsidy (CERS)
In a recent CRA technical interpretation (2020-0873491E5), the CRA provides some guidance on what additional expenses would meet the definition under paragraph 125.7(1) “qualifying rent expense” of the Income Tax Act.
The CRA confirms that where a lease is not a net lease, only the gross rent would meet the definition of qualifying rent expense. As a result, the CRA indicates that even if the lease contains a requirement for a tenant to pay for utilities, any payments made by the tenant for utilities will not be a qualifying rent expense.
With respect to net lease arrangements, the definition provides that additional amounts required to be paid under the net lease by the eligible entity may be a qualifying rent expense. For example, if a net lease requires a tenant to pay utilities as part of regular instalments of operating expenses customarily charged to the tenant, the CRA indicates that this payment is a qualifying rent expense.
The CRA notes however, to be considered a qualifying rent expense, the lease must require the payment; a lease that is silent with respect to a particular item does not, in the CRA’s view, satisfy this condition. Similarly, where a lease states that a tenant is “responsible for” a certain cost (but paying the cost is not a requirement of the lease), this would generally not constitute a qualifying rent expense. An example is provided by CRA to illustrate this.
March 3, 2021
Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) amounts to remain unchanged through to June 2021
On March 3, the federal government announced new details on the CEWS and CERS that will be applicable from March 14, 2021 to June 5, 2021. The backgrounder to the news release included the following:
- The rate structures for the CEWS for active employees, the CERS, and lockdown support that are currently in place until March 13, 2021, will be extended from March 14 to June 5, 2021.
- The CEWS rate structure for furloughed employees will also remain the same as the rate structure currently in place.
- For the revenue-decline reference periods, to ensure that the general approach continues to calculate an organization’s decline in revenues relative to a pre-pandemic month, the prior reference periods will be based on calendar months from 2019, effective as of the qualifying period from March 14 to April 10, 2021. (See the backgrounder for a table which summarizes the proposed reference periods.)
An additional elective alternative baseline remuneration computation for March 14 to June 5, 2021 is proposed to ensure that the baseline remuneration comparator remains appropriate. In particular, an eligible employer would be allowed to elect, for qualifying periods from March 14 to June 5, 2021, to use the period of March 1, 2019 to June 30, 2019, or July 1 to December 31, 2019 to calculate baseline remuneration. The CRA will administer this measure on the basis of draft legislative proposals released with the announcement.
February 26, 2021
CRA follow-up calls on RAC authorization requests
The CRA recently announced on the Represent a Client main page that all electronic authorization requests made by representatives for individuals and business clients will not be activated until the representative has been verified. And more specifically, clients may be contacted by the CRA to verify the representative’s authorization request.
Members have reached out to us, expressing significant concerns aroufebnd the specific methodology that is being used. We have been told that the CRA is calling their clients to verify the representative’s authorization request and if no one answers these calls, the authorization request is cancelled. Although we appreciate that the CRA has a duty to ensure access to taxpayer data is properly authorized, the newly implemented process poses various efficiency and privacy concerns for firms and their clients. One common observation is that many have trained their clients not to provide details over the phone when called on an unannounced basis by anyone due to the current high level of phone fraud.
We have provided feedback to the CRA and we will continue to provide updates on any developments on this issue.
February 25, 2021
Finance Canada releases draft legislation to increase accessibility of Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS)
On February 24, 2021, Finance Canada released draft legislative proposals that would implement technical amendments to the CEWS and CERS programs.
The draft legislative proposals would:
- Provide applicants with more flexibility in determining the revenue decline for the wage and rent subsidies for the qualifying period from December 20, 2020 to January 16, 2021. This proposed amendment would apply as of December 20, 2020.
- Ensure that lockdown support is available to an eligible property owner whose tenant is not arm’s length but has a qualifying business at the property that is subject to a lockdown and must shut their doors or significantly restrict their activities under a public health order. This proposed amendment would apply as of September 27, 2020.
The CRA will administer the subsidies on the basis of these draft legislative proposals.
For further details, please refer to Finance Canada’s news release and backgrounder. In addition, the CRA has updated their technical guidance on CERS to provide examples of non-arm’s-length scenarios.
CRA further extends period for carrying forward unused Health Care Spending Account (HCSA) credits
In a recent CRA technical interpretation (2020-0857841E5), the CRA has indicated that due to the COVID-19 pandemic, an HCSA that qualifies as a Private Health Services Plan (PHSP) and which has unused credits expiring between March 15, 2020 and March 16, 2021, could allow a one-time carry forward of those unused credits for a reasonable period to allow members to access services that were otherwise restricted during the COVID-19 outbreak.
The CRA has indicated that a period of up to 12 months would generally be considered reasonable and would not, in and of itself, disqualify the HCSA from being a PHSP.
This is an extension from a previous administrative concession made by the CRA in technical interpretation 2020-0846751E5 and discussed in our June 8, 2020 tax blog.
February 23, 2021
An additional update on tax deadlines
As we have mentioned in previous posts, we have collected a significant amount of feedback from members and have passed on this information to the CRA. Most of the feedback was received from small and medium-sized CPA firms. We thank all of you who have provided feedback, as it was very helpful.
We communicated what we’ve heard to senior officials at the CRA a number of times and also to the Minister of National Revenue’s office. We conveyed all of the key concerns that members of small and mid-sized firms have raised ̶ including concerns around social distancing/remote work and how that impacts a tax preparation practice, how some members are behind in their work due to pandemic assistance applications, how some have lost resources due to the pandemic, and issues around general wellbeing and a loss of efficiency. As mentioned in a prior update, three-quarters of the small and mid-sized firms we heard from believe that a filing extension is needed for T1s and that was a focus of our discussions with the federal government.
We also conveyed to the CRA that there is a big difference between the ability of an individual taxpayer to meet a deadline such as the April 30 deadline for T1s and a tax preparer’s need to meet the deadline for all of their clients in a tax season where there are significant work-related challenges and for most, where there is more work to do. In its most recent news release, even the CRA concludes this will be “a tax season like no other.”
However, in the past two weeks, the CRA has mentioned the April 30 T1 filing deadline two times in news releases, on February 9 and on February 22. Based on repeated references to April 30 in broad-based communications with no mention of filing extensions and our communications with the CRA, we currently have no reason to expect that there will be a filing extension for T1 returns. Given that the concerns raised by members were the most acute on T1s, we had focused our discussions on that deadline first with a view of how that could impact other deadlines.
We will continue to communicate with the CRA, but we wanted to provide our view on the current status of this important issue.
New requirements for electronic signatures on Form T183
As previously reported, the CRA will continue to accept an electronic signature on Form T183, Information Return for Electronic Filing of an Individual’s Income Tax and Benefit Return, for the 2021 tax filing season. CRA has now posted information on additional requirements relating to electronically signed Form T183s. In particular, Form T183 has been updated to include a date and timestamp, and three new EFILE fields have been added (electronic signature indicator, signature date, and signature time), which must all be transmitted when Form T183 is electronically signed.
We understand this may impact workflow for some tax practices. Note that we asked the CRA last fall and again more recently to not change processes related to Form T183 for this tax filing season due to the pandemic. We will provide an update if more information becomes available.
February 19, 2021
Government of Canada proposes increase to number of weeks for recovery benefits and EI regular benefits
On February 19, the federal government announced its intent to introduce regulatory and legislative amendments to increase the number of weeks of benefits available for the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), the Canada Recovery Caregiving Benefit (CRCB) and Employment Insurance (EI) regular benefits.
The proposed changes would:
- increase the number of weeks available under the CRB and the CRCB by 12 weeks, extending the maximum duration of the benefits through regulation from 26 weeks to up to 38 weeks
- increase the number of weeks available under the CRSB through regulation from the current two weeks to four weeks
- increase the number of weeks of EI regular benefits available by up to 24 weeks to a maximum of 50 weeks through legislation, for claims that are made between September 27, 2020 and September 25, 2021
The government also proposes to allow self-employed workers, who have opted in to the EI program to access special benefits by using a 2020 earnings threshold of $5,000, compared to the previous threshold of $7,555. This change would be retroactive to claims established as of January 3, 2021 and would apply until September 25, 2021.
CRA’s automobile benefits calculator updated for COVID relief measures
As a temporary COVID-19 response measure, if an employee used an automobile more than 50 per cent of the distance driven for business purposes in the 2019 tax year, they will be considered to have used the automobile more than 50 per cent of the distance driven for business purposes in the 2020 and 2021 tax year. The 2021 edition of the Automobile Benefits Online Calculator is now available on the CRA’s website and reflects the temporary measure. For more information, please see the December 21, 2020 Department of Finance Canada news release.
February 18, 2021
Update on CRA multi-factor authentication
On February 5, we posted an item on the CRA’s plan to introduce multi-factor authentication for electronic access to most electronic services. Last week, we had a discussion with the CRA on considerations to keep in mind and our recommendations. Although it does appear that strengthened security is a long-term need, we recommended that mandatory implementation not go forward during the tax filing season that is about to begin. Although the CRA has not announced specific timing, they did provide the update below to us. With a reference to the “coming months,” it appears that the CRA may follow our recommendation on timing. We will pass on more information as it is received.
Multi-Factor Authentication for representatives
The CRA is introducing a Multi-factor authentication (MFA) process to enhance the security of its online services and ensure the safety and protection of taxpayer information. As part of the EFILE community, in the coming months you will be asked to enrol in MFA before gaining access to online services.
We understand you may have questions about how MFA will impact your day-to-day work. As we progress with implementing MFA for representatives, we’re working to ensure that your feedback is addressed and questions are answered. We will be sharing more details in the coming months, but for now please visit our questions and answers webpage on Multi-factor authentication to access CRA login services.
We would also like to take the opportunity to remind you of the value of changing passwords and user IDs regularly. As we head into tax-filing season, we encourage you to change your password if you have not done so recently. This will help protect the personal and tax information of yourself and your clients. Learn more about how you can improve the security of your online CRA accounts.
February 16, 2021
Update on discussions with CRA on tax deadlines
On February 12, the CRA posted their deadline summary for 2021 filing dates, and unfortunately, there were no references to any deadline extensions despite the fact that the pandemic continues. Although there is a light at the end of the tunnel with the rollout of vaccines, it does appear clear that the country will still be in the midst of a crisis throughout the upcoming tax filing season.
As we mentioned in January, we have had many discussions with the CRA on deadlines and have been expressing our concerns and the feedback we have received to date. Although tax preparers will be much better prepared for the upcoming tax filing season when compared with 2020, it will be far from normal. We have heard from hundreds of members from small and medium-sized firms directly and indirectly, and it appears that approximately three-quarters of these members believe that an extension for T1 personal returns will be needed. Many also believe that other extensions will be required. We thank all of you who provided feedback to us as it was extremely useful.
In our communications with the CRA, we passed on the feedback we have received in great detail. In particular, we focused on the many practical and personal issues you are facing and the toll that the pandemic is taking on all of you.
We will continue to discuss the issues with the CRA. Although determining specific timeframes that will suit everyone is difficult, the feedback we received strongly indicates that going from lengthy extensions in 2020 to no extensions at all in 2021 is too extreme for small and medium-sized firms in particular.
We will keep you posted as more information becomes available.
February 11, 2021
Update on home office expenses and form T2200
The CRA has responded to us on a number of outstanding questions relating to home office expenses. Here is our latest update:
Claiming home internet access fees
One common question that has arisen is how to calculate the amount of internet access fees that relate to employment. The CRA’s calculator prorates these costs based on the workspace percentage.
The CRA has confirmed that if an employee wants to use a different method to calculate the employment-use portion of their home internet access fees, they must ensure to meet all the following conditions:
- the cost of the internet plan is reasonable
- the cost of the internet plan has been divided between employment and personal use on a reasonable basis
- the employee is able to substantiate the amount of data used directly in the performance of their employment duties
The employee should include the employment-use portion of the fees calculated under “other expenses” on line 9270 of the T777 or T777S forms. In addition, if using the online calculator, the home internet fees should not be included in the box “Total electricity, heat, water and home internet access fees you paid from” as this total number will be prorated by the workspace at home allocation. As with all other expenses claimed, employees should ensure they maintain appropriate supporting documentation.
Adult child working at parents’ home
The CRA’s website indicates that multiple family members can use the temporary flat rate approach. Given this was unclear, a common situation we asked the CRA to clarify is under what circumstances an adult child living and working at their parent’s home, who meets the pandemic eligibility criteria, can claim a deduction.
In the case of the temporary flat rate method, the CRA recently updated their FAQs, indicating that each employee working from home who has paid home office expenses and meets the eligibility criteria can use the temporary flat rate method to calculate their deduction for home office expenses. As the detailed method is based on expenses actually paid by the person, that means that no amount can be claimed under either method if a child is working at home but does not pay for expenses related to the home.
In situations where an adult child is working from a workspace in their parents’ home and pays an amount to that parent, the amount will only be considered rent for purposes of subparagraph 8(1)(i)(ii) if the amount was paid for the use of the workspace and the arrangement constitutes a landlord/tenant relationship. Further, the amount so paid must be reasonable in the circumstances. Absent the existence of a landlord/tenant relationship, the amount paid by an adult child in these circumstances would not be considered rent and therefore, no deduction can be claimed under either method.
Interaction with CRA’s $500 reimbursement policy for home office equipment
Many employers are paying reimbursements and have taken advantage of the CRA’s temporary reimbursement policy on home office equipment in 2020. For many employers, some of the costs will be for supplies (which would not create a benefit if consumed for work) and others will be for equipment such as desks, monitors, chairs, etc., which are not deductible as employment expenses.
We asked the CRA to confirm that reimbursements solely for home office equipment are not a reimbursement for the purposes of question 2 on Form T2200S.
The CRA has confirmed that if the employer is reimbursed for the purchase of office or computer equipment, all of which are expenses that are NOT eligible to be claimed by the employee as employment expenses, they should indicate “No” for question 2 “Did you or will you reimburse this employee for any of their home office expenses?” on the Declaration of Conditions of Employment for Working at Home Due to COVID-19 (Form T2200S).
Reimbursements of home office supplies
Many employers have reimbursed employees for office supplies and other costs, and in some cases, only to a limit. On the T777S, the CRA states that “You cannot claim any expenses that were or will be reimbursed by your employer.” We asked the CRA to confirm that a deduction can be claimed when the expense was not fully reimbursed.
The CRA has confirmed that the employee cannot claim any expenses that were or will be reimbursed by the employer. However, they can claim the portion of the eligible expenses that were not reimbursed.
We note that the CRA’s calculator and form T777S does not address this situation, so the amount net of reimbursements should be entered.
Calculating the utilities portion of condo maintenance fees
We highlighted to the CRA that calculating the utility portion of maintenance fees will be difficult for most taxpayers as they will need to obtain and extract information from the condo corporation’s financial statements. To assist with this, the CRA has indicated to us that they will accept that the administrator of the condominium building provide the information from either the current or previous fiscal year, whichever is available at the time of the request.
February 09, 2021
Federal government announces CERB repayments for self-employed individuals and 2020 income tax debt interest relief
On February 9, the federal government announced that self-employed individuals who applied for the Canada Emergency Response Benefit (CERB) and would have qualified based on their gross income will not be required to repay the benefit, provided they also met all other eligibility requirements.
CRA and Service Canada will return any repaid CERB payments to self-employed individuals whose net self-employment income was less than $5,000 and who have already voluntarily repaid their CERB payments. Additional details will be available in the coming weeks.
The government will also provide interest relief to Canadians who received COVID-related income support benefits. Once individuals have filed their 2020 income tax and benefit return, they will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022.
To qualify for targeted interest relief, individuals must have had taxable income of $75,000 or less in 2020 and have received income support in 2020 through one or more of the following COVID-19 measures:
- the Canada Emergency Response Benefit (CERB);
- the Canada Emergency Student Benefit (CESB);
- the Canada Recovery Benefit (CRB);
- the Canada Recovery Caregiving Benefit (CRCB);
- the Canada Recovery Sickness Benefit (CRSB);
- Employment Insurance benefits;
- or similar provincial emergency benefits.
The CRA will automatically apply the interest relief measure for individuals who meet these criteria.
Additionally, any CRA-administered credits and benefits normally paid monthly or quarterly, such as the Canada Child Benefit and the goods and services tax/harmonized sales tax credit, will not be applied to reduce individuals’ tax debt owing for the 2020 tax year.
We will be providing more information as additional details become available.
February 5, 2021
CRA introduces client multi-factor authentication to access online services
The CRA is introducing a Multi-Factor Authentication (MFA) process to enhance the security of its online services. When enrolled, the user logging in to CRA online services will receive a one-time passcode by text message or telephone call, which will need to be entered in order to continue the login process. As an authorized representative, you will be asked to enroll in MFA before gaining access to your client’s online services such as Represent a Client and Auto-Fill T1 and T2 functionality, plus My Account and My Business Account for your own personal tax information.
The enrollment process includes providing the CRA with a telephone number where the one-time passcode will be delivered, choosing a method of delivery and the language of the message.
After enrollment, a passcode will be sent each time you log on to a CRA service which will have to be entered and re-authentication will be needed if your session times out. This will occur following a period of prolonged inactivity.
We are following up with the CRA on a number of issues, including when the new process will begin, and we will provide updates as more details become available. For more information, go to the multi-factor authentication to access CRA login services.
January 29, 2021
T2200 process and COVID-19 support tax impacts explained
Read our two latest tax blogs which will provide you with key insights for 2020 tax preparation: Employee home office expenses: Special rules for 2020 and 2020 round-up: Income tax impacts of key COVID-19 support programs.
January 27, 2021
Reminder: CEWS Applications for Periods 1-5 due February 1
As a reminder, keep in mind that the last day to apply for claim periods 1 to 5 (March 15, 2020 to August 1, 2020) under the Canada Emergency Wage Subsidy (CEWS) is February 1, 2021. Given that January 31 falls on Sunday, the CRA has confirmed that the due date is February 1.
January 20, 2021
T183 / T183CORP electronic signatures: Extension of temporary measures
On January 19, 2021, the CRA announced it will be extending its temporary administrative measures currently in place to allow electronic signatures on the T183 and T183CORP for the 2021 tax filing season. We will seek more clarity from the CRA on the exact dates of the extension and recommend that the temporary measures should be extended to at least June 30, 2021. For more information, see the CRA’s news release.
New draft legislative proposals to adjust certain deductions for Employment Insurance and COVID-19 benefits
On January 19, 2021, the Department of Finance Canada published draft legislative proposals to temporarily allow certain deductions from regular Employment Insurance (EI) benefits, including EI special benefits, in order to align with how those deductions are treated for the Canada Emergency Response Benefit (CERB) and other federal COVID-19 emergency income benefits.
The proposed changes would temporarily allow Canadians receiving EI benefits to make the same claims for the Child Care Expense Deduction and Disability Supports Deduction as COVID-19 income support recipients. This change applies to income for 2020 and 2021. The proposal also applies to recipients of Quebec Parental Insurance Plan benefits. For further details, see Finance Canada’s news release.
January 19, 2021
Discussions ongoing with CRA as tax season approaches
With the start of tax season drawing nearer and the ongoing negative impacts of COVID-19, we are continuing to engage in ongoing dialogue with the federal government and the CRA so we can support our members and their work with Canadian taxpayers in filing their tax returns. We have raised the issue of tax deadline extensions, especially for T1 returns, with the CRA and our discussions continue. If you have any comments or concerns as they relate to upcoming tax deadlines, please forward them to Bruce Ball, vice-president, Tax, CPA Canada. The viewpoints received will help shape our ongoing discussions with the federal government.
January 14, 2021
Canada Emergency Wage Subsidy (CEWS) FAQs updated
On January 13, the CRA updated its FAQ page on the Canada Emergency Wage Subsidy (CEWS). Many of the updates relate to the extension of CEWS to March 13, 2021, however the CRA provides new guidance on some key issues. Some of the highlights of the latest update are as follows:
- Clarification on cost sharing arrangements (CSAs) (Question 3-9): The CRA previously confirmed in this question that each of the separate eligible employers in a CSA may qualify for CEWS in respect of their portion of eligible remuneration paid to each eligible employee by the agent, as long as all of the other eligibility criteria have been met. In the recent update, the CRA adds that this may be the case even though the business number is attached to an administrator of the payroll that is not a ‘person or partnership’ for any other purpose under the Income Tax Act.
- Deeming rule for Period 11 (Question 5-03.2): Generally, to determine if the deeming rule under subsection 125.7(9) applies, an eligible employer must compare its reduction in revenue for the current claim period with its reduction in revenue for the immediately preceding claim period. However, the relevant reference periods for claim periods 10 and 11 are the same (this is to better align the reference periods with the claim periods). Thus, for the purposes of the deeming rule, the immediately preceding claim period for claim period 11 will be claim period 9 and not claim period 10.
- Qualifying revenue and Canada Emergency Commercial Rent Assistance (CECRA) (Question 6-2.2): The CRA indicates that the forgivable CECRA loan is not considered an extraordinary item and would be included in the property owner’s qualifying revenue. The rationale provided by the CRA is that this is because the CECRA loan replaces a property owner’s regular rental revenue from their normal operations.
- Qualifying revenue and the forgivable portion of a Canada Emergency Business Account (CEBA) (Question 6-2.3): The CRA indicates that the forgivable portion of a CEBA loan meets all the characteristics of an extraordinary item and thus, the forgivable portion of a CEBA loan is not included in qualifying revenue.
- Bonuses (Question 17-5): The CRA provides some clarifications around the payment of bonuses and determining eligible remuneration and baseline remuneration. In particular, the CRA indicates that in determining the baseline remuneration of a non-arm’s length employee, a proration will generally be necessary to determine a weekly amount if a bonus was paid in the baseline period.
January 11, 2021
COVID-19 tax updates during the holidays
The CRA announced a few COVID-19 tax updates during the holidays. Some notable updates include:
Employer provided benefits
The CRA has published more details on employer-provided benefits and allowances, including commuting costs, employer-provided parking, computer and home office equipment, meal costs, and cell phone and internet service plans. The CRA has indicated that these positions are effective from March 15, 2020 to December 31, 2020. We will continue to work with the CRA to address questions and concerns we receive and will communicate anything new as soon as we get more information.
COVID-19 wage and rent subsidies regulations
New regulations were published in the Canada Gazette Part II on January 6, 2021 and are deemed to have come into force on December 20, 2020. In general, the regulations extend the CEWS and CERS to March 13, 2021 by prescribing three additional claim periods (i.e., Periods 11, 12 and 13) and provide the wage and rent subsidy rates for these claim periods.
GST/HST measures in relation to e-commerce supplies and face masks
The CRA has released more information on the Fall Economic Statement’s proposed GST/HST measures on electronic commerce. Generally, the proposed measures on electronic commerce will result in the GST/HST being required to be collected on the types of purchases that are considered under the proposed measures for consumption in Canada. These measures would generally start to apply on July 1, 2021.
The government is currently seeking stakeholders’ views and comments on the proposals.
The CRA also published further guidance on the proposed GST/HST relief on certain types of facemasks.
Further details on relief for employer-provided automobile benefits
As noted in our December 21, 2020 post, the government released a backgrounder and draft legislation which proposes to provide temporary relief related to employer-provided automobile benefits. The measures proposed include the following:
- Reduced standby charge. Employees will be allowed to use their 2019 automobile usage to determine whether they used the automobile primarily (i.e. more than 50 per cent) for employment purposes in order to access the standby charge reduction in 2020 and 2021. The reduction calculation each year will still be based on 2020 and 2021 personal mileage.
- Operating expense benefit. Under existing rules, this benefit can be based on the lesser of a prescribed amount per personal kilometre driven or one-half of the standby charge if the automobile is used primarily for employment purposes. For 2020 and 2021, this “used primarily for employment test” can also be based on 2019 usage. In addition, employees would not have to notify their employer (as they normally would for other years under paragraph 6(1)(k)).
- Amalgamations and wind-ups. A new proposed rule was introduced for corporations formed on an amalgamation to be treated as the same employer as its predecessor corporations for the purposes of the measures described above. This rule will also apply to wind-ups due to paragraph 88(1)(e.2).
These proposals, if enacted, come into force on January 1, 2020.
The government also announced the automobile benefit and deduction amounts that will apply for 2021.
January 4, 2021
Canada Emergency Wage Subsidy (CEWS) registry launched
On December 21, 2020, the CRA launched the CEWS registry. This web page allows taxpayers to identify which employers have received or will soon receive the wage subsidy.
Reminder on reporting income in new T4 boxes 57 to 60
We have received several questions from members related to the new T4 reporting requirements and the basis in which remuneration in boxes 57 to 60 needs to be reported. Although Canada Emergency Wage Subsidy (CEWS) claims are generally based on eligible remuneration paid to eligible employees that relates to a particular period, T4 boxes 57 to 60 require remuneration be reported on a “when paid” basis. We had suggested to the CRA that they provide more guidance on this issue, as many were assuming that the T4 amounts would be calculated on the same basis as the CEWS. However, it appears that the recently published Employers’ Guide – Filing the T4 Slip and Summary T4 contains wording similar to the original announcement.
Although a “when paid” approach is not consistent with CEWS, the T4 Box 57 to 60 requirement applies to all employers and many will not have made CEWS claims. So, it is our understanding that a “when paid” approach was adopted by the CRA to simplify reporting for these employers as the agency wanted all employers to use the same approach.
December 21, 2020
Alternative rule announced for automobile standby charges
Many individuals were facing higher standby charge benefits due to the pandemic. To address this, the government proposes to allow employees to use their 2019 automobile usage to determine whether they use the automobile primarily for business purposes in order to access the reduced standby charge in 2020 and 2021.
December 18, 2020
Federal government releases draft legislation on flow-through share timing extensions
On July 10, 2020, the federal government proposed to extend the timelines for spending requirements related to the issue of flow-through shares by 12 months. On December 16, draft legislation and a backgrounder were released which contain more details on this announcement.
December 15, 2020
CRA releases details on T2200, home office deductions and employment benefits
On December 15, the CRA posted information on a number of employment-related issues, including working from home expenses, form T2200, and employment benefits.
Home office expenses/T2200
The release of additional details on the T2200 and home office expenses will simplify the rules for employees and their employers. The release included helpful tools, including a comprehensive calculator, guidance and forms, and a redesigned T777S form. However, it did come up short of CPA Canada’s recommendation that T2200 forms should generally not be required in respect of employees who are claiming home office expenses due to the pandemic.
Here are the highlights:
- Employees will generally be able to claim a home office expense deduction if they worked from home in 2020 due to the COVID-19 pandemic and in particular, more than 50 per cent of the time from home for a period of at least four consecutive weeks in 2020.
- Where the employee qualifies, they can do a detailed calculation or they can use a temporary flat rate method. If they use the flat rate method, then no T2200 is needed. However, if they do a detailed calculation, they will have to obtain a regular T2200 form or a shortened pandemic version of the form (Form T2200S) from their employer.
- Under the flat rate method, the individual can claim $2 per day for each day worked at home up to a maximum of $400 (i.e. 200 days).
- The CRA has also announced that internet access costs are eligible, but only if the detailed calculation approach is used. It appears that the CRA expects this cost to be prorated on the same basis as utilities such as electricity and heat.
- The T2200S is much shorter than the simplified version that the CRA previously circulated. An employer will only have to confirm whether the individual worked at home due to the pandemic, whether they were reimbursed for home office costs and whether those costs are reported on the employee’s T4.
One of the difficult issues in developing a flat rate method for all employees was that renters can generally claim a higher amount than homeowners under existing rules. For many, it could be more than $2 per day. In addition to renters, we assume that other employees will be better off using the detailed method, such as those who worked at home for more than 200 days.
For employers, the fact that many of their employees will want to do a detailed calculation and will therefore need a form creates a decision. Will T2200 forms be processed as employee requests are made, or will the employer choose to produce and distribute T2200S forms for all employees who are working at home because of the pandemic? This was one reason why we recommended a general waiver of the T2200 requirement for employees working at home due to the pandemic. The good news is that for those employers who choose to produce forms for all eligible employees, the T2200S is much simpler than prior versions of the form. Note that the usual approach will generally apply for those employees who had pre-existing work at home arrangements.
The CRA also formalized guidance around some employment benefit issues, including commuting costs, home office equipment, and meals.
We will continue to follow these issues and provide updates as needed.
December 14, 2020
Now available: CERS webinar hosted by CPA Canada and CRA
Learn more about the Canada Emergency Rent Subsidy (CERS) in this new recorded webinar co-hosted by CPA Canada and the CRA.
The CRA provides an overview of the program and demonstrates their online CERS tools and application portal. In addition, the CRA responds to some of the top questions that CPA Canada received from members on the CERS.
- Bruce Ball, Vice-President, Taxation, CPA Canada (host)
- Matthew Gray, Policy Advisor, Office of the Minister of National Revenue
- Harry Gill, Director General, Small and Medium Enterprises Directorate, Compliance Programs Branch
- Randy Hewlett, Director General, Legislative Policy Directorate, Legislative Policy and Regulatory Affairs Branch
- Mark Mayer, Manager, Authorization Strategy and Operations Section, Assessment, Benefits, and Services Branch
- Kevin McKenzie, Director General, Business Compliance Directorate, Collections and Verification Branch
- Denise Eisner, Senior Content Strategist, Digital Design and Production Directorate, Public Affairs Branch
December 8, 2020
Submit your questions now: Canada Emergency Rent Subsidy (CERS)
CPA Canada is co-hosting an upcoming recorded webinar with the CRA focusing on the CERS. During the webinar, the CRA will provide an overview of the program and demonstrate their online CERS tools and application portal. In addition, the CRA will respond to some of the top questions that CPA Canada receives on the CERS.
You can submit your questions on Slido (enter code #B229) until end of day on Monday, December 7, 2020 (ET).
A recording of this webinar will be available on this page after December 10, 2020.
Reminder on tax treatment of CEBA loans
With the opening of the expanded CEBA program, we want to remind members that the forgivable portion of CEBA loans is taxed in the taxation year in which the loan was received. This is discussed more in the October 28 posting to this page entitled “Highlights from the CRA’s recent webinar.”
Under the CEBA program expansion, an additional $20,000 can be advanced, of which $10,000 is potentially forgivable. With the end of the year fast approaching, it may make sense, if possible, to ensure that the additional loan amount is received in early January rather than December. For those with a calendar tax year, this should mean that the additional $10,000 forgivable amount is taxed in 2021 rather than 2020.
December 7, 2020
CERS application process issue for representatives resolved
Further to our update on December 3, the CRA has updated the check box text for creating a CERS ZA sub account in Represent a Client and the text is now appropriate for representatives.
December 4, 2020
Applications can now be made under expanded CEBA program
On December 4, the federal government announced that applications can now be made under the extended Canada Emergency Business Account (CEBA) program. As mentioned in prior updates, eligible businesses are able to access a second CEBA loan of up to $20,000 on top of the initial $40,000 that was available. Half of this additional financing, up to $10,000, will be forgivable if the loan is repaid by December 31, 2022. The application deadline was also extended and is now March 31, 2021.
More information is available in the news release.
December 3, 2020
Issue identified with CERS application process for representatives
As previously reported, the CRA has opened the application portal for the Canada Emergency Rent Subsidy (CERS). Under the process, the first step is to create a ZA number for the business. If this is done in My Business Account, an authorized person for the business must click a box to acknowledge the following statement:
“Confirmation (required) – I confirm that this business is eligible for CERS and that I want to create a CERS number.”
Unfortunately, the same text is now included in Represent a Client, and from that perspective, the reference to “I” is now the representative and not the authorized person from the business. As a CPA cannot provide assurance on whether a client is eligible for the CERS without doing a report in prescribed form, it would appear that members will not be able to create a ZA account for clients until this issue is resolved.
When a CERS claim is submitted, the representative confirmation is essentially the same as the CEWS confirmation and is not an issue. So, if the client can create the ZA number, a CPA can still make a claim on behalf of the client pending resolution of this issue.
We have brought this issue to the attention of CRA. We believe that the CRA will adjust the wording for representatives to confirm that the representative has been asked by the business to create the ZA number and will be assisting the business with CERS claims.
Federal government introduces Bill C-14
On December 2, the federal government introduced Bill C-14 which contains legislation for some of the announcements made in the Fall Economic Statement released on November 30. A new release was also issued by Finance Canada.
Under one change in the bill, an expense, such as rent, can qualify as an eligible expense under the new Canada Emergency Rent Subsidy when it becomes due so businesses can access the subsidy before the expense is actually paid.
December 1, 2020
Federal government releases Fall Economic Statement
- Canada Emergency Wage Subsidy (CEWS) rate increased. Due to the second wave of the pandemic, the government is proposing to increase the maximum CEWS rate to 75 per cent for the period beginning December 20, 2020, until March 13, 2021.
- Canada Emergency Rent Subsidy (CERS) rates maintained. The government is proposing to maintain the current CERS rates for an additional three periods, from December 20, 2020 to March 13, 2021. The Lockdown Support rate will also be maintained at 25 per cent for the same period.
- Update on form T2200 and home office expenses. It was announced that “the CRA will allow employees working from home in 2020 due to COVID-19 with modest expenses to claim up to $400, based on the amount of time working from home, without the need to track detailed expenses, and will generally not request that people provide a signed [T2200] form from their employers.”
- GST/HST on digital and other supplies made by non-residents. To level the playing field, the government proposes that foreign-based vendors selling digital products or services to consumers in Canada be required to register for, collect and remit the GST/HST on their taxable sales to Canadian consumers. Other transactions involving non-resident suppliers will also be subject to GST/HST. These changes are effective July 1, 2021.
- Digital Services Tax update. The government has proposed a tax on corporations providing digital services, effective on January 1, 2022. More details will be announced in Budget 2021. The tax would apply until such time as an acceptable multilateral approach to tax digital profits comes into effect.
- Stock option rules to move forward. The previously announced restrictions on employee stock options will move forward and will apply to options granted on or after July 1, 2021.
- Consultation on anti-avoidance rules. The government will launch consultations in the coming months on the modernization of Canada’s tax anti-avoidance rules and the General Anti-Avoidance Rule in particular.
- Canada Emergency Business Account (CEBA) deadline extended. The previously announced enhancements to CEBA will proceed and the deadline for CEBA loan applications has been extended to March 31, 2021.
- Canada Child Benefit payments for young children. Benefits under the Canada Child Benefit will be increased for families with young children.
November 23, 2020
CRA updates to CEWS FAQs
On November 23, the CRA updated its FAQ page on the Canada Emergency Wage Subsidy (CEWS). Many of the updates relate to amendments introduced in Bill C-9, however CRA provides new guidance on some key issues. Some of the highlights of the latest update are as follows:
- Revenue reduction for periods 5 to 10 (Question 5-03.1) – In order to determine if the deeming rule for periods 5 to 10 applies (see Question 5-03), an eligible employer must compare its reduction in revenue for the current claim period with its reduction in revenue for the immediately preceding claim period. For this purpose, the CRA indicates that the reduction in revenue for the immediately preceding claim period must be calculated using the rules (i.e. the elections and approaches) that were applicable to that specific claim period for the eligible employer.
- Amending or revoking an election (Question 12-3) – The CRA confirms that an eligible employer may amend or revoke an election, provided it is made and the claim amended on or before the due date for filing CEWS application for that claim period. For elections that apply to multiple claim periods, the amendment or revocation must be made before the application due date for the first claim period in respect of which the election is made
- Bonuses and commissions (Questions 17-5 and 17-6) – CRA confirms that bonuses and commissions would generally be considered to be eligible remuneration, but only eligible remuneration paid by an employer to an employee in respect of a week in a claim period is included for purposes of computing CEWS, meaning that manual prorations may be needed for bonuses and specific determinations may be needed for commissions.
For the purposes of computing baseline remuneration, a bonus amount must be paid during a relevant baseline remuneration period to be considered (see Question 18 for a listing of all relevant baseline periods). Then, an employer may need to do a manual calculation to determine the amount of bonus that was paid in respect of each week in the claim period. An illustration for owner-managers is included in Example 17-5A.
- Asset purchases (Question 8-3) – As previously discussed, the asset purchase rule was broadened under Bill C-9 for arm’s-length acquisitions and can apply where the claimant acquired all or substantially all of the property of the seller that can reasonably be regarded as being necessary for the eligible entity to be capable of carrying on a business of the seller, or part of a business of the seller, as a business. Question 8-3 and Example 8-3B have been updated to provide more information.
- Wages in lieu of termination notice and salary continuance payments (Question 17-7) – CRA indicates that a payment of wages in lieu of termination notice that is made under the terms of an individual’s employment is considered salary or wages from employment. However, because such payments are not considered to have been paid in respect of a week, they are not eligible for CEWS.
On salary continuance payments, because the employment relationship continues to exist, salary continuance payments to an eligible employee would generally be considered eligible remuneration paid in respect of a week (and they would not be considered to be on leave with pay for purposes of CEWS)
- Payments under a supplementary unemployment benefit plan (“SUBP”) (Question 17-8) – CRA has added this new question to deal with SUBP payments and when they may be considered eligible remuneration.
- Correction to previous guidance on “employed in Canada” (question 13-1) – In its update to this question, CRA now indicates that it is necessary for an individual to be employed primarily in Canada throughout the claim period to be an eligible employee. In the previous version of this question, CRA indicated that …“it is not necessary for an individual to be “employed in Canada” throughout the claim period to be an eligible employee.”
CRA opens applications for the Canada Emergency Rent Subsidy (CERS)
The CRA has launched the CERS application portal and other materials today. Please go to the CRA site for further information.
November 20, 2020
CRA to launch Canada Emergency Rent Subsidy (CERS) tools and application portal
Bill C-9, which contains the legislation for the new CERS program and CEWS amendments, received royal assent on November 19, 2020. We expect that the CRA will be launching their online CERS tools, guidance and application portal on Monday, November 23. We will provide an update with a link to this material once it becomes available.
Finally, Finance Canada has released proposed legislation to formalize rent payable as an eligible expense for purposes of the CERS, provided that conditions are met. The government also announced in an accompanying news release that the CRA will process claims based on the draft legislation prior to it being passed into law.
November 18, 2020
CPA Canada’s work continues on Form T2200
We are continuing to work with senior government officials to find a streamlined solution to address working-from-home expenses incurred by employees during the COVID-19 pandemic. We have been engaged with both Finance Canada and the CRA for several months, providing feedback, advice and expertise to the government on this specific issue.
Under the current system, employers will be required to complete potentially millions of individual T2200 forms for their employees to allow them to claim a deduction for working-at-home expenses. Employees will also have to learn the rules for making a claim for the first time. This represents an enormous compliance burden and comes at the worst possible time as Canadians and businesses continue to struggle with the impacts of the pandemic.
On the T2200 form, we believe that the best alternative for the 2020 tax year is to waive the requirement for employers to complete the T2200 forms for employees who are only claiming working-from-home expenses. For employees, we had discussions with the government to see if there could be a simplified approach for claiming a deduction for these expenses.
November 13, 2020
Update on CERS: Rent paid vs. payable and program start-up
In recent days, a cash flow concern was raised in respect of the Canada Emergency Rent Subsidy (CERS). As many businesses have not been able to make rent payments that are already due, concern has been raised as they will need the CERS benefit to fund these payments.
When Finance Minister Chrystia Freeland appeared before the Senate Committee on National Finance on November 12, she reported that the federal government plans to expand the rules for the CERS to include rent that is payable. We understand that the CRA is looking into how this may be accomplished administratively prior to a change being enacted.
Also, on November 13, CRA officials appeared before the same committee. During their presentation, the CRA stated that they will open the CERS application process as soon as possible after Bill C-9 receives Royal Assent. Preliminary timelines discussed included opening the CRA website for applications as early as November 20 and payments being generated as early as December 1.
We will continue to monitor this program and provide updates as needed.
November 11, 2020
Highlights from CRA Q&A session
In a follow up webinar, the CRA responds to questions resulting from the October 26 webinar co-hosted by CPA Canada. Responses focus on the Canada Emergency Wage Subsidy (CEWS), tax treatment of the Canada Emergency Business Account (CEBA) and other taxable benefit issues. Here are some of the highlights:
- Can you amend CEWS choices and elections?
CRA provides that a “choice” and an “election” are treated differently for the purposes of CEWS. Where an employer would like to change a CEWS choice they have previously made, the employer can do so by submitting an amended application and RC661 attestation form. Furthermore, CRA notes that since the October 26 webinar, Bill C-9 has been introduced and proposes to add subsection 125.7(10) which would allow employers to amend or revoke previously made CEWS elections, provided it is filed before the specified time periods.
- Will CRA provide relief for the standby charge?
During the pandemic, many employees with company cars have not been able to travel for business due to COVID-19. These employees may now have a higher proportion of personal use, resulting in a higher taxable benefit. CRA indicates that relief is not currently being contemplated in this situation, and that employees should compute the standby charge as legislated under subsection 6(2).
- Motor vehicle home at night policy for essential workers
Employees who have an employer-provided motor vehicle (that is not an automobile) and are required to take the motor vehicle home may qualify for a reduced operating benefit rate, provided CRA’s conditions outlined in its “Motor vehicle home at night policy” (found in the T4130 Guide) are met. Due to the pandemic, the CRA indicates that for employees providing an essential service, who have an employer provided motor vehicle that is taken home at night, they will accept ”minimizing the employee’s risk of exposure during the pandemic” to be a valid business requirement for the purposes of its motor vehicle at home policy, and if all other conditions are met, the employer could compute the operating benefit at the lower rate.
- Travel from home to worksite
CRA addressed whether travel from home to a work site (or “point of call”) during the pandemic would be considered business travel. CRA confirmed that it would indeed be considered business travel, provided that the route taken is reasonable, and that the worksite is not a regular place of employment. Note that this is not a change in position for CRA, and is reflected in their current T4130 Guide.
In addition to the above, CRA responds to a number of other questions related to CEWS including a number of technical questions, what is the statute of limitation for CEWS audits and how interest will be applied to overpayments. CRA also clarifies its guidance provided on the October 26 webinar regarding the income tax treatment of CEBA. We continue to encourage CRA to publish these responses on their website.
Finally, we received many questions on the operation of the CEBA, which is not administered by the CRA. Therefore, we were not able to address those issues.
November 9, 2020
Backgrounder released on new Canada Emergency Rent Subsidy and the CEWS extension
Finance Canada has released a backgrounder on the Canada Emergency Rent Subsidy. As was the case with the other tax-related COVID-19 relief programs, we will provide updates on the program and discuss any questions or issues on the program with the CRA as they arise.
In addition, a backgrounder was also released on the extension of the Canada Emergency Wage Subsidy (CEWS).
November 5, 2020
Q&A session with the CRA about the CEWS and more: Responses to the October webinar
Now available: The CRA responds to questions resulting from the October 26 webinar co-hosted by CPA Canada. Responses focus on the Canada Emergency Wage Subsidy (CEWS), tax treatment of the Canada Emergency Business Account (CEBA) and other taxable benefit issues.
November 3, 2020
More on the CEWS changes in Bill C-9
Bill C-9 was introduced on November 2 and contained amendments to the Canada Emergency Wage Subsidy (CEWS) and legislation for the new Canada Emergency Rent Subsidy. On the CEWS amendments, it generally implements the changes announced in the October 14, 2020 Finance Canada backgrounder. Some additional changes were also included:
- Application deadlines – As the program was extended to June 2021, the deadline for applications was amended to be the later of January 31, 2021 and 180 days after the end of the particular qualifying period.
- Asset purchases: The asset purchase rule has been broadened for arm’s-length acquisitions. Rather than having to acquire all or substantially all of the business property, the condition can be met by acquiring all or substantially all of the property of the seller that can reasonably be regarded as being necessary for the eligible entity to be capable of carrying on a business of the seller, or part of a business of the seller, as a business.
- Elections under paragraphs 125.7(4)(c) and (d): The technical issue that prevented elections under these paragraphs after period 4 has been corrected.
- Amending or revoking elections: An eligible entity may now amend or revoke an election made on or before the date that the application is due for the first qualifying period in respect of which the election is made.
- Eligible employees: an eligible employee will include employees employed primarily in Canada and this requirement is restricted to the period the individual is employed by the eligible entity.
November 2, 2020
Federal government introduces Bill C-9: CEWS amendments and new Canada Emergency Rent Subsidy legislation
On November 2, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, introduced Bill C-9, An Act to Amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy), which would implement new, targeted support to help hard-hit businesses.
Technical backgrounders will also be released and we will provide more information as it becomes available.
Draft legislation released on definition of eligible employee for CEWS
Finance Canada has released draft legislation for the Canada Emergency Wage Subsidy (CEWS), which will amend the definition of eligible employee if passed into law. Under the proposed definition, an eligible employee will include employees employed primarily in Canada and this requirement is restricted to the period the individual is employed by the eligible entity.
October 28, 2020
Highlights from the CRA’s recent webinar
The CRA recorded a webinar with us earlier this week. Here is a brief summary of some of the highlights. After viewing the webinar, members can use the Slido application to submit questions to the CRA. The Slido code is #K536. Slido will be open until 11:59 p.m. (EST) on October 29, 2020. The CRA will review questions and provide available responses in early November. Watch this page for updates.
The CRA provides a number of updates on CEWS during the webinar. Some outstanding issues the CRA addresses include:
- what to expect on a CEWS audit
- amending CEWS claims to revoke elections
- referral of paragraph 125.7(4)(d) election concern for periods 5 to 9 to Finance Canada
- use of retail months instead of calendar months
Tax treatment of the Canada Emergency Business Account (CEBA)
We have received a number of questions from members on whether the forgivable portion of the interest-free loan received pursuant to the CEBA program is included in income and, if so, when it should be included.
The CRA confirms the following:
- The part of the loan that is forgivable is included in the income of the year in which the loan is received by virtue of paragraph 12(1)(x).
- However, as CEBA funds are to be used to pay for non-deferrable operating expenses of the business including payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, the recipient can elect to reduce the amount of outlay or expense under subsection 12(2.2) as opposed to reporting the amount as an income inclusion.
- If the amount is repaid, a deduction can be claimed at the time of repayment.
Employer reimbursements of commuting costs and home office expenses
There are a number of questions relating to employee expenses many are looking for the CRA to provide guidance on. In the webinar, the CRA addresses the following employee-related issues:
- Commuting Costs. Where an employee is reimbursed or receives a reasonable allowance from their employer for travel expenses associated with travelling from home to their regular place of employment during the pandemic, the CRA will not consider this to be a taxable benefit.
- Parking Costs. Employer-provided parking at the employee’s regular place of employment will not be considered a taxable benefit by the CRA where the regular place of employment is closed during the COVID-19 pandemic.
- Home Office Equipment. It appears that the CRA is expanding its previous position (2020-0845431C6 (F)) on employer reimbursements of personal computer equipment. In the webinar, the CRA states that employer reimbursements of up to $500 of home office equipment or computer equipment will not be a taxable benefit, provided the equipment is needed for the employee to perform his/her duties of employment at home. CRA indicates home office equipment would include items such as desks or chairs.
Subsection 164(6): Loss carrybacks by estates
Many have been asking whether the CRA will allow more time for the application of a subsection 164(6) for loss carrybacks by an estate, as there have been delays in the probate process, thereby delaying the ability to dispose of property with an accrued loss. The CRA indicates that they cannot extend the time limit for the estate to dispose of its properties beyond the first taxation year of the estate as provided in subsection 164(6). Subsection 164(6) does not allow the Minister of National Revenue any discretion to extend the application beyond the time limit, nor is subsection 164(6) specified in The Time Limits and Other Periods Act, which was enacted in Bill C-20.
We encourage you to watch the webinar for further details on the above, as well as other topics.
October 26, 2020
Webinar with the CRA about the Canada Emergency Wage Subsidy (CEWS) and more
The webinar recording of the CRA’s update on CEWS and other issues is now available.
After viewing this webinar recording, members can use the Slido application to submit questions. The Slido code is #K536. Slido will be open until 11:59 p.m. (EST) on October 28, 2020. The CRA will review questions and provide available responses in early November. Watch this page for updates.
CEBA now available to businesses using personal banking accounts
On October 26, the deputy prime minister and minister of finance announced that as early as October 26, 2020, the Canada Emergency Business Account (CEBA) will be available to businesses that have been operating out of a non-business banking account. To be eligible, businesses must have been operating as a business as of March 1, 2020, must successfully open a business account at a Canadian financial institution that is participating in CEBA, and meet the other existing CEBA eligibility criteria. The deadline to apply for CEBA is December 31, 2020.
October 23, 2020
Coming soon – Webinar with the CRA about the Canada Emergency Wage Subsidy (CEWS) and more
As part of our commitment to delivering timely and relevant information to members, CPA Canada will co-host a webinar with the CRA focusing on the Canada Emergency Wage Subsidy (CEWS). A recording of this webinar will be available on this page early next week.
The CRA will provide updates on the CEWS audit work, other taxable benefit issues as well as outstanding non-CEWS technical issues.
After viewing the webinar recording, members will have an opportunity to submit questions related to the presentation. The CRA will review these questions and provide responses as available via a second webinar recording in early November.
- Bruce Ball, Vice-President, Taxation, CPA Canada (Host)
- Ted Gallivan, Assistant Commissioner, Compliance Programs Branch, CRA
- Harry Gill, Director General, Small and Medium Enterprises Directorate, CRA
- Randy Hewlett, Director General, Legislative Policy Directorate, CRA
- Kevin McKenzie, Director General, Business Compliance Directorate, Collections and Verification Branch
- Costa Dimitrakopoulos, Director General, Income Tax Ruling Directorate, Legislative Policy and Regulatory Affairs Branch
October 19, 2020
International tax guidelines updated
On October 15, the CRA made two updates to its international tax guidelines:
- Section I.-A has been updated to clarify that the CRA will generally view the Canadian government’s recommendation to Canadians to return to Canada as a “Travel Restriction.”
- Section III.-D. has been added to address the various Canadian payroll withholding issues applicable to non-resident employers having non-resident employees work remotely in Canada because of the COVID-19 travel restrictions. Specifically, the CRA will not assess or penalize the non-resident employer for failing to withhold the required payroll deductions, in respect of remuneration paid to a non-resident employee performing employment duties remotely in Canada, provided certain conditions are met.
This administrative position will apply beginning on the day the non-resident employee began working remotely in Canada because they were unable to return back to their country of tax residence due to COVID-19 travel restrictions, and ending at the earliest of:
- the day the non-resident employee returned or was able to return to their jurisdiction of residence;
- the day specified on a Regulation 102 waiver relieving the non-resident employee from the relevant Canadian withholdings;
- the day the non-resident employer was certified by the Minister as a qualifying non-resident employer and the non-resident employee was also a qualifying non-resident employee; or
- December 31, 2020.
October 15, 2020
Finance releases a backgrounder on CEWS extension and other program changes
On October 14, Finance Canada released a backgrounder providing further details on the extension of the Canada Emergency Wage Subsidy (CEWS) until June 2021, including proposed program parameters that would apply until December 19, 2020.
The proposals include the following:
- The base subsidy rate for September 27 to October 24, 2020 will continue to apply from October 25 to December 19, 2020. As such, the maximum base subsidy rate would be set at 40 per cent for this period, and the maximum top-up subsidy rate would remain at 25 per cent.
- The revenue-decline test for the base subsidy and the top-up subsidy would be harmonized from September 27 onward. Instead of using the current three-month revenue-decline test for the top-up subsidy, both the base and top-up would be determined by the change in an eligible employer’s monthly revenues, year-over-year, for either the current or previous calendar month. For employers using the alternative revenue-decline test, both the base subsidy and the top-up subsidy would be determined by the change in an eligible employer’s monthly revenues relative to the average of its January 2020 and February 2020 revenues.
- To ensure that the change in the revenue-decline test does not lead to a less generous wage subsidy, the wage subsidy program would include a “safe harbour” rule applicable from September 27 to December 19, 2020. This rule would entitle an eligible employer to a top-up subsidy rate that is no less than it would have received under the three‑month revenue-decline test.
- For furloughed employees, as of October 25, 2020, the wage subsidy would be aligned with the benefits provided through Employment Insurance (the original rules had been extended to October 24 previously). This means the subsidy per week in respect of an arm’s length employee (or a non-arm’s length employee who received pre-crisis remuneration for the relevant period) would be:
- the amount of eligible remuneration paid in respect of the week; or,
- if the employee receives remuneration of $500 or more in respect of the week, the greater of:
- $500 and
- 55 per cent of pre-crisis remuneration for the employee (up to a maximum subsidy amount of $573).
The government will issue a technical backgrounder on the extended wage subsidy, including details on eligibility, and legislation will be introduced to implement these changes.
October 14, 2020
Further details on CRA’s update to the CEWS FAQs
As previously reported, the CRA updated its Canada Emergency Wage Subsidy (CEWS) FAQ page on October 6, 2020. Some further details on several of the key changes are as follows:
- Computing “average weekly eligible remuneration” (Question 18-2) – the CRA provides guidance on how to compute “average weekly eligible remuneration” for baseline remuneration purposes. The CRA indicates that it is calculated by dividing the total eligible remuneration paid by the eligible employer to the eligible employee during the baseline remuneration period by the total number of weeks to which the eligible remuneration paid relates (i.e. total eligible remuneration paid/number of weeks). Any period of seven or more consecutive days for which the employee was not remunerated is excluded from the calculation. A number of examples are also provided to illustrate this.
- Chain of entities and s. 125.7(4)(d) election (Question 8-02) – A question we had previously posed to the CRA was whether a chain of non-arm’s length entities could make an election under paragraph 125.7(4)(d) under the Income Tax Act. The CRA now provides in its updated FAQs that this election cannot be used by a chain of entities where all of the particular person’s or partnership’s qualifying revenue is also received from persons or partnerships that are not dealing with each other at arm’s length. Note that we previously asked CRA whether the rule can be used after period 4.
- Cost sharing arrangements (“CSAs”) (Question 3-9) – The CRA addresses situations where there are a group of eligible employers who have a CSA to share certain costs such as salary or wages paid to employees. Further, the CSA establishes an agency relationship whereby a single agent performs the payroll function for the group. In these situations, CRA indicates that each of the separate eligible employers may qualify for CEWS in respect of their portion of eligible remuneration paid to each eligible employee by the agent, as long as all of the other eligibility criteria have been met. Each employer will need to have a payroll program (RP) account number.
- Future remittances for employers who use payroll service providers (Question 3-8) – The CRA has updated this question to clarify that employers who use a payroll service provider will be expected to continue to use their new RP account for future payroll remittances. An exception to this would be those employers who have entered into a CSA (as described above and in question 3-9).
- Joint ventures (JVs) and CEWS (Question 3-10) – This new question indicates that since a JV is not recognized as a taxpayer, it cannot apply for CEWS. However, if all of the interest in an eligible employer are owned by participants in a JV and all or substantially all of the qualifying revenue of the eligible employer is in respect of the JV, then the eligible employer may use the qualifying revenue of a joint venture instead of its own qualifying revenue in order to determine if it experienced the required reduction in revenue to qualify for the CEWS. This guidance does not address situations where the eligible employer has other operations outside of the JV and we will follow up with the CRA.
- Change in Recourse Process (Question 36) – For claim denials received before September 21, 2020, if an employer disagrees with the decision made by the CRA in regard to its wage subsidy claim, the employer may request a second level review of the claim application. For claim denials received after September 21, 2020, the second level review will no longer be available. A notice of determination (NOD) or a notice of assessment (NOA) will inform an employer when a claim is fully or partially denied and an employer can object within 90 days where they disagree.
In addition, some other notable updates include:
- Payroll account in an asset acquisition (Question 4) – Where an eligible employer acquires the assets of a person or partnership, and satisfies the conditions under subsection 125.7(4.1), the eligible employer is deemed to have an open payroll program account on March 15, 2020.
- “Employed in Canada” (Question 13-1) – The CRA indicates that for purposes of determining an eligible employee, the meaning of “employed in Canada” means that the employee is performing the duties of an office or employment in Canada (i.e. they are performing the duties physically in Canada). The CRA also notes that it is not necessary for an individual to be “employed in Canada” throughout the claim period to be an eligible employee.
- Maternity and parental top-up leave payments (Question 17-4) – Maternity and parental top-up leave payments qualify as eligible remuneration and an employee on maternity leave will not be considered to be on leave with pay for the purposes of CEWS.
October 13, 2020
New COVID-19 business support measures proposed
On October 9, 2020, the federal government announced its intention to introduce new legislation to provide additional COVID-19 related support, including:
- The new Canada Emergency Rent Subsidy which would provide rent and mortgage support until June 2021 for qualifying organizations affected by COVID-19. The rent subsidy would be provided directly to tenants, while also providing support to property owners. The new rent subsidy would support businesses, charities, and non-profits that have suffered a revenue drop, by subsidizing a percentage of their expenses, on a sliding scale, up to a maximum of 65 per cent of eligible expenses until December 19, 2020. Organizations would be able to make claims retroactively for the period that began September 27 and ends October 24, 2020.
- A top-up Canada Emergency Rent Subsidy of 25 per cent for organizations temporarily shut down by a mandatory public health order issued by a qualifying public health authority, in addition to the 65 per cent subsidy.
- The extension of the Canada Emergency Wage Subsidy until June 2021. The subsidy would remain at the current subsidy rate of up to a maximum of 65 per cent of eligible wages until December 19, 2020.
- An expanded Canada Emergency Business Account (CEBA), which would enable businesses, and not-for-profits eligible for CEBA loans to access an interest-free loan of up to $20,000, in addition to the original CEBA loan of $40,000. Half of this additional financing would be forgivable if repaid by December 31, 2022. Additionally, the application deadline for CEBA is being extended to December 31, 2020. Further details, including the launch date and application process will be announced in the coming days. An attestation of the impact of COVID-19 on the business will be required to access the additional financing.
October 7, 2020
CRA provides further guidance on the Canada Emergency Wage Subsidy (CEWS)
The CRA updated its FAQs for the CEWS on October 6. New questions include:
- 3-9. Can an employer that participates in a cost-sharing arrangement qualify for the wage subsidy?
- 3-10. Can a joint venture qualify for the wage subsidy?
- 8-02. Can the special rule used to calculate qualifying revenue discussed in Q8 be used in a direct chain of entities that are not dealing with each other at arm’s length?
- 13-1. In determining who is an eligible employee, what is the meaning of the phrase, “employed in Canada?”
- 17-4. Are maternity or parental top-up payments included in eligible remuneration for purposes of computing the wage subsidy?
- 18-2. How is the average weekly eligible remuneration amount calculated for the purposes of determining baseline remuneration?
The CRA has also updated its responses to a number of existing questions. We will provide a more thorough analysis of the key changes soon.
Finally, in a recently released technical interpretation (2020-0855831E5), the CRA addresses whether revenue determined under the percentage of completion method is considered qualifying revenue (generally, yes). In addition, they state that unrealized gains/losses of investments arising from mark-to-market adjustments to the carrying amount of the investments under accounting practices is not included in qualifying revenue.
October 6, 2020
CRA launches new recovery benefit program websites
The CRA has launched new program websites for the three new temporary recovery benefits: Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB) and Canada Recovery Caregiving Benefit (CRCB). In addition, the government announced that it opened the application process for the CRSB and CRCB on October 5, 2020 while CRB applications will be accepted starting on October 12, 2020. Each webpage has details on the programs.
The CRA’s new program websites include some key information, such as:
- Amounts received under all three benefits are taxable and a 10 per cent withholding tax will be applied at source
- T4A slips will be issued by the CRA reflecting total CRA administered COVID-19 benefits received and taxes withheld at source.
- To ensure the appropriate safeguards are in place to protect Canadians from fraud and non-compliance, CRA is taking steps to implement additional verification and security measures up-front:
- Applications have to be submitted via CRA My Account or by phone for every applicable period.
- The CRA may validate applications by contacting applicants over the phone before processing benefit payments.
- If a recipient mistakenly receives one of these benefit payments, they will need to pay it back to CRA via My Account, online banking or mail; if a cheque is received and not deposited, the cheque must be mailed back to the Sudbury Tax Centre.
The CRB has some unique features, which include:
- Recipients can earn employment and self-employment income while receiving CRB. However, recipients will have to reimburse $0.50 of the benefit for every dollar of net income they earn above $38,000 during the calendar year at the same time their personal tax return is due. Late payments will be charged interest.
- For purposes of calculating the required reimbursement, net income means line 23600 of the recipient’s personal income tax return which includes the CERB, CRCB and CRSB. However, it does not include the CRB and adjustments will be made for split income and certain repaid amounts.
Finally, it should be noted that the legislation for these programs (Bill C-4) received Royal Assent on October 2, 2020.
CRA update on 164(6) loss carrybacks by an estate
We asked the CRA whether they will allow more time for the application of subsection 164(6) for loss carrybacks by an estate.
Under subsection 164(6), capital losses and terminal losses that arise in the first taxation year of a graduated rate estate (GRE) can be claimed on the deceased taxpayer’s terminal return if an election is made and certain conditions are met. We have received feedback that there may be delays in getting probate which could delay the ability to dispose of property with an accrued loss and these accrued losses may not arise in the GRE’s first taxation year.
Unfortunately, the CRA stated that it is unable to extend the time limit for the dispositions and any losses that arise in subsection 164(6) beyond the first taxation year of the graduated rate estate. The CRA stated that it cannot extend the time limit beyond the first taxation year because subsection 164(6) and the recently introduced Time Limits and Other Periods Act doesn’t provide the Minister of National Revenue the necessary discretion to do so.
The CRA’s technical interpretation on this issue should be released shortly through tax services.
September 29, 2020
Federal government revises legislation for new recovery benefits
On September 28, 2020, Bill C-4, An Act relating to certain measures in response to COVID-19, was introduced and proposes to implement the new recovery benefits that were previously announced. Bill C-4 revises and replaces Bill C-2, introduced on September 24, with the key change being the expansion of the eligibility criteria for the Canada Recovery Sickness Benefit.
September 28, 2020
CEWS: Furloughed employee update
The government has announced it is proposing to extend the current treatment of furloughed employees under the Canada Emergency Wage Subsidy (CEWS) program for the upcoming four-week period, from September 27 to October 24, 2020.This means employers who qualify for the wage subsidy would be able to continue to claim up to a maximum benefit of $847 per week per employee to support remuneration of their furloughed workers until October 24, 2020.
For the periods after October 24, the government will review the wage subsidy program in light of ongoing progress in fighting COVID-19 as well as any adjustments needed to facilitate the extension of the wage subsidy into 2021 as committed in the Speech from the Throne.
September 25, 2020
Federal government introduces legislation for new recovery benefits
On September 24, 2020, the federal government tabled Bill C-2, An Act relating to economic recovery in response to COVID-19, which creates three new temporary recovery benefits to support Canadians who are unable to work for reasons related to COVID-19. Specifically, the legislation includes:
- A Canada Recovery Benefit (CRB) of $500 per week for up to 26 weeks, to workers who are self-employed or are not eligible for EI and who still require income support. This benefit would support Canadians who have not returned to work due to COVID-19 or whose income has dropped by at least 50 per cent.
- A Canada Recovery Sickness Benefit (CRSB) of $500 per week for up to two weeks, for workers who are sick or must self-isolate for reasons related to COVID-19.
- A Canada Recovery Caregiving Benefit (CRCB) of $500 per week for up to 26 weeks per household, for eligible Canadians unable to work because they must care for a child under the age of 12 or a family member because schools, day-cares or care facilities are closed due to COVID-19 or because the child or family member is sick and/or required to quarantine.
As announced on August 20, temporary measures to help Canadians access EI benefits more easily are effective on September 27, 2020, for one year. These changes will also establish a minimum weekly benefit payment of $500 for all EI recipients, at the same level as the CRB.
For further information, see Employment and Social Development Canada’s backgrounder.
September 24, 2020
Tax highlights in the Speech from the Throne
The Speech from the Throne announced many tax and related initiatives (some of which have been previously announced), which include:
- extending the Canada Emergency Wage Subsidy (CEWS) to the summer of 2021
- addressing corporate tax avoidance by large digital companies
- cutting the corporate tax rate by half for companies making zero emissions products
- providing automatic tax return filing for simple returns to ensure lower-income Canadians get benefits
- expanding the Canada Emergency Business Account (CEBA) to help businesses with fixed costs
- concluding work to limit the stock option deduction for wealthy individuals and established corporations
- identifying additional ways to tax “extreme wealth inequality”
- increasing Old Age Security (OAS) once a senior turns 75 and boosting the Canada Pension Plan survivor’s benefit
- updating the Employment Insurance (EI) system so it is the only delivery mechanism for employment benefits and, in the meantime, creating the transitional Canada Recovery Benefit for people who do not qualify for EI
- enhancing the First-Time Home Buyer Incentive
- introducing a new Canadian disability benefit program modelled after the Guaranteed Income Supplement for seniors
- implementing better processes to determine eligibility for government disability programs and benefits
This fall, the government will release an update to Canada’s COVID-19 Economic Response Plan. As more details emerge, we will provide further updates.
September 23, 2020
Reporting the TWS to the CRA
The CRA has published further information on how to report the Temporary Wage Subsidy (TWS). If you are eligible to receive the TWS, you may need to fill out and submit Form PD27, 10% Temporary Wage Subsidy Self-Identification Form for Employers, for each of your payroll program (RP) accounts. The CRA will use the information from your Form PD27 to reconcile the TWS on your payroll program (RP) accounts. The CRA encourages claimants to submit the PD27 as soon as possible to avoid receiving a discrepancy notice at the end of the year. The CRA also provides a number of examples that may help you in completing the PD27.
September 22, 2020
Guidance from CRA on their resumption of activities
The CRA has provided information on activities that are resuming in September and tips on how to recognize when you are legitimately being contacted by the CRA. For further information, see the CRA’s news release.
September 18, 2020
Further updates on CRA online access
Further to our post earlier today, the CRA has provided some further information on the issues related to CRA online services. In particular, they have confirmed that those who have had access issues to their Represent a Client account, My Account or My Business Account have been locked out as a result of the cyber incidents discussed in the CRA’s September 17 backgrounder.
The CRA has also indicated the following services have been temporarily shut down for now as they deal with this issue:
- Change my address and phone number(s)
- Arrange my direct deposit
- Authorized representative(s)
- the link to My Service Canada Account
If you find that your access to Represent a Client, My Account or MyBusiness account has been blocked, CRA has advised us that you should contact their General Enquiries line. We will continue to keep you updated on this as we learn more details.
Update on CRA online access
Many of you have been advising us on issues associated with access to CRA online services and Represent a Client in particular. On September 17, the Office of the Chief Information Officer (OCIO) released a statement indicating that the security issues reported in August were more widespread than first announced, and suspicious activities have been identified on approximately 48,500 CRA user accounts between early July and August 15. All of these 48,500 accounts have been locked to prevent any additional unauthorized access and/or fraud on them.
We are trying to get more information from the CRA, but we suspect that the Represent a Client access issues are related to this.
We have also heard that getting assistance from the CRA has been challenging due to long wait times on their phone system and other issues. We have also brought those concerns to the attention of the CRA. We will provide more information as it becomes available.
September 17, 2020
Update on CEWS and other CRA priorities
As the CRA continues its work on COVID-19 emergency relief measures, it is also turning attention back to other outstanding priorities. Find out about some of the most recent developments in our latest blog post.
September 14, 2020
CRA consultation on Form T2200
As some of you may know, the CRA has started a process to consult with business groups on a new draft simplified version of form T2200, Declaration of Conditions of Employment. The simplified form is meant to address work-space-in-the-home expenses incurred by employees during the COVID-19 pandemic.
Under current rules, employees who are otherwise eligible to claim employment expenses also need to obtain a signed copy of a T2200 form that was signed by their employer. The draft T2200 short form focuses on individuals who were required to work at home during the pandemic who wish to claim home office expenses. Although the short form will be easier to complete and will provide better information on who can claim pandemic-related home office expenses when compared with the existing T2200 form, the federal government’s proposed process does not deal with our key concerns.
Our first key concern is the number of forms that will be required to be completed. Whether a short form or a longer form, the need to prepare potentially millions of individual forms for Canadian employees will require a significant amount of compliance time and resources on a cumulative basis for employers. With many businesses struggling with issues related to the pandemic and business recovery, we believe that the resources needed to complete these forms can be better spent on more productive activities.
Another key concern is the time it will take employees to understand the rules and make accurate home office deduction claims as many employees will be making a claim for the first time. To help deal with this issue, we had suggested that serious consideration be given to providing a simplified calculation as an alternative and we provided an example based on how Australia is dealing with this issue. Again, we have offered to participate in a process to identify alternatives to simplify deductions. A simplified deduction would also help address T2200 concerns.
As it appears more likely that the government will require the individual preparation of some sort of T2200 form, we will consult with our tax committees on specific issues associated with the draft form. We have already identified some potential issues. We will be providing our views through our ongoing framework agreement with the CRA. In addition, we will also continue to raise our concerns in discussions with senior government officials on the big picture issues.
Overall, we strongly believe that a more streamlined solution is possible that will reduce the administrative burden for employers and employees while allowing to CRA to administer the tax system. This should be fully investigated before a final decision on the T2200 form is made.
September 8, 2020
Canada Emergency Commercial Rent Assistance (CECRA) extended for one more month
On September 8, the federal government announced that the CECRA program would be extended by one month to cover rent for September. The government also stated that this will be the final extension of this program as the government explores options to support small businesses as they face the ongoing challenges of the COVID-19 pandemic.
Extended SR&ED deadlines announced by CRA
The CRA received a ministerial order to allow for the extension of certain deadlines imposed under the Income Tax Act, including some reporting deadlines for scientific research and experimental development (SR&ED) claims. The SR&ED reporting deadlines affected include any that occurred on or after March 13, 2020. No SR&ED reporting deadlines are extended past December 31, 2020. The CRA has posted further information on which SR&ED deadlines have been extended on their website.
September 4, 2020
International income tax guidance update
On September 2, the CRA made additional changes to its international income tax guidance (updating the version posted to the CRA site on August 31). Specifically, section I-B on corporate income tax residency was updated to address an issue with corporate residency requirements as it relates to the surplus calculations of a foreign affiliate of a Canadian-resident corporation. A new section VI was added that deals with non-resident employer certification to address an issue for non-resident employers whose non-resident employees may have had to remain in Canada for an extended period as a result of the travel restrictions.
Note that the CRA has also included their guidance on how to obtain international waivers and certificate of compliance during the COVID-19 crisis.
September 1, 2020
Update on non-tax federal government pandemic programs
On August 31, the Government of Canada announced that the application deadline for the Canada Emergency Business Account (CEBA) has been extended from August 31 to October 31, 2020. The Business Credit Availability Program (BCAP) has also been extended to June 2021.
The government is also looking into ways to expand the CEBA program to include businesses with qualifying payroll or non-deferrable expenses that have been unable to apply thus far due to not operating from a business banking account. Further details on these changes will be announced in coming days.
On the Canada Emergency Commercial Rent Assistance (CECRA) program, no further extension has been announced (the last assistance period ended on August 31). The Finance Minister discussed this issue at a news conference and stated that federal and provincial governments are looking for new ways to provide assistance for fixed costs including rent and more information should be available very soon.
CRA extends international income tax guidance
On August 31, the Canada Revenue Agency extended its international income tax guidance period, which is now from March 16 until September 30, 2020 (previously August 31). The CRA also mentioned that it does not anticipate any further extensions.
August 28, 2020
New T4 reporting requirements
On August 26, the CRA announced it will be introducing additional T4 reporting requirements applicable to all employers and will involve reporting amounts paid for specific periods during 2020.
The CRA states that the new reporting will be used to validate benefit payments under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Response Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
Additional details on the new reporting requirements can be found on the CRA’s COVID-19 update page. We will be in discussions with the CRA to clarify some issues and will provide an update as we learn more.
August 27, 2020
Extended temporary measure enabling electronic signatures for individual and corporate T183s
On August 25, the CRA announced an extension of its temporary administrative measure of recognizing an electronically signed Form T183 or T183CORP as having met the signature requirements of the Income Tax Act for the remainder of the current filing season (we will follow up with the CRA to see if there is a more precise end date).
In order for the CRA to continue to accept an electronic signature from a taxpayer whose identity has been verified by the filer, the electronic signature will generally need to be provided in one of the following ways:
- It may be provided if the taxpayer sends the information return, including the electronic signature using the electronic address most recently provided by the taxpayer to the electronic filer.
- It may be provided in person by the taxpayer, in the presence of the electronic filer. e.g. using a stylus or finger on a tablet.
- It may be provided through an access controlled, secured electronic location such as a secure website, that is accessible to the taxpayer only because the location of the secure website has been made known to the taxpayer and access has been granted by the filer.
The CRA has also highlighted that it will continue to pursue the regulatory approval necessary to implement these measures permanently.
New tax blog post: COVID-19 tax updates: Latest information on deadline extensions and relief
The CRA announced additional tax deadline extensions and relief from interest and penalties. Our latest blog post has a summary of these changes and updates on questions we asked the CRA.
August 20, 2020
New tax blog post: New CEWS tools and guidance
The CRA launched more tools and guidance to help businesses and practitioners apply for the Canada Emergency Wage Subsidy (CEWS). Get insights into these and other developments in our latest blog post.
Government announces next phase of COVID-19 income support for individuals
The government announced today proposed changes to the Employment Insurance (EI) program, the introduction of three new income support benefits and an extension of the Canada Emergency Response Benefit (CERB). The Government of Canada intends to introduce legislation to support the delivery of the new recovery benefits.
The proposed changes to the EI program will make it available to more Canadians by relaxing many qualification requirements. Those receiving EI will be eligible for a taxable benefit rate of at least $400 per week, or $240 per week for extended parental benefits, and regular benefits will be accessible for a minimum duration of 26 weeks. The EI insurance premium rates for both employees and employers will also be frozen for two years.
The three new income support benefits include:
- The Canada Recovery Benefit (CRB) will provide $400 per week for up to 26 weeks, to workers who are self-employed or are not eligible for EI and who still require income support and who are available and looking for work.
- The Canada Recovery Sickness Benefit (CRSB) will provide $500 per week for up to two weeks, for workers who are sick or must self-isolate for reasons related to COVID-19.
- The Canada Recovery Caregiving Benefit (CRCB) will provide $500 per week for up to 26 weeks per household, for eligible Canadians unable to work because they must care for a family member or dependents under various scenarios.
The government also proposes to extend the CERB by an additional four weeks to a maximum of 28 weeks. Further details can be found in Employment and Social Development Canada’s backgrounder.
August 17, 2020
Government update on cybersecurity issues
As reported in the media, there have been cyber attacks on CRA’s ‘My Account’ service as well as ‘GCKey’ accounts for other online services. The number of individuals affected is somewhat unclear as the accounts attacked were a combination of CRA’s ‘My Account’ and ‘GCKey’ accounts used for other government services, however, it appears that CRA ‘My Account’ access will be closed for approximately 5,500 individuals.
The government provided an update on August 17 and the highlights from the press conference are as follows:
- The attack was referred to as “credential stuffing,” where automated bots attempt to sign onto a website using usernames and passwords obtained from prior breaches of other sites. This tactic preys on users who use the same usernames and passwords at different sites.
- The CRA also confirmed that the attackers were able to bypass the security question protections on the CRA site. This issue is being addressed.
- My Business Account access has been restored and CEWS applications can be made.
- My Account and Represent a Client are still offline for all users. Service is expected to resume by Wednesday, August 19, except for those whose accounts were specifically attacked.
- For the 5,500 individuals where access to My Account was closed, letters will be mailed to them by the CRA this week explaining what they will need to do to restore access.
If there are any further developments, we will provide an update.
Applications for CEWS claim period 5 are now open
The CRA is accepting applications for the Canada Emergency Wage Subsidy (CEWS) claim period 5 (July 5 to August 1) as of August 17, 2020. Applicants can apply for the wage subsidy online through My Business Account, Represent a Client, or the Web Forms applications. In addition, the CRA has updated their applications guide to reflect the new program rules introduced in Bill C-20, which apply generally for CEWS claim periods 5 and onwards. Although My Business Account access was suspended over the weekend, access to that service was restored on August 17.
CRA provides an update on SR&ED deadlines
Bill C-20 provided the ability for the Minister of National Revenue to extend the Scientific Research and Experimental Development (SR&ED) reporting deadlines for up to six months, starting March 13, 2020 and not past December 31, 2020, however in order to do so, the Minister must obtain approval from Parliament in the form of an order. The CRA recently updated their website with the following information:
“Since this order has not yet been issued, claimants with a SR&ED reporting deadline on or after March 13, 2020, and who were unable to file an SR&ED claim because of the COVID-19 pandemic, are encouraged to file their claim on the expectation that such an order will be released. Claimants are encouraged to submit their SR&ED claims as early as possible, preferably with their income tax return.”
August 14, 2020
CRA’s ongoing updates to the CEWS calculator
CRA has developed and implemented the enhanced Canada Emergency Wage Subsidy (CEWS) calculator (which includes the online calculator and the calculation spreadsheet) under a tight timeframe. We understand that CRA is continually updating these tools, as glitches and improvements are highlighted. We wanted to remind you that it is important for you to check their webpage often to ensure you are using the latest version. For the online calculation, this will happen automatically when you access it, but the Excel spreadsheets are being updated as issues are identified.
August 13, 2020
CRA updates the CEWS attestation
The CRA has recently uploaded an updated Form RC661, Attestation for owner/managers and/or senior employees. The key changes include adjustments to reflect the new periods (i.e. Periods 5 to 9) along with adding the elections related to assets sales, the alternative approach for determining the revenue drop for periods 5 to 9, and the alternative methods for determining baseline remuneration.
August 11, 2020
Update on CEWS calculator and further guidance
Further to our posting on August 6, the CRA has released its enhanced Canada Emergency Wage Subsidy (CEWS) calculator, a CEWS support page, and revised CEWS FAQs. All have been updated to take into account the new CEWS program rules (see our blog for further details) and are designed to assist employers and their advisors in determining the amount of CEWS they may be eligible for. The CRA also announced that CEWS applications under the revised rules will be accepted beginning on August 17. We will provide more details as they become available.
August 10, 2020
CRA updates 10 per cent Temporary Wage Subsidy guidance
The CRA recently updated their website to provide more detailed guidance on reporting the 10 per cent Temporary Wage Subsidy (TWS), and on form PD27 (Temporary Wage Subsidy Self-identification Form for Employers) in particular. All employers eligible for the TWS are expected to file. For those eligible employers who claimed no amount for the TWS (or a reduced amount) because they also claimed the Canada Emergency Wage Subsidy, they must also complete the PD27. As the CRA will use the information on this form to reconcile the subsidy to the employer’s payroll program account, CRA is encouraging employers to complete this form by the end of 2020.
Note that we have identified an issue in the certification section of the PD27 web form in Represent a Client. We have asked the CRA to reconsider this wording given that the representative is preparing the form on behalf of the employer.
August 6, 2020
CRA to release an enhanced CEWS calculator and further guidance
The CRA has informed us that they are currently working on an enhanced Canada Emergency Wage Subsidy (CEWS) calculator that takes into account the new CEWS program rules (see our blog for further details) and is intended to assist employers and their advisors in determining the amount of CEWS they may be eligible for. In addition to the enhanced calculator, the CRA has indicated they are developing further FAQs to address the revised CEWS program rules. We will update you as we learn more about the calculator and guidance, including the timing of their launch.
July 31, 2020
Government updates on CERB and CECRA programs
On July 31, the federal government provided updates on the Canada Emergency Response Benefit (CERB) and the Canada Emergency Commercial Rent Assistance (CECRA).
During a press conference on July 31, the Prime Minister announced that the government plans to transition current participants of the CERB program to Employment Insurance (EI) when the CERB program comes to an end. In addition, the government proposes to amend the EI rules to create new benefits for current CERB recipients who would not otherwise qualify for EI. More details will be provided before the end of August.
On the CECRA program, the Finance Minister announced that the program will be extended by one month to provide assistance to eligible small businesses for August rent. No other changes to the program were announced.
July 28, 2020
CRA updates income tax deadline summary
Further to the CRA’s July 27 announcement on interest and late filing penalties for T1, T2 and T3 returns, the CRA has also updated its income tax deadline summary page. However, we have noted some inconsistencies and uncertainties. We have sent a note to the CRA to clarify, and we will provide more information when we hear back.
CRA releases 10% Temporary Wage Subsidy (TWS) self-identification form
The CRA has released Form PD27, 10% Temporary Wage Subsidy Self-identification Form for Employers. Eligible employers of the TWS will be required to complete this self-identification form for each of their payroll program accounts. The CRA will use the information on this form to reconcile the subsidy to the employer’s payroll program account. Further information on the TWS can be found on the CRA’s FAQ page.
July 27, 2020
CRA extending payment deadline and applying relief to interest on existing debt
On July 27, the CRA issued a news release announcing a further extension to the payment due date for current year individual, corporate, and trust income tax returns, including instalment payments, from September 1, 2020, to September 30, 2020. Penalties and interest will not be charged if payments are made by the extended deadline of September 30, 2020. The previously extended filing due dates for individual, corporate, and trust income tax returns remain unchanged, however the CRA will not impose late-filing penalties provided the return is filed by September 30, 2020.
The CRA is also waiving interest on existing tax debts related to individual, corporate, and trust income tax returns from April 1, 2020, to September 30, 2020 and from April 1, 2020, to June 30, 2020, for goods and services tax/harmonized sales tax (GST/HST) returns.
July 24, 2020
New tax blog: Summary of changes to CEWS program
The federal government is extending the Canada Emergency Wage Subsidy (CEWS) until December 19, 2020, among other important changes. Find out the details announced on July 17, 2020 and included in Bill C-20 in our latest blog post.
Relief for flow-through share issuers
The federal government is also proposing to assist flow-through share issuers by extending the timelines for spending the capital they raise via flow-through shares by 12 months. Finance Canada’s backgrounder has more details on the proposed changes and states that legislative amendments will follow “in due course.”
July 20, 2020
Bill C-20 introduced with changes to CEWS and more
Further to the July 17 announcements by the government, Finance Minister Bill Morneau has introduced new legislation in the House of Commons (Bill C-20) which includes changes to the Canada Emergency Wage Subsidy (CEWS) and enhanced support for persons with disabilities. We will keep you updated as this bill progresses and will provide our analysis of the changes to the CEWS in this week’s tax blog.
In addition, Bill C-20 contains the proposals to address issues relating to legislative time limits and deadlines that were first released on May 19. It should be noted that it does not include the proposed changes to the Canada Emergency Response Benefit (CERB) that were contained in Bill C-17.
July 17, 2020
Details announced for latest CEWS extension
Finance Minister Bill Morneau confirmed that the federal government will extend the Canada Emergency Wage Subsidy (CEWS) to December 19, 2020. He also announced details on how the program will be revised to take into account feedback that the government has received.
Today’s proposed changes included in the government’s draft legislative proposals would:
- allow the extension of the CEWS until December 19, 2020, including redesigned program details until November 21, 2020
- make the subsidy accessible to a broader range of employers by including employers with a revenue decline of less than 30 per cent and providing a gradually decreasing base subsidy to all qualifying employers
- introduce a top-up subsidy of up to an additional 25 per cent for employers that have been most adversely affected by the pandemic
- provide certainty to employers that have already made business decisions for July and August by ensuring they would not receive a subsidy rate lower than they would have had under the previous rules
- address certain technical issues identified by stakeholders
- this includes the amendments previously announced plus additional changes, including new rules to assist eligible employers who have acquired assets – an issue we raised in discussions with government
We will provide more information once we have reviewed the announcement more thoroughly.
New details to support persons with disabilities
The Minister of Employment, Workforce Development and Disability Inclusion announced that the government will propose legislation to make the one-time tax-free payment to persons with disabilities available to more people by expanding it to recipients of any of the following programs or benefits:
- a Disability Tax Credit certificate provided by the CRA
- Canada Pension Plan disability benefit or Quebec Pension Plan disability benefit
- disability supports provided by Veterans Affairs Canada
Additional support will also be provided to eligible seniors.
We will provide more information once we have reviewed the announcement more thoroughly.
For more details, see the Employment and Social Development Canada news release.
July 15, 2020
COVID-19 tax updates: Draft Regs on RPPs and DSLPs, CEWS changes and disputes, and more
Our discussions with the CRA continue as the government evolves its COVID-19 tax measures and administrative practices. Find out the latest key announcements and changes made in the past few weeks in our latest blog post.
July 13, 2020
Canada Emergency Wage Subsidy (CEWS) extended through to December 2020
The Prime Minister announced today that the government will extend the CEWS through to December 2020. No further details were included in the Prime Minster’s announcement. We will update you as more information is provided.
July 10, 2020
CEWS FAQ update: Vacation pay, recourse process, and more
On July 9, the CRA updated its Canada Emergency Wage Subsidy (CEWS) FAQ page. Some of the key changes are as follows:
- Various updates were made to reflect the government’s extension of CEWS. Note that the regulation to extend CEWS and maintain the rules for the fourth period was released on June 29, 2020. The extension and rules for the fifth and sixth periods have not yet been released.
- Question 6-4 on amalgamations and wind-ups has been re-worded, however there is no substantive change.
- Question 17-3 provides guidance on how sick pay, vacation pay, and statutory holiday pay is included in eligible remuneration. The CRA confirms that to be eligible, the sick, vacation or holiday pay must be paid to the eligible employee in respect of a particular week in the claim period.
- Question 36 provides guidance on the recourse process when the CRA denies a CEWS claim.
- A number of other new questions have been added including:
- Question 3-01, which deals with the proposals around tax-exempt trusts
- Questions 6-7 and 6-8 deal with foreign exchange fluctuations and functional currency elections
- Question 8-01 deals with employers electing under paragraph 125.7(4)(d) and the use of a foreign currency in computing qualifying revenue
- Question 12-2 states that form RC661 is where an employer should indicate that elections have been made
We will be providing a more in-depth analysis of some of these changes in our next tax blog early next week.
June 30, 2020
Updated CRA GST/HST FAQ page now available
The CRA recently updated its GST COVID-19 FAQ Page for the Finance Canada announcement that there will be no extension of the relief that was originally announced by the CRA on March 27, 2020.
In addition, the CRA has added new FAQs on electronic signatures for GST/HST documents. As a temporary measure, the CRA will be accepting electronic signatures for GST/HST documents submitted online. The CRA indicates that effective July 6, 2020, businesses will be able to use a new electronic service to submit a GST/HST document with an electronic signature. The link to this new service will be found on the MyBA main web page of the GST/HST program account menu. This temporary measure does not apply to GST/HST returns and forms filed by paper.
Canada Emergency Commercial Rent Assistance (CECRA) extended by one month
The Prime Minister has announced that the Canada Emergency Commercial Rent Assistance (CECRA) program will be extended by one month. The purpose of the CECRA program is to provide relief to small businesses experiencing financial hardship due to COVID-19 by way of unsecured, forgivable loans to eligible commercial property owners to reduce the rent owed by their impacted small business tenants and meet operating expenses on commercial properties.
June 29, 2020
GST/HST and Customs Duty payment deferral ending as planned on June 30
The Department of Finance Canada announced that the GST/HST and customs duty payment deferral is ending as planned on June 30.
Finance states that businesses that continue to experience difficulty in remitting GST/HST and customs duty amounts owing can contact the Canada Revenue Agency (CRA) and Canada Border Services Agency (CBSA) to make a request for the cancellation of penalties and interest, and/or for a flexible payment arrangement with the CRA.
CRA’s guidance on international income tax issues extended to August 31
As noted in prior postings, the Canada Revenue Agency (CRA) released guidance on several international income tax issues on May 19. On June 26, a revised version of the guidance was posted to the CRA’s website, which includes an extension to August 31 (the original guidance was set to expire today). Apart from the extension, there were no other significant changes.
CRA’s Business Resumption Plan
The Canada Revenue Agency (CRA) recently published its National Business Resumption (NBR) Plan. Over the past three months, the CRA has shifted its resources to providing critical services which include activities around benefit payments and the federal government’s response to the COVID-19 pandemic. While the CRA will continue its activities in these critical areas, it indicates in the NBR Plan that other services and functions will be resumed in a phased approach over the next six to nine months.
The NBR Plan outlines the services that will resume over the summer months (July to August 2020), and provides an estimated time frame for all other services. It is important to note that the plan builds on the list of critical services already in operation.
Services to resume over the summer (July to August 2020)
Here are some of the key services that will resume over the summer:
- Appeals Branch – Remaining functions in the Appeals Branch will be fully operational by the end of the summer, including the Objections Program and the Taxpayer Relief Program.
- Assessment, Benefit, and Service Branch – Resumption of all remaining functions based on ability and capacity to support normal and COVID-19 priorities simultaneously, with a few exceptions (e.g. T183 monitoring activities).
- Collections and Verification Branch – CRA paused most collections activities over the last few months. The NBR Plan indicates a number of services will resume over the summer including: Debt Management Call Centres, processing of insolvency filings and proofs of claim to trustees, responding to taxpayer request calls and correspondence.
- Also of note, the CRA will be launching CEWS and CERB post payment compliance activities over the summer and into September 2020. It is unclear what this might entail, but we will keep you posted as we learn more on this.
- Compliance Programs Branch – In addition to high risk audit work already underway, the CRA indicates it will be resuming audit programs focused on high net worth compliance, GST/HST refund integrity and GST/HST large business compliance.
Services to resume after the summer
Beyond the summer, the NBR Plan provides some anticipated timelines for remaining services but indicates they are still being assessed to confirm the optimum time for resumption.
It appears that many of the Collections and Verification Branch activities will begin to slowly resume normal activities beginning in September 2020. Finally, the CRA estimates that collections officers will resume their more traditional approach to collections (e.g. where legal warnings will be issued by officers if a payment arrangement is not negotiated) in January 2021.
With respect to audit activities, the plan indicates that audits of small-medium sized enterprises will resume over October 2020 to January 2021.
Sending Correspondence to CRA during COVID-19
Due to the COVID-19 crisis, the Canada Revenue Agency (CRA) has closed many of its offices, and has been operating under a critical services mode. As many CRA employees continue to work remotely, services can be delayed. CRA continues to recommend that taxpayers and advisors use CRA’s online portals (such as My Business Account or Represent a Client) to the extent possible when corresponding with the CRA. In addition, payments should be made electronically – including online banking or MyPayment – to ensure they are received by the CRA on time, or in person at a financial institution.
In the event you have to mail correspondence to the CRA, we have summarized where things should be sent to ensure their timely receipt.
Status of Tax Services Offices (TSOs)
Not all TSOs are open during this time, however the four Tax Centres (TCs) (Jonquière, Prince Edward Island, Sudbury, and Winnipeg) are open. CRA has indicated however that only the drop boxes at the TCs in Jonquière, Sudbury, and Winnipeg are being monitored regularly and remain open.
While some of the TSOs are open, some are only open partially and auditors, examiners and collectors are all working remotely. As such, CRA suggests sending mail, faxes and payments directly to one of the TCs. As mentioned, online portals or direct contact with your auditor to arrange for email exchange is probably the best approach.
Special electronic mailboxes
The CRA has created a temporary procedure allowing taxpayers and their representatives to electronically submit the following urgent requests:
- NRDISPOG@cra-arc.gc.ca – section 116 certificates of compliance, comfort letters, and enquiries on previously submitted requests
- NRWAIVERSG@cra-arc.gc.ca – international waivers and enquiries on previously submitted requests
- CCTX19G@cra-arc.gc.ca – clearance certificates (Forms TX19 and GST352)
To correspond with a CRA agent for any of these purposes via email, CRA indicates you should send an email to the relevant email address stating that you want to correspond with CRA by email. A CRA officer will respond to your email, send you the requirements to authorize email communication, and tell you when/if you are permitted to submit your application or request by email.
Non-resident GST registration
CRA’s website indicates that all non-resident GST registrations should be directed to the London-Windsor TSO at this time:
GST HST Non-Resident Registrations & Security
451 Talbot Street
London, ON N6A 5E5
Requests for municipal determinations for GST/HST purposes
The CRA has confirmed with us that requests for municipal determinations (for all provinces except Quebec) for GST/HST purposes can continue to be sent to:
Public Service Bodies & Governments Division
Excise & GST/HST Rulings Directorate
11th floor, Tower A
Place de Ville
320 Queen Street
Ottawa, ON K1A 0L5
If you are in the province of Quebec, send the request for municipal determination or designation to Revenu Québec at:
Directeur des Taxes à la consommation
Direction générale de la législation
3800, rue de Marly, secteur 5-2-2
Québec, QC G1X 4A5
Update: June 26, 2020
Reminder: Deadline for SRED filings remains unchanged
Please keep in mind that the filing deadline for the Scientific Research and Experimental Development (SR&ED) claims has not changed and remains due 18 months after a corporation’s year-end. For corporations that have a December 31, 2018 year-end, the corporation has until June 30, 2020, to file a SR&ED claim.
Although Bill C-17 would give the Canada Revenue Agency the ability to provide relief for late-filed claims, the bill has not progressed since its introduction on June 10.
June 25, 2020
Update on extension for Subsection 216(4) personal returns
In an item posted on June 24, we mentioned that the CRA extended the due date for filing subsection 216(4) returns for non-resident individuals and paying amounts owing to September 1, 2020. On their tax deadline page, the CRA mentioned that penalties and interest will not be applied if returns are filed and payments are made by September 1, 2020, but did not confirm that there would no negative impacts to those individuals who previously filed an NR6 form.
We have received confirmation from the CRA that there will also be an administrative extension to the undertaking referred to in the NR6 form and, therefore, the CRA will not issue a default assessment against the agent for a non-resident taxpayer who fails to file their subsection 216(4) return until after the extended September 1 due date has been missed.
Update on key GST issues
On a recent conference call with the CRA, we discussed a number of GST priority issues and we wanted to update you on a few of the key issues:
The CRA has indicated the Voluntary Disclosures Program (VDP) has resumed operations and that taxpayers can submit VDP applications. Registrants must include payment of the estimated tax owing with their VDP. The CRA’s website indicates that the online submission method remains the best option to submit an application at this time.
Non-resident GST registrations
We had feedback from members indicating that there seemed to be significant delays in the processing of Non-Resident GST Registrations as a result of the impact of COVID-19 on CRA’s operations. The CRA has confirmed that the Non-Resident GST Registrations group is now fully operational and there are no significant delays in their processing. As per the CRA’s website, non-resident registrations should be directed to the Non-Resident Registration section of the London-Windsor TSO for now.
Upcoming GST obligations
We also wanted to remind you of the upcoming GST payment and filing deadlines. On payments, the deadline for GST/HST payments or remittances that become owing on or after March 27, 2020, and before June 2020, was extended to the end of June. For GST/HST returns, the deadline for businesses to file their returns is unchanged. However, the CRA won’t impose penalties where a return is filed late provided that it is filed by June 30.
Further payment extensions and late filing relief have not been announced to date.
Update on CRA’s guidance on international income tax issues
As we first noted in a posting on May 20, 2020, the CRA released guidance on several international income tax issues. The CRA states that its guidance will apply until June 29 and at that time, the CRA would decide whether an extension is necessary. CPA Canada contacted the CRA to ask whether the guidance will be extended and we understand the decision is still being considered. We will post an update when more information becomes available.
June 24, 2020
Update on CRA’s Canada Emergency Wage Subsidy (CEWS) FAQs
The CRA has updated their CEWS FAQ page to reflect a number of changes that were recently announced. Details of each of these changes were discussed in our previous postings and blogs, and include:
- The proposed extension of the CEWS for an additional twelve weeks. The FAQ reconfirms that all the rules related to the CEWS for the proposed fourth period will be identical to the ones for the preceding third period. It also highlights that an announcement of the potential changes to the program’s framework for the fifth and/or sixth periods will be made shortly. The regulations for this extension have not yet been released.
- The proposed expansion of the CEWS to capture employers who did not have a payroll account (RP) but instead use a payroll service provider (i.e. paymaster) who make their payroll remittance on the provider’s RP account (see Bill C-17).
- The proposed change to allow corporations formed by amalgamation of two or more predecessor corporations (or where a corporation is wound up into another) to calculate benchmark revenue using combined revenues (see Bill C-17).
The CRA confirms in its FAQs that these proposed changes will only be administered and applied once the legislation has received Royal Assent. At present, Bill C-17 has not progressed since receiving first reading.
Calculating qualifying revenues for recently incorporated businesses
In new question 6-5, the CRA clarifies that where a sole proprietor’s business was recently incorporated, the corporation cannot compare its revenue to that of the proprietorship for either the corresponding period in 2019 or to January and February of 2020 when applying the revenue test (depending on when incorporation took place). In other words, it will be treated as a brand-new business (see discussion on the Alternative Approach in Question 5 and Example 4 of the FAQ for new businesses).
Qualifying revenues and adjustments for operational changes
New question 6-6 highlights that prior or current reference period qualifying revenues cannot be adjusted to reflect operational changes that have taken place in the business. An eligible employer should use its normal accounting practices when determining its qualifying revenue and that there are no provisions (other than the “special rules” referred to in the FAQ) that allow an eligible employer to adjust qualifying revenue from prior or current reference periods for changes in operation levels. As examples, operational changes that cannot be adjusted for include a supply chain disruption causing a loss of revenue in a prior period or a business or asset purchase in a current period that increases revenue.
Note that we have raised the business acquisition issue in multiple discussions with Finance Canada.
When employers need to repay the CEWS
In question 28-1, the CRA provides information on circumstances where an employer needs to repay the CEWS.
The CRA has also provided instructions on how to repay either entire or partial amounts received on the “after your apply” section of its CEWS landing page.
Employers may be subject to interest on excess wage subsidies received and penalties may apply on all fraudulent claims.
New deadlines for non-resident individuals
The CRA has provided additional filing and payment extensions, to September 1, for T1 returns for non-residents electing under either subsection 216(4) or section 217 who would have otherwise had a filing deadline of June 30, 2020. Penalties and interest will not be applied if returns are filed and payments are made by September 1, 2020. See the new “Section 216(4)” and “Section 217” items on the CRA’s tax deadline page.
However, the information on CRA’s tax deadline page does not deal with additional implications of a late-filed subsection 216(4) T1 return where the individual previously filed form NR6. According to the NR6 form, the CRA states in respect of the rental agent “you as agent will have to pay to the Receiver General for Canada the full amount of tax that would otherwise have been required to be remitted in the year” if the return is not filed on time. This means that where Part XIII tax was withheld on net rental income during the year and the return is late, the agent must calculate tax on gross rental income and remit that to the CRA.
As this issue goes beyond simple interest and late-filing penalties (i.e. an amount of tax potentially owing by the agent) and was not addressed specifically, we have asked the CRA for clarification.
June 18, 2020
COVID-19 tax updates: CEWS, CRA interpretations, deadlines, international issues and more
With many COVID-19 emergency tax measures now enacted, we continue our regular series of updates with the latest on the Canada Emergency Wage Subsidy (CEWS), related CRA interpretations, time limits and more. Read our latest blog.
Update: June 16, 2020
Federal government extends CERB for an additional eight weeks
The Prime Minister announced that the government will extend eligibility for the Canada Emergency Response Benefit (CERB) by eight weeks – enabling those who are trying to find work to keep claiming the $2,000/per month benefit. Read the news release for more details.
CEWS revenue test threshold remains 30 per cent for period 4
On June 10, the CRA sent an email to stakeholders on the Canada Emergency Wage Subsidy (CEWS). In addition to some general information and a reference to the recently completed consultation, the CRA stated that:
“Any potential changes would commence as of periods 5 (July 5 to August 1) and/or 6 (August 2 to August 29). Further details on this will be forthcoming.”
The same message has now been posted to the main CEWS page. Based on this, the 30 per cent revenue threshold will continue to apply for period 4.
June 15, 2020
Finance consults on potential CEWS changes: CPA Canada provides feedback
The Department of Finance Canada consulted with Canadians on potential changes to the Canada Emergency Wage Subsidy (CEWS). Find out about our feedback on improving this vital program for supporting employers affected by COVID-19.
June 11, 2020
Federal government introduces Bill C-17
The federal government introduced Bill C-17 on June 10. While the focus of the bill is on the Canada Emergency Response Benefit (CERB), some key Canada Emergency Wage Subsidy (CEWS) issues were also addressed.
One concern we have been focused on are paymasters and other arrangements where one entity administers a payroll for a second entity. In such a case, only the payroll administrator has a payroll account with the CRA, which makes the second entity ineligible for a CEWS claim under the existing rules. Bill C-17 proposes to amend the definition of qualifying entity to include an entity where payroll administration for its employees is undertaken by a “payroll service provider” and that provider has a payroll account with the CRA which is used to make source deduction remittances in respect of the employees of that entity. This change comes into force on the same date the CEWS initially received Royal Assent (April 11, 2020).
The proposed legislation also amends the CEWS rules to implement the changes announced in the May 15 Department of Finance Canada backgrounder. This includes:
- allowing corporations formed on an amalgamation of two or more predecessor corporations (or where a corporation is wound up into another) to calculate benchmark revenue using combined revenues
- introducing a new alternative baseline remuneration period
- adding restrictions to the eligible entity definition for tax-exempt trusts
The proposed legislation contains amendments to the CERB rules, which include:
- support to individuals who experience a short-term loss of employment, quarantine themselves or care for someone diagnosed with COVID-19, whereby they will be allowed to make a claim for a two-week period rather than a four-week period under the current program
- tightening eligibility requirements whereby an individual will not be eligible for benefits if that individual fails to return to work after an employer requests their return or fails to resume self-employment, when it is reasonable to do so, and where an individual declines a reasonable job offer if they are able to work
- penalties for claimants whose applications include information that is deliberately “false or misleading,” and for those who “knowingly fail” to disclose sources of income or other relevant information in their CERB application
- it appears that the new penalties can apply retroactively to claims made before the introduction of this legislation
A number of administrative rules were also included.
Other amendments included in the bill will:
- provide support to Canadians with disabilities to deal with extra expenses during the COVID-19 pandemic, as previously announced by the federal government
- enact recently released legislative proposals that address issues relating to time limits and deadlines
June 9, 2020
New blog post on Canada Emergency Wage Subsidy (CEWS) and other COVID-19 related issues
Read our latest blog post, which provides updates from the CRA, including amending CEWS claims, CEWS and corporate groups, recent rulings, and other COVID-19 related issues.
June 8, 2020
Support for Canadians with disabilities to address challenges from COVID-19
The federal government has announced support to help Canadians with disabilities deal with extra expenses during the COVID-19 pandemic. This support includes a special one-time, tax-free payment to individuals who are certificate holders of the Disability Tax Credit as of June 1, 2020, as follows:
- $600 for Canadians with a valid Disability Tax Credit certificate
- $300 for Canadians with a valid Disability Tax Credit certificate and who are eligible for the Old Age Security (OAS) pension
- $100 for Canadians with a valid Disability Tax Credit certificate and who are eligible for the OAS pension and the Guaranteed Income Supplement (GIS)
June 3, 2020
Updated summary of identified COVID-19 tax issues (non-CEWS)
Read the latest version of the summary of identified COVID-19 tax issues complied by CPA Canada and the Canadian Tax Foundation. This update includes new issues as well as any developments on existing issues since the May 4, 2020 version. We continue to work with the federal government on outstanding issues and will keep you updated as further information becomes available.
June 1, 2020
CRA tax deadline summary revised
Further to our May 28 tax deadline webinar and May 29 tax blog, the Canada Revenue Agency (CRA) has updated their tax deadline summary to clarify some uncertainties that they had previously confirmed with us. In particular, the CRA page now states:
- For T2 corporate returns:
- For returns otherwise due after March 18 and before May 31, 2020, these are due June 1, 2020.
- For returns otherwise due on May 31, or in June, July, or August 2020, these are due September 1, 2020.
- For T3 trust returns:
- For returns otherwise due after March 30 and before May 31, 2020, these are due June 1, 2020.
- For returns otherwise due on May 31, or in June, July, or August 2020, these are due September 1, 2020.
- For other information returns, elections, designations and information requests:
- Unless otherwise noted, filings and responses due after March 18 and before May 31, 2020 are due June 1, 2020.
- Unless otherwise noted, filings and responses that would have been due on May 31, or in June, July, or August 2020 are due September 1, 2020.
Specifically, this means that T2 returns for November 30, 2019 year ends and partnership returns normally due on May 31, 2020 are now due on September 1, 2020, as previously reported.
The other information in the summary is largely unchanged from the previous version. In particular, forms such as the T106, T1135 and other schedules and elections will be due at the same time as the return in question, including the extension.
Please note, we are currently in the process of archiving older tax news items. For a copy of an older news item not displayed here, please contact CPA Canada Tax.