In addressing the COVID-19 pandemic, the Government of Canada has declared a number of support measures in order to aid business owners. The measures to date include:
>> Deferral of Tax Filings and Remittances: The Federal Goods and Services Tax / Harmonized Sales Tax (GST/HST) applies to sales of almost all goods and services in Canada at each stage of the supply chain, in each case with the vendor collecting the GST/HST and then remitting the net amount after deducting input tax credits to the Federal Government for each reporting period. The frequency of reporting is dependent on annual sales, with vendors with annual sales of more than $6 million reporting monthly. Remittance deferrals have been put in place for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year. For GST and customs duty payments for imported goods, the payment deadline for March, April and May accounts is deferred until June 30, 2020. The deadline for corporate income tax filings has been extended to June 1, 2020 with payment of taxes owing extended to September 1, 2020.
>> Canada Emergency Wage Subsidy (“CEWS”): The Government of Canada is offering employers a subsidy that covers 75% of remuneration paid to individual employees up to a maximum benefit of $847 per week for up to 12 weeks, retroactive to March 15, 2020. This subsidy is available to individuals and corporate employers of all sizes to assist in funding payroll for both existing employees and new employees. In order to qualify, an employer must suffer a decrease of at least 30% in monthly revenues.
>> The 10% Small Business Wage Subsidy: The Government of Canada is offering a separate 10% small business wage subsidy to employers, and has indicated that employers that don’t quality for CEWS may continue to qualify for this subsidy. The subsidy will amount to 10% of remuneration paid from March 18 to June 19, 2020, up to a maximum of $1,375 per employee and $25,000 per employer. Eligible employers can immediately benefit by reducing the income tax remittances otherwise deducted from employee pay. This subsidy is available to individual and corporation employers. For corporations to be eligible they must be eligible for the small business deduction in Canada. It must have been a Canadian-controlled private corporation, and its eligibility will depend on whether the taxable capital of an associated group if which it is a member is less than $15 million and whether it had a small business limit in the previous year. Corporations listed on a designated stock exchange or controlled by a corporation listed on such an exchange do not qualify. For those eligible, benefits from the 10% wage subsidy reduce the amount available under the CEWS in the same period.
>> Business Credit Availability Program (“BCAP”): Through this program, the Business Development Bank of Canada (“BDC”) and Export Development Canada (“EDC”) are to provide $65 billion in direct lending and other financial support to struggling businesses. The loans will be at market rates and are targeted to small and medium enterprises (“SMEs”) who are creditworthy but whose financing requirements exceed the capacity of their financial institutions. This program is being rolled out commencing March 27, 2020. Businesses that are in need of financing are to work with their current financial institutions so that they may assess the business’s financial needs and determine whether BCAP resources are required (ie, they exceed the level of support their financial institution is able to provide). This initiative includes the following measures:
– SME Loan Guarantee. EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to SMEs.
– SME Co-Lending Program. BDC is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program.
– The Canada Emergency Business Account. This $25 billion program will provide interest-free loans of up to $40,000 to small businesses, to help cover their operating costs during a period where their revenues have been temporarily reduced. To qualify, a business will need to demonstrate that it paid between $50,000 to $1 million in total payroll in 2019.
– Bank of Canada (“BOC”): In response to the COVID-19 pandemic, the BOC lowered its benchmark interest rate from 1.25% to 0.75%. It is also expanding the eligible collateral under its standing term liquidity facility (“STLF”), which will allow financial institutions to access emergency liquidity and if necessary to enable them to continue their private funding. Under the STLF, eligible financial institutions can borrow from the BOC by pledging a broad set of collateral, including mortgages. This improves those financial institutions’ ability to fund new lending. The STLF is one of several facilities the BOC has put in place to address potential liquidity issues.
Given the dynamic nature of the COVID-19 pandemic, support measures and aid for business in Canada is continuing to be announced and evolve.
Disclaimer: Although this legal summary has been prepared with the utmost care, we do not assume any liability for the content being correct, complete and up to date. Our summary cannot replace legal advice in individual cases. We are at your disposal for specific legal advice.
