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Canada’s COVID-19 Economic Response Plan

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Canada’s COVID-19 Economic Response Plan

On March 18, 2020, the Prime Minister announced an economic stimulus plan of $82B help stabilize the economy, as part of the Government of Canada’s COVID-19 Economic Response Plan.

Below are a few highlights of the Economic Plan, as it relates to individuals and businesses and details on the pages following.

Canadian Government unemployment response plan for coronavirus
(click to enlarge)
Canadian Government unemployment response plan for coronavirus

Support to Canadians

Temporary Income Support for Workers and Parents

For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to say home to care for children, the Government is:

Waiving the one-week waiting period for those individuals in imposed quarantine that claim Employment Insurance (EI) sickness benefits. This temporary measure will be in effect as of March 15, 2020.

Waiving the requirement to provide a medical certificate to access Employment Insurance (EI) sickness benefits.

Introducing the Emergency Care Benefit providing up to $900 bi-weekly, for up to 15 weeks. This flat-payment Benefit would be administered through the Canada Revenue Agency (CRA) and provide income support to:

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

Workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an elderly parent, but do not quality for EI sickness benefits.

Parents with children who require care or supervision due to school closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.

Application for the Benefit will be available in April 2020 and require Canadians to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility. Canadians will select one of three channels to apply for the Benefit:

1.    by accessing it on their CRA MyAccount secure portal;

2.    by accessing it from their secure My Service Canada Account; or

3.    by calling a toll-free number equipped with an automated application process.

Longer-Term Income Support for Workers

For Canadians who lose their jobs or face reduced hours as a result of COVID’s impact, the Government is:

Introducing an Emergency Support Benefit delivered through the CRA to provide up to $5.0 billion in support to workers who are not eligible for EI and who are facing unemployment.

Implementing the EI Work Sharing Program, which provides EI benefits to workers who agree to reduce their normal working hour as a result of developments beyond the control of their employers, by extending the eligibility of such agreements to 76 weeks, easing eligibility requirements, and streamlining the application process. This was announced by the Prime Minister on March 11, 2020.

Income Support for Individuals Who Need It Most

For over 12 million low- and modest-income families, who may require additional help with their finances, the Government is proposing to provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC). This will double the maximum annual GSTC payment amounts for the 2019-2020 benefit year. The average boost to income for those benefiting from this measure will be close to $400 for single individuals and close to $600 for couples.

The Government is also proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-2020 benefit year, by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment.

Together, the proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.

To ensure that certain groups who may be vulnerable to the impacts of COVID-19 have the support they need, the Government is proposing targeted help by:

Providing $305 million for a new distinctions-based Indigenous Community Support Fund to address immediate needs in First Nations, Inuit, and Métis Nation communities.

Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.

Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings. This will provide flexibility to seniors that are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements. Similar rules would apply to individuals receiving variable benefit payments under a defend contribution Registered Pension Plan.

Flexibility for Taxpayers

In order to provide greater flexibility to Canadians who may be experiencing hardships during the COVID-19 outbreak, the Canada Revenue Agency will defer the fling due date for the 2019 tax returns of individuals including certain trusts.

For individuals (other than trusts), the return fling due date will be deferred until June 1, 2020. However, the Agency encourages individuals who expect to receive benefits under the GSTC or the Canada Child Benefit not to delay the fling of their return to ensure their entitlements for the 2020-2021 benefit year are properly determined.

For trusts having a taxation year ending on December 31, 2019, the return fling due date will be deferred until May 1, 2020.

The Canada Revenue Agency will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

Government of Canada’s COVID-19 Economic Response Plan

In order to reduce the necessity for taxpayers and tax preparers to meet in person during this difficult time, and to reduce administrative burden, effective immediately the Canada Revenue Agency will recognize electronic signatures as having met the signature requirements of the Income Tax Act , as a temporary administrative measure. This provision applies to authorization forms T183 or T183CORP.

The Canada Revenue Agency is adapting its Outreach Program to support individuals during COVID-19. Through this service, the Canada Revenue Agency offers help to individuals to better understand their tax obligations and to obtain the benefits and credits to which they are entitled. Traditionally available in-person, this service is now available over the phone, and through webinar, where possible.

Role of Financial Institutions

Banks in Canada have affirmed their commitment to working with customers to provide flexible solutions, on a case-by-case basis, for managing through hardships caused by recent developments. This may include situations such as pay disruption, childcare disruption, or illness. Canada’s large banks have confirmed that this support will include up to a 6- month payment deferral for mortgages, and the opportunity for relief on other credit products.

Mortgage Default Management Tools

The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers offer tools to lenders that can assist homeowners who may be experiencing financial difficulty. These include payment deferral, loan re- amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements.

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

Support to Businesses

Helping Businesses Keep their Workers

To support businesses that are facing revenue losses and to help prevent lay offs, the government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

Flexibility for Businesses Filing Taxes

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020.  This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

The Canada Revenue Agency will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For most businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.

The Liaison Offer service offers help to owners of small businesses to understand their tax obligations. Traditionally available in-person, this service is now available over the phone and will be customizing information during these challenging times by ensuring small businesses are aware of any changes such as filing and payment deadlines, proactive relief measures, etc.

Ensuring Businesses Have Access to Credit

The Office of the Superintendent of Financial Institutions (OSFI) announced it is lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately. This action will allow Canada’s large banks to inject $300 billion of additional lending into the economy.

The Bank of Canada cut the interest rate to 0.75% as a proactive measure.

Supporting Financial Market Liquidity

As a further proactive and coordinated measure to bolster the financial system and the Canadian economy, the government announced on March 16 that it is launching an Insured Mortgage Purchase Program (IMPP). Under this program, the government will purchase up to $50 billion of insured mortgage pools through the Canada Mortgage and Housing Corporation (CMHC). This action will provide long-term sable funding to banks and mortgage lenders, help facilitate continued lending to Canadian consumers and businesses, and add liquidity to Canada’s mortgage market. Details of the terms of the purchase operations will be provided to lenders by CMHC later this week.

F.A.Q’s:

What support is the Government providing for Workers and Parents during the COVID-19 crisis?

For Canadians without paid sick leave (or similar workplace accommodation) who are sick, quarantined or forced to say home to care for children, the Government is 1) Waiving the one-week waiting period for those individuals in imposed quarantine that claim Employment insurance (EI) sickness benefits and 2) Waiving the requirement to provide a medical certificate to access EI sickness benefits.

What is the Emergency Care Benefit for Coronavirus?

It provides up to $900 bi-weekly, for up to 15 weeks. This flat-payment Benefit would be administered through the Canada Revenue Agency (CRA) and provide income support to 1) Workers, including the self-employed, who are quarantined or sick with COVID-19 but do not qualify for EI sickness benefits; 2) Workers, including the self-employed, who are taking care of a family member who is sick with COVID-19, such as an elderly parent, but do not quality for EI sickness benefits; and 3) Parents with children who require care or supervision due to school closures, and are unable to earn employment income, irrespective of whether they qualify for EI or not.

Whether a COVID-19 loss will be covered by insurance will depend on the terms and conditions of the applicable policy, applied to the specific circumstances of the loss.

How do I apply for the Coronavirus Emergency Care Benefit?

Application for the Benefit will be available in April 2020 and require Canadians to attest that they meet the eligibility requirements. They will need to re-attest every two weeks to reconfirm their eligibility. You can apply for the Benefit by 1) Accessing it on their CRA MyAccount secure portal; 2) accessing it from their secure My Service Canada Account; or 3) calling a toll-free number equipped with an automated application process.

What is the one-time special GSTC payment?

The Government is proposing to provide a one-time special payment by early May 2020 through the Goods and Services Tax credit (GSTC). This will double the maximum annual GSTC payment amounts for the 2019-2020 benefit year. The average boost to income for those benefitting from this measure will be close to $400 for single individuals and close to $600 for couples.

Will there be an increase to Canada Child Benefit (CCB) during the Coronavirus pandemic?

The Government is also proposing to increase the maximum annual Canada Child Benefit (CCB) payment amounts, only for the 2019-2020 benefit year, by $300 per child. The overall increase for families receiving CCB will be approximately $550 on average; these families will receive an extra $300 per child as part of their May payment.

Is there any relief for student loans during the COVID-19 pandemic?

The government will be placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.

Is there any relief for withdrawal from registered accounts because of the Coronavirus?

The government will be reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020. Similar rules would apply to individuals receiving variable benefit payments under a defend contribution Registered Pension Plan.

Are there any extension provided to filing deadlines due to COVID-19?

For individuals (other than trusts), the return fling due date will be deferred until June 1, 2020.

For trusts having a taxation year ending on December 31, 2019, the return fling due date will be deferred until May 1, 2020.

Is there any Interest/Penalty relief for Individual tax balances?

The CRA will allow all taxpayers to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020. This relief would apply to tax balances due, as well as installments, under Part I of the Income Tax Act. No interest or penalties will accumulate on these amounts during this period.

Are there any measures for tax preparers and accountants?

Effective immediately, the CRA will recognize electronic signatures as having met the signature requirements of the Income Tax Act. This provision applies to authorization forms T183 or T183CORP.

Is there any relief with regard to Mortgages?

Canada’s large banks have confirmed that support will include up to a 6- month payment deferral for mortgages, and the opportunity for relief on other credit products, on a case-by-case basis.

The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers offer help, such as payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses, and special payment arrangements.

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

Is there any support/relief for small businesses?

The government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees’ remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.

The Canada Revenue Agency will allow all businesses to defer, until after August 31, 2020, the payment of any income tax amounts that become owing on or after today and before September 2020.

The Canada Revenue Agency will not contact any small or medium (SME) businesses to initiate any post assessment GST/HST or Income Tax audits for the next four weeks. For most businesses, the Canada Revenue Agency will temporarily suspend audit interaction with taxpayers and representatives.

– Baber Rahim, JD Candidate and Tax Law Clerk

© Kalfa Law 2019

The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.

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