The COVID-19 crisis has presented unexpected challenges and disruptions for small and medium-sized businesses across Canada. Business leaders should take the right tax planning steps and apply for wage subsidies and other government incentives as support options available to help navigate the pandemic
This pandemic has put immense pressure on Canadian businesses across numerous sectors and industries. It is important to pay attention to what the Canadian government is implementing to support small businesses. Support options continue to evolve and develop as the government reacts to the ongoing economic crisis. Staying up to date on these developing activities is an important step in getting through the pandemic.
Tax Planning: It is important that you be proactive and prepare your tax returns early for a better understanding of your current tax situation. The federal government has extended tax return deadlines for filing and paying any amount owing for businesses and individuals. Filing early can provide an additional cash flow opportunity for those that are expecting a tax refund. Taxpayers should take advantage of the extended tax payment deadlines for any balance owing. A tax that becomes owing on or after March 18 has been deferred to September 1 with no accumulating interest or penalties. GST payment and customs duties are also extended to June 30. In times of market turmoil and depressed business valuations, it is important to seek out opportunities that may be available.
It may be an ideal time to consider the tax planning idea of an estate freeze, or if you have already done so an estate re-freeze, to manage your estate and taxes in an effective manner.
Wage: Subsidies The government has created two wage subsidy options for Canadian businesses: the 75% Canada Emergency Wage Subsidy (CEWS) and the 10% Small Business Wage Subsidy (SBWS).
The CEWS is available to eligible employers for up to 12 weeks and is retroactive to March 15, 2020. The subsidy will be available at a rate of 75% of weekly remuneration paid to a maximum of $847 per employee. Your business must see a drop of at least 15% of revenue in March 2020 and 30% for April 2020 and/or May 2020 to qualify for this subsidy.
If your business does not qualify for the CEWS it may still qualify for SBWS, equal to 10% of the remuneration paid during the eligible period up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
Loans and credits: It may be essential that certain business leaders apply for loans and credits for additional cash relief. The Government of Canada has introduced the Business Credit Availability Program (BCAP) which will provide $65 billion in direct lending and other types of financial support through Export Development Canada (EDC) and the Business Development Bank of Canada (BDC).
The Canada Emergency Business Account (CEBA) provides credit for small businesses to pay for immediate operating costs such as payroll, rent, and utilities. It is available to employers with $20,000 to $1.5 million in total payroll in 2019 and operating as of March 1, 2020. CEBA will provide interest-free credit of up to $40,000 to eligible businesses and if you repay the loan by December 31, 2022, 25% (up to $10,000) will be forgiven. If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5% interest. Many provinces across Canada are also offering additional support including loan guarantees, Crown utility bill payment deferrals, province loan payment deferrals, and enhanced small business loan programs.
By Dave Walsh, Tax Service Line Leader, BDO Canada
Dave is the Tax Service Line Leader for BDO Canada, leading the Firm’s Tax Services team. Dave has over 25 years of experience in public practice advising clients across a diverse range of industries in Canada and around the world. Dave is a member of the Executive Leadership Team of BDO Canada and is a member of the Tax Leadership team for the BDO Global network.