2020 Federal Fall Economic Update

December 3, 2020

The federal government recently announced some tax changes at their Fall Economic Statement. We have summarized some of the most important items below:

COVID-19 Support
  • The government has provided details on period 11 to 13  (covering December 20, 2020 to March 13, 2021) of the Canada Emergency Wage Subsidy (CEWS) including:
    • The calculation of the base subsidy will remain 80% of the revenue decline to a maximum subsidy of 40% of qualifying remuneration when the revenue declined 50% or more in the current or prior period.
    • The top up subsidy will increase to 1.75x the revenue decline over 50% to a maximum of 35% of qualifying remuneration when the revenue declined 70% or more in the current or prior period.
    • The total subsidy available when the revenue decline is over 70% in the current or prior period is now 75% of qualifying remuneration for these periods.
    • Provided additional details on support for furloughed employees for period 11 to 13.
CERS Updates
  • The government confirmed that period 4-6 of the Canada Emergency Rent Subsidy (CERS) (same time frame as period 11 to 13 of CEWS) will remain at the same rates for period 1-3 of the CERS (i.e. a maximum subsidy of 65%).
  • The government also confirms its intention to proceed with the proposed change to the rent subsidy, where if you have not paid the amounts due for your eligible expenses yet, you must attest (confirm) that these amounts will be paid within 60 days of receiving your rent subsidy payment.
CEBA Updates

The government has recently provided details on the additional $20,000 Canada Emergency Business Account (CEBA) application and most financial institutions now allow you to apply for this additional amount.

The following should be noted with respect to this additional loan:
 
  • The deadline to apply for a Canada Emergency Business Account (CEBA) loan has been extended to March 31, 2021.
  • No further details have been provided in respect of the new $20,000 CEBA Loan (in addition to the $40,000 original CEBA Loan).
  • This additional $20,000 loan will allow $10,000 to be forgivable if certain criteria are met. Therefore, a total of $60,000 of loans will be provided under this program with $20,000 being forgivable. 
  • If the outstanding principal, other than the amount of potential debt forgiveness, is repaid by December 31, 2022, the remaining principal amount will be forgiven, provided that no default under the loan has occurred.
  • The criteria to apply for the $20,000 loan is generally the same as the criteria to apply for the $40,000 loan.
  • You can apply at your financial institution for the additional $20,000 loan if you already applied for the $40,000 loan or you can apply for just the $60,000 loan if you have not applied for the $40,000 loan.
  • If you have already received the $40,000 loan and repaid the loan, you can still apply for the $20,000 loan.
  • As of October 26, 2020, eligibility for CEBA expanded by removing the previous March 1, 2020 condition for having an active business chequing/operating account. With this removal, eligible businesses can now apply after opening a business chequing/operating account with their primary financial institution. 
  • The forgivable portion is required to be included in taxable income at the time the loan is received, regardless of whether or not the loan will be forgiven.
  • All applications for the CEBA loans are due March 31, 2021.
Additional details about this $20,000 expansion can be found here https://ceba-cuec.ca/

To apply for the additional $20,000 loan or the new $60,000 loan if you have not applied previously, please visit your financial institution's website.
 
Highly Affected Sectors Credit Availability Program (HASCAP)
  • The government is proposing to create a new program for the hardest hit businesses, including those in sectors, like tourism and hospitality, hotels, arts and entertainment. This stream will offer 100 percent government-guaranteed financing for heavily impacted businesses, and provide low-interest loans of up to $1 million over extended terms, up to ten years. Details coming soon.

Other Tax Changes
  • Changes to the taxation of employee stock options to limit the amount that would qualify for ½ stock option deduction that allows stock option benefits to be taxed like capital gains to the first $200,000 of employee stock options that may vest in an employee in a calendar year. The Government is proposing that these new rules would apply for employee stock options granted after June 2021. These rules would generally not apply to Canadian controlled private corporations.
  • The government 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 form from their employers. Further detail will be communicated by the CRA in the coming weeks.
Sales Tax Changes
  • GST/HST Relief on Face Masks and Face Shields - the Government proposes to temporarily relieve (i.e., zero rate) supplies of certain face masks and face shields from the Goods and Services Tax/Harmonized Sales Tax (GST/HST).
  • Introducing GST/HST on Cross-Border Digital Products and Cross-Border Services.
  • Introducing GST/HST on Goods Supplied through Fulfillment Warehouses (“Amazon Tax”).
  • Introducing GST/HST on Platform-based Short-Term Accommodation (“Airbnb Tax”).
There were no proposed changes to federal tax rates, including capital gain inclusion rates or taxation of corporate surplus at capital gains tax rates.

More details on the above tax changes can be found here - https://www.budget.gc.ca/fes-eea/2020/report-rapport/anx4-en.html#overview

Please reach out to your Roth Mosey contact to determine how this new legislation will impact you. We are here to help! 
 

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