COVID-19: Administrative Accommodations by the Canada Revenue Agency (“CRA”) with respect to International Tax Matters

In light of the COVID-19 crisis and the travel restrictions implemented by Canada and many other jurisdictions as well as by businesses (the “Travel Restrictions”), the CRA has temporarily relaxed the way it administers certain rules and requirements contained in the Income Tax Act (Canada) (“ITA”) to account for the “forced” and involuntary presence of many non-residents in Canada for an extended period of time. As no one knows how long these Travel Restrictions will remain in effect, the guidelines described below, which apply from March 16, 2020 to June 29, 2020, may be extended by the CRA if necessary.

Deemed Residence: 183-Day Rule

For an individual, being subject to Canadian tax depends on his or her tax residence, which remains essentially a question of fact determined according to connecting factors established in common law. On the other hand, and subject to any applicable tax treaty, a non-resident who, in a calendar year, remains in Canada for more than 183 days is deemed to be a Canadian tax resident for the entire year and as such, becomes subject to Canadian tax on his worldwide source of income.

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COVID-19 : Assouplissements administratifs de la part de l’Agence du revenu du Canada (« ARC ») en matière de fiscalité internationale

Compte tenu de la crise de la COVID-19 et des interruptions de déplacement décrétées par le Canada et d’autres juridictions ainsi que par les entreprises (les « restrictions de voyage »), l’ARC a assoupli de façon temporaire sa façon d’administrer certains critères d’assujettissement contenus dans la Loi de l’impôt sur le revenu (Canada) (« LIR ») pour tenir compte de la présence « forcée » et involontaire de plusieurs non-résidents au Canada pendant une période prolongée. Personne ne sait combien de temps resteront en vigueur ces restrictions de voyage et les directives décrites ci-dessous, qui s’appliquent du 16 mars au 29 juin 2020, pourraient être prolongées par l’ARC au besoin.

Résidence réputée : règle des 183 jours

L’assujettissement d’un individu à l’impôt canadien est fonction de sa résidence fiscale, situation qui demeure essentiellement une question de fait tranchée selon des critères de rattachement établis par la common law. Par contre, et sous réserve de toute convention fiscale applicable, un non-résident qui, dans une année civile, séjourne au Canada plus de 183 jours est réputé être un résident fiscal canadien pour l’année entière et il devient donc assujetti à l’impôt canadien sur son revenu de source mondiale.

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Work From Home Tax Relief – $500 Non-Taxable Reimbursement for Personal Computer Equipment

On April 22, 2020, the Canada Revenue Agency (“CRA”) indicated that it would allow special favorable tax treatment to employees working from home during the COVID-19 crisis.[1]  

In particular, the CRA will accept that the reimbursement of an employee, for amounts spent on personal computer equipment to enable the employee to work from home, mainly benefits the employer. As a result, the reimbursed amount will not be a taxable benefit to the employee.  This relief is to apply for amounts up to $500 and only in respect of amounts for which the employee provides receipts.

In the normal course, an employer can provide an employee with an allowance for home office expenses, which is a taxable benefit for the employee.[2]    Alternatively, the employer can decide to reimburse an employee expense upon presentation of an invoice, in which case the reimbursement will be a taxable benefit if it primarily benefits the employee rather than the employer.[3]  Usually if an employee receives a reimbursement for home office equipment, it is characterized as a personal expense, primarily for the employee’s benefit, and therefore a taxable benefit.

The CRA’s announcement does not change the tax consequences for employers.  An employer providing an employee with reimbursements for home office expenses, even certain capital expenses such as the acquisition of tools, will normally be entitled to deduct the full amount of the reimbursements as a business expense, provided the amount is reasonable in the circumstances.[4]


[1]       CRA Views 2020-0845431C6: Taxable benefit – telework / Taxable benefit – Section 6 (1) a), 6 (1) b), April 22, 2020.

[2]       See CRA Interpretation, 2011-0402581I7 — Allowance for workspace in the home, July 12, 2011. See also, CRA, Interpretation Bulletin, IT-352R2 — Employee’s Expenses, Including Work Space in Home Expenses, August 26, 1994.

[3]       See CRA, Tech Interp, 1999-0013955 — Construction and expenses — workspace, February 3, 2000.

[4]       Ibid.

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Canada Revenue Agency Answers Questions About COVID–Related Extensions for GST/HST and Customs Payments

Further to the announcement on March 27, 2020 that GST/HST and Customs Duties payment deadlines would be extended due to the COVID pandemic, the Canada Revenue Agency has provided some additional guidance in the form of a Question and Answer document posted on the Canada Revenue Agency website.

The document deals with the delays granted to payments of tax, but also to questions of the processing of returns, the payment of refunds and the granting of rebates. One of the key things for all taxpayers to remember is that the due dates for the filing of returns has not changed, only the requirement to make payments of tax without incurring interest charges or penalties has changed. Excise taxes and duties are all still due at the ordinary times.

Do not hesitate to contact us if you need further information about the changes to your tax obligations during the COVID Pandemic.

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Recent Canadian and Quebec Tax Measures

During the week of March 23, 2020, the Canadian and Quebec governments announced a series of additional tax measures to further strengthen the economy in the wake of the ongoing COVID-19 pandemic. A number of procedural announcements relating to statutory deadlines and limitation periods have also been made by the Canada Revenue Agency (CRA) and Quebec Revenue Agency (Revenu Québec). A summary of these new measures is provided below. Summaries of previously announced measures may be accessed here (Canada) and here (Quebec).

Federal

Taxation of the Canada Emergency Response Benefit (CERB)

The federal government announced the introduction of the CERB on March 18, 2020. The CERB will provide a taxable benefit of $2,000 a month for up to 4 months to support workers (including self-employed individuals) who lose their income as a result of the COVID-19 pandemic. Following conflicting reports in this regard, the government confirmed on March 27, 2020 that the CERB will be taxable for claimants, but that no income tax withholding will be made on the CERB by the federal government.

Enhanced Temporary Wage Subsidy for Eligible Employers

On March 18, 2020, the federal government announced that a temporary wage subsidy (TWS) would be introduced for eligible employers in an amount equal to 10% of salary and other remuneration paid to Canadian employees. The stated purpose of the TWS is to help Canadians remain employed. It improves the cash flow of eligible employers (which include Canadian-controlled private corporations eligible for the small business deduction, individuals other than trusts, certain partnerships, non-profit organizations and registered charities) by allowing them to deduct the amount of the subsidy from periodic source deduction remittances payable to the CRA over the coming months. The maximum subsidy was initially set at $1,375 per employee, and $25,000 per employer.

On March 27, 2020, Prime Minister Trudeau announced that the amount of the TWS will be increased to 75% (as opposed to 10%) of salary and other remuneration paid to Canadian employees. It remains to be seen whether the maximum subsidy of $1,375 per employee and $25,000 per employer will be increased as well.

Further details in this regard will be provided once they become available.

Postponement of GST/HST Remittances

The federal government is deferring remittances of the following amounts to June 30, 2020:

  • Goods and Services Tax (GST)/Harmonized Sales Tax (HST) owing in respect of the February, March and April 2020 reporting periods, for monthly filers;
  • GST/HST owing in respect of the January 1, 2020 through March 31, 2020 reporting period, for quarterly filers; and
  • GST/HST owing in respect of the previous fiscal year and installments of GST/HST in respect of the current fiscal year, for annual filers whose GST/HST return or installment is due in March, April or May 2020.

This relief measure does not clearly address the situation of certain registrants, such as those who file on a quarterly basis but whose fiscal year-end is not December 31. Such businesses should contact the CRA to confirm whether they benefit from the deferral.   

The proposed measure also does not appear to extend the deadline for filing GST/HST returns.

Directors of corporate taxpayers should bear in mind that they may be held jointly and severally liable to pay any unremitted GST/HST, as well as any interest or penalties relating thereto.

Postponement of Import GST and Customs Duty Payments

The federal government has also announced that it is deferring the payment deadline for import GST and customs duties in respect of March, April and May statements of accounts until June 30, 2020.

Filing Notices of Objection with CRA

On March 28, 2020, the CRA announced that the deadline for filing notices of objection due March 18, 2020 or later would be extended until June 30, 2020.

Tax Court of Canada Procedures

On March 23, 2020, the Tax Court of Canada (TCC) released a Practice Direction and Order announcing that all sittings and conferences calls scheduled between March 16, 2020 and May 1, 2020 inclusively are cancelled and that the Court and its Registry offices will be closed until further notice.

The TCC also announced that it is suspending, from March 16, 2020 to May 1, 2020, the time limits provided for in the Tax Court of Canada Rules and any TCC orders and directions made prior to March 16, 2020.

The statutory deadlines for filing notices of appeal from income tax assessments and reassessments and GST assessments and reassessments continue to apply.  The notices of appeal required to be filed within these statutory deadlines must be filed electronically or by telecopier.  Where no statutory deadline applies, taxpayers are asked to wait and file their notices of appeal once the Court resumes its operations.

Quebec

Postponement of QST Returns and Remittances

In Information Bulletin 2020-5 dated March 27, 2020, the Quebec government announced that it would allow businesses to postpone the filing of Québec Sales Tax (QST) returns and the remittance of QST due between March 27, 2020 (inclusively) and June 30, 2020. As mentioned above, it does not appear that the equivalent federal relief measure extends the filing deadline for GST/HST returns. Given that Quebec taxpayers report GST and QST on the same return, it is not clear whether any substantial relief will be afforded to them from a reporting standpoint. Further information regarding the possible harmonization of the federal and Quebec relief measures is expected in the coming days.

Directors of corporate taxpayers should bear in mind that they may be held jointly and severally liable to pay any unremitted QST, as well as any interest or penalties relating thereto.

Acceleration of Tax Credits and Tax Refunds

In a press release dated March 27, 2020, Revenu Québec announced that it would accelerate the processing of tax credits and tax refunds claimed by businesses. No specific timeline has been announced in this regard.

Filing Corporate Income Tax Returns and Notices of Objection with Revenu Québec

Revenu Québec also announced in the above-mentioned press release that the deadline to take “administrative tax actions” (gestes fiscaux administratifs) will be extended to June 1, 2020.

The press release clarifies that this measure applies to corporate income tax returns that would otherwise be due between March 27 and June 1, 2020. Interest and penalties are therefore not expected to apply during such period in respect of such returns.

No further clarification is provided with respect to other administrative tax actions targeted by this measure. Although it may arguably include the filing of a notice of objection, absent specific legislative action or further clarification from Revenu Québec, it is recommended that taxpayers continue to file such notices by the 90-day statutory deadline to preserve their right to challenge any notice of assessment or reassessment.

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