Category Archives: Analysis

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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Employee Home Office Expenses – Allowances, Reimbursements and Deductibility

With the increase in working at home arrangements due to current events, employers and their employees may have questions about the tax treatment of home office expenses for these employees.

Generally, an employer can compensate an employee for home office expenses by way of an allowance or a reimbursement. An employee can also be given an “accountable” advance which is treated as a reimbursement assuming that the employee can provide itemized receipts and the balance is returned to the employer.

If an employee receives an allowance or if he or she pays for the expenses out-of-pocket, then the expenses may be deductible subject to certain requirements discussed below. If an allowance or reimbursement is considered a taxable benefit and not deductible to the employee, the employer can mitigate the cost to the employee by compensating the employee for the additional tax but will have to do so on a “gross up” basis as paying an employee’s tax is also itself a taxable benefit.

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Proposed Tax Measures to Stabilize the Economy During COVID-19 (Canada)

On March 18, 2020, the Canadian government announced economic measures to help stabilize the Canadian economy in response to the COVID-19 pandemic. These measures are intended to provide up to $27 billion in direct support to Canadian workers and businesses. This newsflash will provide a brief summary of the key tax measures that were included with this announcement. Similar measures were announced on March 17, 2020 by the Quebec government. Fasken commentary on the Quebec measures can also be found on our website.

Tax Return Filing Deadlines

With 2019 tax return filing deadlines approaching, the Canada Revenue Agency (“CRA”) will defer the filing due date for the 2019 tax returns of individuals, including certain trusts. For certain individuals (other than trusts), the return filing due date will be deferred from April 30 until June 1, 2020. Self-employed individuals (and their spouses) are unaffected by these measures as the filing due date for 2019 tax returns remains June 15, 2020.

For trusts having a taxation year ending on December 31, 2019, the return filing due date will be extended from March 30, 2020 to May 1, 2020.

Upcoming Income Tax Liabilities

CRA will permit all taxpayers (including businesses) to defer, until after August 31, 2020, the payment of any amounts on account their income tax liabilities that become owing on or after March 18, 2020 and before September, 2020. This relief applies to income tax balances due, as well as instalments on account of such taxes. CRA will not charge interest or penalties on these amounts during this period.

It should be noted that the timing of payment of other Canadian taxes including GST/HST, payroll taxes and non-resident withholding taxes are not deferred.

Suspension of Audit Activity

CRA will not contact any small or medium businesses to initiate any post assessment GST/HST or income tax audits for the next four weeks (ending April 15, 2020) and the CRA will temporarily suspend audit interaction with taxpayers and representatives for the “vast majority of businesses”.

Other Tax Proposals

Unlike the administrative relief described above, some of the measures announced require Parliamentary approval. The Canadian government has proposed to provide a special payment by early May 2020 through the Goods and Services Tax credit (“GSTC”). The proposal is to double the maximum annual GSTC payment amounts for the 2019-20 benefit year. The Minister of Finance (Canada) estimates that the average increase to income for those benefiting from this measure will be approximately $400 for single individuals and nearly $600 for couples.

The Canadian government is also proposing to increase the maximum annual Canada Child Benefit (“CCB”) payment amounts for the 2019-20 benefit year by $300 per child.

Finally, these measures contain a proposal to provide “eligible small employers” a wage subsidy for a period of three months. The announcement states that eligible small employers will include corporations eligible for the small business deduction, as well as non-profit organizations and charities but provides no further specifics. The proposed subsidy is to 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. The announcement does not stipulate when the three month period will begin but provides that eligible businesses will be able to deduct the amount of such subsidy from the income tax withholdings that they would otherwise remit in respect of their employees’ remuneration.

Canada’s prime minister indicated that all of the major political parties in Parliament support these measures and will likely reconvene Parliament to approve them in the coming days.

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Fiscalité & immobilier – les autorités fiscales vérifient minutieusement les transactions immobilières

Suite aux annonces du Budget 2019, l’Agence du Revenu du Canada (« l’ARC ») a lancé un Groupe de travail sur l’immobilier dont la mission est de dissuader le non-respect des règles fiscales dans le marché immobilier. Le gouvernement fédéral a alloué des fonds et des ressources considérables pour examiner les transactions immobilières dans lesquelles les parties n’ont pas respecté les règles de l’art. 

Voici le questionnaire (disponible en anglais seulement) de l’ARC envoyé à des personnes et des sociétés sélectionnées dans le cadre du processus de vérification. Le questionnaire est vaste, contient plus de 35 questions et demande au contribuable de fournir une documentation importante.

Ce programme de vérification des transactions immobilières est spécifiquement ciblé et peut avoir un impact sur :

  • Les promoteurs et développeurs immobiliers en ce qui concerne le respect des taxes de ventes;
  • Les contribuables impliqués dans des activités de flips immobiliers;
  • Les contribuables percevant des commissions dans le secteur immobilier; et
  • Les contribuables qui déclarent la vente d’une résidence principale.

Compte tenu de ce qui précède, il est primordial de structurer et de planifier vos transactions immobilières en conformité avec la législation fiscale en vigueur. Si vous avez reçu une demande d’information similaire, il est recommandé de demander des conseils et des avis juridiques avant de répondre au questionnaire.

Nicolas Simard possède une vaste expérience en litige fiscal de toute nature concernant l’impôt sur le revenu, les taxes à la consommation ainsi que les divulgations volontaires. Il peut être joint au 514-397-5288.


David H. Benarroch est spécialisé dans de nombreux domaines de la fiscalité, notamment le contentieux fiscal, la conformité fiscale et la planification fiscale.

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Tax and Real Estate – Tax Authorities Scrutinizing Real Estate Transactions

Following the Budget 2019 announcements, the Canada Revenue Agency (“CRA”) launched a Real Estate Task Force whose mission is to deter tax non-compliance in the real estate market.

 The federal government has allocated significant funds and resources to scrutinize real estate transactions in which parties have failed to comply with the appropriate regulations.

Here you will find a CRA questionnaire sent to selected individuals and corporations as part of the audit process. The questionnaire is broad, contains over 35 questions and requests significant documentation.

This real estate audit program is specifically aimed and can impact:

  • Promoters and developers for sales tax compliance;
  • Taxpayers involved in property flipping activities;
  • Taxpayers earning commissions in the real estate sector; and
  • Taxpayers reporting the sale of a principal residence.

In light of the foregoing, structuring and planning real estate transactions while ensuring tax compliance is of primary importance. If you have received a similar information requests, seeking legal guidance and advice is recommended before answering the questionnaire.

Nicolas Simard has extensive experience in every kind of tax litigation concerning income tax, consumption taxes and voluntary disclosure. He may be reached at 514-397-5288.


David H. Benarroch specializes in many areas of tax, including tax litigation, tax compliance and tax planning.

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