Tax Measures Under Canada’s COVID-19 Economic Response Plan

The new CERS operates similarly to the CEWS, whereby the subsidy amount is considered an overpayment of tax by the business. This results in a reduction of tax payable for the company or triggers a tax refund.

Furthermore, the new Lockdown Support, which provides an additional 25% through the CERS for qualifying organizations that are subject to a lockdown and must shut their doors or significantly limit their activities under a public health order issued under the laws of Canada, a province or territory (including orders made by a municipality or regional health authority under one of those laws). Combined, this would mean that certain businesses subject to a lockdown could receive rent support of up to 90 per cent.

The CRA launched the online CERS tools, guidance and application portal[25] on November 23, 2020. First payments were expected to be generated as early as December 1, 2020.

Curtailment of Audit and Reassessment Activity

The CRA has issued the following relief measures:

  • Reassessment: The normal reassessment period described in subsection 152(3.1) of the ITA and the assessment period described in section 298 of the Excise Tax Act (“ETA”) are extended pursuant to the Time Limits and Other Periods Act (COVID-19). Certain time limits that would otherwise expire between March 13, 2020, and December 30, 2020, and time limits which would otherwise expire between May 20, 2020, and December 30, 2020, are extended by six months or until December 31, 2020, whichever comes first. The Ministerial order regarding the extension of ITA provisions can be found here and the Ministerial order regarding the extension of ETA provisions can be found here. [26][27]
  • Collections: Starting in September[28], collections officers will begin contacting individuals and businesses with a balance owing to discuss and re-evaluate their financial situation. The officer may request payment of the debt, or offer a payment arrangement where possible.
  • Audits: The CRA has expressed that it is resuming a full range of audit work and is adapting its practices to reflect the health and economic impacts of COVID-19. Specifically, the CRA is prioritizing actions that are beneficial to the taxpayer or where taxpayers have indicated there is an urgency to advancing the CRA’s audit. The CRA has also indicated that it is focusing on higher dollar audits first, audits close to completion, and those with a strategic importance to the Government of Canada, provinces and territories, or Canada’s tax treaty partners. In addition, efforts to combat suspected fraud and other criminal activity are advancing. Beginning in September[29], the CRA’s business audits will focus on complex and aggressive tax planning arrangements using partnerships and trusts by sophisticated and high income earners. Audits in the real estate sector aim to combat offensive non-compliance prevalent in Vancouver and Toronto areas. Starting in October[30], medium business audits will resume, except for audits in the GST/HST Special Audits Program, which includes non-profit organization and charities, and MUSH sectors (Municipalities, Universities, Schools and Hospitals).
  • Objections: The CRA has indicated that any objections related to Canadians’ entitlement to benefits and credits have been identified as a critical service which will continue to be delivered during COVID-19 times of hardship and therefore, there should be no delays associated with the processing of these objections. For any other objections filed by individuals and businesses related to other tax matters, the CRA is currently holding these accounts in abeyance. The deadline to make any objection requests due March 18, 2020, or later will be extended until June 30, 2020.
  • Appeals: The Tax Court of Canada (“TCC”) reopened for the transaction of business on July 6, 2020, with the exception of the Hamilton office. Sittings will resume in certain major centres on July, 20, 2020, (see list of cities here[31]), and conference calls may resume earlier. The TCC issued new health and safety guidelines[32] for attending in-person hearings. Hearings scheduled up to December 31, 2020, in cities that are not on the list will be adjourned and rescheduled to dates beyond 2020. The Registry will contact affected parties directly. Parties may have the option of moving their hearing to one of the centres on the list. Where possible, the court will conduct online or teleconference proceedings for case management conferences, status hearings, pre-trial conferences, motions without witnesses, and applications without witnesses. To help alleviate the backlog caused by the Court’s closure a fast-track settlement conference process[33] will be temporarily available. The fast-track settlement conference process will not require parties to have made a written offer of settlement. It is expected that fast-track settlement conferences will be scheduled within 90 days of the parties applying by way of a joint written request with the Court. If the parties fail to settle, the appeal will be put back in the scheduling queue at the same stage as it was prior to the fast-track settlement conference being held. All motion days are suspended for the time being, but parties may also request for their motion to be considered in writing by consent of both parties. Also, the period beginning March 16, 2020, and ending on September 13, 2020, will be excluded from the computation of time under the TCC’s rules, response deadlines to the Registry, and from any Order or Direction of the Court. Parties should add 173 days to the timetable issued by the court before March 16, 2020, by consulting the chart provided by the TCC here[34]. For more information, see the TCC’s Notice to the Public and the Profession, dated June 17, 2020[35], July 6, 2020[36], July 8, 2020[37], and August 14, 2020[38].
  • Appeals to the CPP/EI Appeals Division: The CRA’s dispute resolution and taxpayer relief[39] programs are resuming operations in respect of decisions made by the CRA on pensionability issues under the Canada Pension Plan (“CPP”), and insurability issues under the Employment Insurance Act (“EI Act”). Taxpayers who filed objections or CPP/EI appeals to the Minister, or who applied for relief of penalties and interest, are currently being contacted. CPP/EI rulings will be activated.
  • Requirement to pay (“RTP”): Banks, employers and other third parties do not need to comply or remit on existing RTPs until further notice.
  • Requests for information (“RFI”): Taxpayers who have received a request for information issued prior to March 16, 2020 and due after that date will be contacted where the CRA continues to require the information in the RFI.
  • Transfer pricing documentation: Requests for contemporaneous documents issued before April 1, 2020, with a deadline of March 18, 2020, or later, are deemed to be canceled. These requests will be re-issued at a later date and the requested documents must be submitted within three months of the re-issued request.
  • Scientific research and experimental development (“SR&ED”): New reviews or audits are not being undertaken at this time. Ongoing exams and audits will be finalized as soon as possible to help companies get their credits faster. In general, the CRA does not communicate with small and medium-sized businesses to review SR&ED claims. Taxpayers being audited can contact their auditor by phone or online through My Business Account if they want or need the review of their SR&ED claim to proceed. Applications approved during the current period may be subject to review or audit at a later date to confirm eligibility. The CRA gives priority to objections related to critical programs, which include SR&ED claims. The SR&ED reporting deadlines on or after March 13, 2020, are extended as follows:
    • Corporations: deadlines are extended by six months or to December 31, 2020, whichever comes first.
    • Individuals who operate a sole proprietorship: deadlines are extended by six months to December 15, 2020, for those with a December 31, 2018, tax year-end and who had a SR&ED reporting deadline of June 15, 2020.
    • Trusts: deadlines are extended by six months or to December 31, 2020, whichever comes first.

    [40]

  • Film and media tax credits: The Canadian film or video production tax credit program will not undertake any new audits. Ongoing audits will be completed as soon as possible to help businesses receive their credits faster. Applications approved during the current period may be subject to review or audit later.

Once the crisis has subsided, there will be a significant backlog for the CRA to deal with, and considerable delays for the foreseeable future.

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