COVID-19 Tax Updates: More Information on Deadline Extension and Relief
The Canada Revenue Agency (CRA) announced additional tax deadline extensions and relief from interest and penalties. In this update, we highlight the extension of the tax deadline and other relief announced on 21 December by the CRA. While the changes were positive, we also received some questions that we have taken up with the CRA.
The Alternative Rule Announced for Automobile Standby Charges
Earlier many individuals were facing higher standby charge benefits due to the pandemic. Now to address this, the government has planned to allow employees to use their 2019 automobile usage to determine whether they use the automobile primarily for business purposes to access the reduced standby charge in 2020 and 2021. This is the latest update and it came on 21 December 2020.
CRA Releases Details on T2200, Home office Deductions, and Employment Benefits
The CRA posted details on a variety of job-related issues on 15 December, including work from home expenditures, T2200 form, and employment benefits.
Home Office Expenses/T2200
The release of additional details on the T2200 and home office expenses will simplify the rules for employees and their employers. The release included helpful tools, including a detailed calculator, instructions, and forms, as well as a revamped T777S form.
Below are a few highlights of it:-
- It is said that employees can easily claim a home office expense deduction if they have worked from home for more than 4 consecutive weeks in 2020 due to the COVID-19 pandemic.
- Employees can do a thorough calculation when they qualify or they can use a temporary flat rate process. If they are using the flat rate approach, then no T2200 is needed. If they do a thorough calculation, however, they will have to receive from their employer a standard T2200 form or a shortened pandemic variant of the form (Form T2200S).
- Under the flat-rate method, you are eligible to claim $2 per day for your everyday work at home. You can get this up to 200 days which means you are eligible for $400.
The CRA has also announced that the cost of internet access is eligible, but only if a comprehensive approach to measurement is used. The CRA seems to expect this expense to be prorated on the same basis as power and heat utilities.
Reminder on The Tax Treatment of CEBA Loans
With the opening of the expanded CEBA program, we want to remind members that the forgivable portion of CEBA loans is taxed in the taxation year in which the loan was received.
An additional $20,000 can be advanced under the CEBA program extension, of which $10,000 is potentially forgivable. With the end of the year fast approaching, it may make sense, if possible, to ensure that the additional loan amount is received in early January rather than December.
Federal Government Releases Fall Economic Statement
The Government of Canada issued the 2020 Fall Economic Statement, Helping Canadians and Battling COVID-19 on November 30, 2020. The primary tax and the relevant amendments include the following:
- Canada Emergency Wage Subsidy (CEWS) rate increased
Because of the second wave of the pandemic, the government is proposing to increase the CEWS maximum rate to 75% by 13 March 2021 for the period starting on 20 December 2020.
- Canada Emergency Rent Subsidy (CERS) rates maintained
For an additional three periods, from 20 December 2020 to 13 March 2021, the government is proposing to retain the current CERS prices. At the same time, the Lockdown Support rate will also be held at 25%.
- GST/HST on digital and other supplies made by non-residents
The government proposes that international vendors offering digital goods or services to Canadian consumers are required to register, receive, and remit GST/HST on their taxable sales to Canadian consumers to level the playing field. GST/HST may also be subject to other transactions involving non-resident suppliers. These amendments are effective on 1 July 2021.
- Digital Services Tax update
The government has proposed a tax, effective January 1, 2022, on companies offering digital services. Further info will be released in the 2021 budget. The tax would apply until an acceptable multilateral approach to tax digital profits comes into effect.
- Canada Emergency Business Account (CEBA) deadline extended
The previously announced CEBA enhancements will continue and the deadline for applications for a CEBA loan has been extended to 31 March 2021.
CRA updates to CEWS FAQs
The CRA updated its FAQ page on the Canada Emergency Wage Subsidy on November 23 (CEWS). Many of the updates relate to amendments proposed in Bill C-9, but on some key topics, CRA offers fresh guidance. The following are some of the highlights of the new update:
- Amending or revoking an election
The CRA confirms that, if the election is made and the claim is amended on or before the due date for filing the CEWS application for that claim period, a qualified employer may change or revoke the election. In the case of elections that extend to multiple claim periods, an adjustment or revocation must be made before the due date of the application for the first claim period for which the election is held.
- Bonuses and commissions
CRA confirms that bonuses and commissions will usually be considered eligible remuneration, but to calculate CEWS, only eligible remuneration paid by an employer to an employee for a week in a claim period is included, which means that manual prorations may be required for bonuses and precise determinations may be required for commissions.
- Interest relief on existing tax debts
The CRA’s news release states that from April 1, 2020, to September 30, 2020, they are “waiving interest on existing tax debts related to individual, corporate and trust income tax returns.”
Has the CRA also extended the timeframe for section 216 undertakings?
The answer is no as CRA has not extended the timeframe for section 216 undertakings.
Support for Canadians with disabilities to address challenges from COVID-19
It has been said by the federal government that it will help Canadians with disabilities to address challenges from the COVID-19 pandemic. This aid provides a special one-time, tax-free reimbursement as of June 1, 2020, to persons who are certificate holders of the Disability Tax Credit as follows:
- $600 for Canadians with a valid certificate of Disability Tax Credit
- $300 for Canadians with a valid certificate of Disability Tax Credit and qualifying for Old Age Security (OAS) pension
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