Businesses across all industries and stages of growth are facing unprecedented challenges during the COVID-19 crisis. In response, the federal and provincial governments in Canada are responding with an unprecedented combination of relief and stimulus programs for businesses aimed at minimizing layoffs, ensuring access to credit and liquidity, and deferring tax payments, among other things. The following is a brief overview of some of the newly announced government-funded programs that may be available to Canadian businesses, along with links to where you can access more information about these programs. As some of these programs have been approved and announced very quickly, their implementation is evolving. Our intention is to update this blog post where new material information becomes available.
Government Responses to COVID-19
Federal and provincial governments, as well as several crown corporations, have responded to the COVID-19 crisis with announcements of various programs to help Canadian businesses survive the economic challenges presented by the social distancing measures now in place across the country. While, as noted, details regarding many of these programs are evolving, we have highlighted key aspects of those programs that we believe are most likely to be of interest to our clients.
1. Wage Subsidies
Businesses and not-for-profits will be eligible for the Canada Emergency Wage Subsidy if their revenues have decreased at least 30% for March, April or May compared to the same month in 2019. The federal government will subsidize up to 75% of employees’ wages up to a total of $58,700 per employee ($847 per week). This is a 12-week program and will be back-dated to March 15. Eligible employers will be able to access the Canada Emergency Wage Subsidy by applying through a Canada Revenue Agency online portal. More details on this program and related matters can be found in our recent blog post here.
The Canada Emergency Wage Subsidy supplements the temporary 10% wage subsidy announced earlier and available to a limited universe of businesses and not-for-profits. Any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.
2. Deferred Taxes, Remittances and Import Duties
GST/HST and Customs Duties: Businesses are now able to defer Goods and Services Tax (GST) and Harmonized Sales Tax (HST) remittances and customs duty payments until June 30, 2020. No penalties or interest will accumulate on these amounts during this period.
Income Tax: Businesses are now able to defer payment of income tax until after August 31, 2020, for any amounts that become owing on or after March 18, 2020 and before September 2020.
BC Provincial Business Taxes: The following are some of the measures the British Columbia government has implemented to assist businesses:
a) Provincial business tax filings and payment deadlines in British Columbia have been extended to September 30, 2020 for:
- Provincial Sales Tax (PST);
- Employer health tax (note that businesses with a payroll of less than $500,000 are already exempt from this tax);
- Municipal and Regional District Tax; and
- Carbon Tax.
b) Commercial properties (i.e. light and major industry and business classes) will have their school property tax cut by 50% for the 2020 tax year, providing relief for businesses that own their own property and for tenants on triple-net leases. For more information see our blog post here.
Alberta Provincial Business Taxes and Remittances: The following are some of the measures the Alberta government has implemented to assist businesses:
a) Corporate income tax payments due between March 18, 2020 and August 31, 2020 can be deferred until August 31, 2020; and
b) Workers Compensation Board premium payments can be deferred until 2021, and for small and medium-sized businesses, the provincial government will cover 50% of premiums due at that time.
3. Business Credit Availability Program
The federal government’s Business Credit Availability Program (the “BCAP”) is a $65 billion program intended to help Canadian businesses access financing during this period of uncertainty. It is delivered through two crown corporations, Export Development Canada (“EDC”) and the Business Development Bank of Canada (“BDC”), working in cooperation with financial institutions. Where the needs of a business exceed the level of support its financial institution is able to provide, the BCAP, which consists of the following programs, will provide support in the form of direct lending and other types of financial support at market rates.
Canada Emergency Business Account: The Canada Emergency Business Account is a $25 billion program to be implemented by eligible financial institutions. Small businesses and not-for-profits that paid between $50,000 to $1 million in total payroll in 2019 will be able to access interest-free loans of up to $40,000. If the balance of the loan is repaid on or before December 31, 2022, 25% of the loan will be forgiven (i.e. up to $10,000). The loans are intended to cover operating costs during a period when revenues are reduced due to the economic impacts of COVID-19.
EDC Loan Guarantee for Small and Medium-sized Enterprises (SMEs): EDC, whose mandate has been expanded to include domestic matters, will guarantee new operating credit and cash flow term loans from financial institutions in amounts up to $6.25 million, with a cap of $20 billion, to allow export sector and domestic SMEs to access more cash immediately.
BDC Co-Lending Program for SMEs: BDC and participating financial institutions will co-lend term loans to SMEs in amounts up to $6.25 million, with commercial interest rates and 10-year repayment periods, also with a cap of $20 billion.
The BCAP is available to credit-worthy businesses with viable business models whose access to financing would otherwise be restricted. While there is no limit on the amount available to a business, the BDC, EDC and participating financial institutions will continue to employ internal risk management practices for granting credit.
Interested businesses should contact their financial institution to apply for any of these loan programs. More information can be found from the federal government here, from EDC here and from BDC here.
NOTE: Due to the rapidly changing legal landscape with respect to COVID-19 and our government’s response to the pandemic, please understand that any blog posts written in the past may not reflect the current applicable government programs.
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