COVID-19 Developments and Legal Updates

Brent McCumber, P.Eng.

On March 18, 2020, the Government of Canada announced a significant economic response plan to mitigate the economic impact of COVID-19 on Canadians and businesses.  While this $82 billion plan contains many important measures, in this article we will highlight some of the relief this response plan provides to taxpayers.  In particular, certain tax filing deadlines and tax payment deadlines have been deferred and certain audit activities by the Canada Revenue Agency (“CRA”) have been suspended.

With respect to tax filing deadlines, filing due dates for 2019 income tax returns for individuals and certain trusts have been deferred as follows:

• For individuals, the return filing due date will be deferred until June 1, 2020.
• For trusts having a taxation year ending on December 31, 2019, the return filing due date will be deferred until May 1, 2020.

With respect to tax payment deadlines, the CRA will allow all taxpayers (including businesses) to defer payment of certain income tax amounts (i.e. tax balances due and instalments owing under Part I of the Income Tax Act) that become owing on or after March 18, 2020 and before September 2020.  It is unclear when payment on these amounts will be required, as the Government merely indicated that it will be “after August 31, 2020”.  As a further measure of relief, the Government has indicated that interest and penalties will not accumulate on these amounts during this “period”.  It is unclear whether this “period” will encompass the time from March 18, 2020 until August 31, 2020 or from March 18, 2020 until the ultimate due date(s) after August 31, 2020.  We emphasize that this deferral only applies to payments of Part I taxes and the interest and penalties on such amounts.  For example, payroll remittances and non-resident withholdings do not benefit from this relief.

With respect to audit activities, the CRA will not contact “small or medium businesses” to initiate certain GST/HST or income tax audits for the next four weeks.  Further, the CRA will temporarily suspend audit interaction with taxpayers and representatives for the “vast majority of businesses”.  While it is unclear what constitutes a “small or medium business” or the “vast majority of businesses”, it is clear that the CRA will be curtailing its audit activities.

This response plan also provides that the CRA will temporarily recognize electronic signatures on certain documents authorizing tax preparers to file returns on behalf of taxpayers.  This is a sensible administrative concession that will help limit in-person meetings between taxpayers and their tax preparers.  It is unclear how long this administrative concession will be in place.

Despite some uncertainty, these relief measures are welcome.  We will provide further updates as more details on these and other tax-related measures become available.

This article is provided for general information only. If you have any questions about the above, please contact a member of our Tax Group.

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