On November 30, the Minister of Finance released Fall Economic Statement 2020 which contains numerous proposals, including announcements to extend some of the current support programs, funding for specific industries and for specific sectors of the workforce, and some proposed changes to the Income Tax Act and Excise Tax Act. Below are highlights of some of these proposals:
Canada Emergency Wage Subsidy (“CEWS”)
- Increase the maximum subsidy rate to 75 per cent for the period beginning December 20, 2020 and to extend this rate until March 13, 2021, to provide greater certainty to employers. More information on the CEWS program can be found at this link.
Canada Emergency Rent Subsidy (“CERS”) and Lockdown Support
- Extend the current subsidy rates of the Canada Emergency Rent Subsidy for an additional three periods. This means a base subsidy rate of up to 65 per cent will be available on eligible expenses until March 13, 2021. More information on the CERS program can be found at this link.
- Extend the rate of 25 per cent for the Lockdown Support for an additional three periods, until March 13, 2021. More information on the Lockdown Support program can be found at this link.
Canada Emergency Business Account (“CEBA”)
- Extend the deadline to apply for a CEBA loan to March 31, 2021. More information on CEBA can be found at this link.
Canada Child Benefit (“CCB”)
- Provide immediate support for families with young children in the form of an increased CCB for 2021, four payments of:
- $300 per child under the age of six to families entitled to the CCB with family net income equal to or less than $120,000, and
- $150 per child under the age of six to families entitled to the CCB with family net income above $120,000.
Canada Student Loans and Canada Apprentice Loans
- Eliminate interest on the repayment of the federal portion of Canada Student Loans and Canada Apprentice Loans for 2021-22.
Employee Stock Options
Effective July 1, 2021:
- a $200,000 annual limit will apply on employee stock option grants that can qualify for the employee stock option deduction. This limit will be based on the fair market value of the shares underlying the options, at the time the options are granted.
- employee stock options granted by Canadian-controlled private corporations (“CCPCs”) will not be subject to the new limit.
- emerging or scale-up companies, non-CCPC employers with annual gross revenues of $500 million or less will also not be subject to the new limit.
Office in Home Expenses
- To simplify the process for the home office expense deduction for both taxpayers and businesses, the CRA will allow employees working from home in 2020 due to COVID-19 with modest expenses to claim up to $400, based on the amount of time working from home, without the need to track detailed expenses, and will generally not request that people provide a signed form from their employers. This measure will help taxpayer’s access deductions they are entitled to receive and simplify the tax filing process.
- Ensure corporations in all sectors, including digital corporations, pay their share of taxes in respect of their activity in Canada. Propose to implement a tax on corporations providing digital services, effective January 1, 2022.
General Anti-Avoidance Rule (“GAAR”)
- Launch consultations in the coming months on the modernization of Canada’s anti-avoidance rules, in particular the General Anti-Avoidance Rule. The government has stated it is essential to the integrity of the tax system that our anti-avoidance rules be updated so they are sufficiently robust for tax authorities and courts to address this sophisticated and aggressive tax planning.
GST in Relation to E-commerce supplies
Effective July 1, 2021:
- foreign-based vendors selling digital products or services to consumers in Canada be required to register for, collect and remit the GST/HST on their taxable sales to Canadian consumers.
- apply the GST/HST on all sales to Canadians of goods that are located in Canadian fulfillment warehouses. Under this proposal, the GST/HST will be required to be collected and remitted by either the foreign-based vendor or the digital platform that facilitates the sale.
- apply the GST/HST to all platform-based short-term rental accommodation supplied in Canada. Under this proposal, the GST/HST will be required to be collected and remitted – by either the property owner, or the digital accommodation platform – on short-term accommodation that is supplied in Canada through a digital accommodation platform.
Canada Revenue Agency (“CRA”)
- Propose an additional $606 million over 5 years, starting in 2021-22, to allow the CRA to fund new initiatives and extend existing programs targeting international tax evasion and aggressive tax avoidance. Specifically, the CRA will hire additional offshore-focused auditors to focus on individuals who avoid taxes by hiding income and assets offshore, enhance the audit function targeting higher-risk tax filings, including those of high-net worth individuals, and strengthen its ability to fight tax crimes such as money laundering and terrorist financing by upgrading tools and increasing international cooperation.
- To help make the housing market more secure and affordable for Canadians, the government stated it is committed to ensuring that foreign, non-resident owners, who simply use Canada as a place to passively store their wealth in housing, pay their fair share. The government will take steps over the coming year to implement a national, tax-based measure targeting the unproductive use of domestic housing that is owned by non-resident, non-Canadians, which removes these assets from the domestic housing supply.
In addition to the above proposals, the government announced it is examining new ways to use the tax system to address the rise of extreme wealth inequality.
Select Funding Support Measures
Highly Affected Sectors
- Create the Highly Affected Sectors Credit Availability Program (“HASCAP”) – a new program for the hardest hit businesses, including those in sectors, like tourism and hospitality, hotels, arts and entertainment. This stream will offer 100 percent government-guaranteed financing for heavily impacted businesses, and provide low-interest loans of up to $1 million over extended terms, up to ten years.
Regional Relief and Recovery Fund
- To better ensure the Regional Relief and Recovery Fund can continue to support small businesses unable to access other federal pandemic support programs, proposing a top-up of up to $500 million, on a cash basis, to Regional Development Agencies and the Community Futures Network of Canada, bringing total funding to over $2.0 billion in this fund.
- Proposing to provide up to $3 million to the Canadian Northern Economic Development Agency for foundational economic development projects that will support small businesses in Canada’s Territories.
- To better tailor support to businesses in Western Canada, in recognition of its diverse regional economies, proposing to introduce a new approach to regional development in the West by creating separate regional development agencies for British Columbia and the Prairies, adding a new, seventh Regional Development Agency in British Columbia.
Tourism and Hospitality
- The government will earmark a minimum of 25 per cent of all the Regional Relief and Recovery Fund’s resources to support local tourism businesses, providing more than $500 million in program support through June 2021.
Workers in Live Events and Arts Sector
- To support the planning and presentation of COVID-19-safe events and the arts — including both live and digital — and to provide work opportunities in these sectors, the government will provide $181.5 million in 2021-22 to the Department of Canadian Heritage and the Canada Council for the Arts to expand their funding programs.
- Provide additional COVID-19 relief to local television and radio stations by supporting the waiving of broadcasting Part II licence fees in 2020-21, which are collected annually by the Canadian Radio-television and Telecommunications Commission. Waiving these fees will provide up to $50 million in relief to these companies.
- To support regional air transportation, including regional air carriers, propose to provide up to $206 million over two years, starting in 2020-21, to the Regional Development Agencies for a new Regional Air Transportation Initiative.
- To support small and regional airports in making critical investments in health and safety infrastructure, propose to provide additional funding of $186 million over two years, starting in 2021-22, for the Airports Capital Assistance Program (ACAP). Small federally-owned airports, which are not currently eligible for ACAP, would also be eligible to access the program for 2021-22 and 2022-23.
- To support large airports in making critical investments in safety, security and transit infrastructure, propose to provide $500 million over six years, starting in 2020-21, to establish a new transfer payment program. Transit projects at large airports, such as the new Réseau express métropolitain station at the Montreal Airport, will be eligible for funding. The government will consider supporting further airport investments to help address the health, safety and economic impacts of COVID-19.
- To continue supporting the operations of Canada’s major airports, the government proposes to extend $229 million in additional rent relief to the 21 airport authorities that pay rent to the federal government, with comparable treatment for Ports Toronto, which operates Billy Bishop Toronto City Airport. This support to airports would be made up of repayable and non-repayable rent relief, with non-repayable support costing $29 million over 4 years, starting 2020-21. Rent relief would be provided as follows:
- Waiving rent payments for small airports (i.e., those with passenger volumes of less than one million passengers in 2019) for 2021, 2022 and 2023;
- Waiving rent payments for medium airports (i.e., those with passenger volumes between one million and ten million in 2019) for 2021; and,
- Deferring rent payments for the largest airports for 2021, with repayment to occur over ten years, starting in 2024.
- To further assist airports to manage the financial implications of reduced air travel, the government proposes to provide $65 million in additional financial support to airport authorities in 2021-22.
- To ensure that innovative, intellectual property-rich firms have the support they need to face the challenges presented by COVID-19, propose that $250 million over 5 years, beginning in 2021-22, be provided to the Strategic Innovation Fund.
Gender Equality and Diversity
- To further bolster training supports for those hardest hit by the pandemic, including marginalized and racialized women, Indigenous Peoples, persons with disabilities and recent newcomers to Canada, the government proposes to invest an additional $274.2 million over 2 years, starting in 2021-22. This funding will support the Indigenous Skills and Employment Training Program, the Foreign Credential Recognition Program, the Opportunities Fund for Persons with Disabilities, and the Women’s Employment Readiness Canada pilot project.
Early Childhood Educator Workforce
- Proposing to provide $420 million in 2021-22 for provinces and territories to support attraction and retention of early childhood educators.
Canada Summer Jobs and Youth Employment
- To help young people develop stronger connections to the job market, and to support employers through a period of economic recovery, the government intends to support up to 120,000 job placements through Canada Summer Jobs in 2021-22 – an increase of 40,000 from 2020-21 levels. To this end, the government proposes to provide approximately $447.5 million in new investments in the program next year.
- To help young people gain the skills and experience needed to find and keep quality work, the government proposes to invest $575.3 million over the next two years in the Youth Employment and Skills Strategy to provide approximately 45,300 job placements for young people.
- To scale up and expand existing supports for the labour market integration of skilled newcomers with a focus on in-demand sectors, such as health, IT, and skilled trades, the government proposes to invest $15 million in 2021-22 in the Foreign Credential Recognition Program. Up to 15,000 skilled newcomers are expected to benefit from this investment.
Home Energy Retrofits
- Proposing to provide $2.6 billion over 7 years, starting in 2020-21, to Natural Resources Canada to help homeowners improve their home energy efficiency by providing up to 700,000 grants of up to $5,000 to help homeowners make energy-efficient improvements to their homes, up to one million free EnerGuide energy assessments, and support to recruit and train EnerGuide energy auditors to meet increased demand.