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COVID-19 tax updates: More information on deadline extensions and relief

The Canada Revenue Agency (CRA) announced additional tax deadline extensions and relief from interest and penalties. Learn about these and other developments.

In this update, we highlight the tax deadline extensions and other relief that were announced by the CRA on July 27 (which were posted on July 27 and July 31 on our federal government COVID-19 tax updates page). While the changes were positive, we also received some questions that we have taken up with the CRA.

First, the key changes are as follows:

Payment due dates extended

The CRA has further extended the payment due dates for individuals, corporations and trusts, including instalment payments to September 30, 2020 (from September 1, 2020):

  • For individuals, the extension applies to amounts owing on 2019 returns and instalments otherwise due on June 15 and September 15.
  • For corporations and trusts, the extension applies to amounts owing on tax returns and instalments that otherwise became due on or after March 18 and before September 30, 2020. The extension also applies to taxes under Parts X.2, X.4, X.5, XII.1, XII.3 and XII.5 of the ITA that became due during the same period.
  • For trusts, the extension also applies to the Part XIII remittances associated with income paid or payable to non-resident beneficiaries.

Additional late-filing penalty relief

The CRA is offering further relief from late-filing penalties for individual, corporate and trust income tax returns, although the previously extended filing due dates are unchanged. For individual returns, this means that the date for late-filing penalty relief was extended to September 30, 2020 from September 1, 2020. For trust and corporate returns, the CRA stated that a late-filing penalty will not be assessed as long as the return is filed by September 30 and reference was made to corporate and trust returns for 2019 and 2020. We asked the CRA for clarification as that would potentially bring in returns that were due before the pandemic started, and we address this below.

Interest relief on existing tax debts

The CRA will also waive arrears interest on existing tax debts related to individual, corporation, and trust income tax returns from April 1, 2020 to September 30, 2020, and for Goods and Services Tax/Harmonized Sales Tax (GST/HST) returns from April 1, 2020 to June 30, 2020. This relief seems to apply to both current-year and prior-year debts. Similar relief was provided for amounts owing under Part X.2 – Tax in Respect of Registered Investments, Part X.4 – Tax in Respect of Overpayments to Registered Education Savings Plans, Part X.5 – Payments Under Registered Education Savings Plans, Part XII.1 – Tax on Carved-Out Income, Part XII.3 – Tax on Investment Income of Life Insurers and Part XII.5 - Recovery of Labour-Sponsored Funds Tax Credit of the ITA.

With this combination of waivers and extensions, there are some inconsistencies and uncertainties between the CRA’s news release and its COVID-19 deadlines page. We raised some questions with the CRA and they provided some clarity on many of the issues as follows.

Extended payment deadlines

When will interest begin to accrue?
The CRA has indicated that interest will begin to accrue on amounts owing on October 1, 2020. This includes amounts owing from assessments made after September 30, 2020.

Does the payment extension include all tax balances due?
At one point, the payment extension did not apply to taxes beyond Part I (e.g., Part IV for a corporation). The CRA has updated its website to confirm that the extension now applies to all amounts owing that are incorporated in:

  • individual, corporate, and trust income tax returns
  • Parts X.2, X.4, X.5, XII.1, XII.3 and XII.5 of the ITA
  • Part XIII tax on trust income payable to non-resident beneficiaries 

Late-filing penalties

If a return eligible for relief is filed by September 30, 2020 but there is still a balance owing, will a late-filing penalty apply?
The CRA confirmed to us that late-filing penalties will not apply as long as a return eligible for the relief announced on July 27, 2020 is filed by September 30, 2020. For returns filed after September 30, 2020, the late-filing penalty will be applied as though September 30, 2020 was the effective due date for the return (i.e. when calculating the number of months or days late). 

Is the July 27, 2020 announcement retroactive?
The CRA announced that they “will not charge late-filing penalties where a 2019 individual return or a 2019 or 2020 corporation, or trust return is filed late as long as it is filed by September 30, 2020.” However, it was unclear whether this announcement included all 2019 corporate and trust tax returns. The CRA confirmed to us that the relief is more restricted – it applies to returns otherwise due on or after March 18, 2020, and before September 30, 2020. We have asked the CRA to update the reference for greater clarity.

Does the extension apply to forms such as T106 and T1135, and any other elections, forms, and schedules that must be filed with the return?
The CRA has indicated to us that where a form or election has a deadline tied to the filing deadline of the corresponding tax return, the September 30, 2020 relief will apply for any penalty associated with late-filing that form or election. They later updated the tax deadline page to state that the relief applies in respect of income tax returns and the associated elections, designations and information returns, such as the Form T1135, that are required to be filed with or on the same day as the return.

What about other forms and schedules not filed with the return?
The CRA told us that other forms and schedules, etc., whose normal deadline is not tied with the tax return are not eligible for the September 30, 2020 relief. 

Interest relief on existing tax debts

How will interest be calculated on tax debts assessed after September 30?
The CRA’s news release states that they are “waiving interest on existing tax debts related to individual, corporate and trust income tax returns from April 1, 2020, to September 30, 2020.” This raised the question of whether this relief applies to amounts assessed after September 30, 2020. For example, assume that an individual made an error in their 2018 tax return and the CRA reassesses it sometime after September 30, 2020. We were told by the CRA that no interest would accrue during the relief period for programs highlighted in the release regardless of when the assessment is completed.

Issues for section 216 returns

Has the CRA also extended the timeframe for section 216 undertakings?
The short answer is no. As we discussed in more detail in our July 15 blog post, the CRA administratively extended the timeframe for the undertaking made when a form NR6 is filed, both for corporations and individuals. The CRA confirmed with us that a further extension is not planned. On balances owing for current year returns, the CRA states on their tax deadline page that interest will not be applied if payments are made by September 30, 2020.

We have encouraged the CRA to update their tax deadline webpage to reflect the information they provided to us.

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NOTE: The commentary function of this page has been temporarily closed. Unfortunately, because of the volume of feedback regarding recently announced COVID-19 tax measures, we do not have the capacity to respond to individual inquiries. We strongly encourage you to visit our Federal Government COVID-19 Tax Updates page for information.