Note: The updates listed below are our latest and most relevant news items. To access older stories, please visit our news archives page.
March 29, 2023
2023 Federal Budget
Watch now: 2023 Federal Budget Tax Highlights webinar
Deputy Prime Minister and Minister of Finance Chrystia Freeland tabled this year’s federal budget on March 28, 2023. Watch CPA Canada’s webinar in English and French to better understand the most important tax measures contained in this year’s budget. In addition, don’t forget to download the Tax Highlights document.
Looking for in-depth analysis and insight on current tax issues? Sign up for our tax blog by checking Tax Blog under My Subscriptions in your profile.
March 28, 2023
CRA announces administrative extension for Underused Housing Tax
To provide more time for taxpayers, the Canada Revenue Agency (CRA) has announced that penalties and interest will be waived under the Underused Housing Tax Act for the 2022 calendar year, provided the return is filed and any UHT due is paid by October 31, 2023. For further details, please see CRA’s news release.
CRA publishes Q&As on the Underused Housing Tax
The CRA has recently published a number of questions and answers on the Underused Housing Tax (UHT).
We understand from the CRA that more UHT Q&As will be published soon. We will you keep you updated on this.
March 9, 2023
Update on the Underused Housing Tax (UHT) and the impact on Canadian owners
As discussed in our recent blog, the UHT is intended to apply to underused residential property in Canada owned directly or indirectly and wholly or partly by non-resident, non-Canadians. Under the rules, where there is an excluded owner, the property is not taxable and the owner is not required to file a UHT return. One category of excluded owner are individual Canadian citizens or permanent residents of Canada (“Canadians”) provided that they own the property directly for their own benefit. Unfortunately, the same isn’t true if these Canadians chose to use a corporation, trust or partnership as part of the ownership structure. For example, if a Canadian owns the shares of a corporation that holds residential properties, the corporation must file a UHT return for each property and report the tax exemption that applies for specified Canadian corporations.
In recent weeks, we have received significant feedback from CPAs and others, and it is becoming clear that there will be a very large number of UHT returns that will be required for ownership structures that qualify for the specified Canadian corporation, specified Canadian trust and specified Canadian partnership exemptions. Also, many are raising concerns where there are Canadian co-owners as they must determine whether a partnership exists. If there is a partnership, a UHT return is required.
We have been communicating with the Canada Revenue Agency and passing on UHT questions since last December. In late February, we reached out to the CRA and other federal government officials and recommended that the federal government waive the requirement to file a 2022 UHT return for affected owners who are exempt from UHT due to the exemptions for specified Canadian corporations, specified Canadian partnerships and specified Canadian trusts. That is, these owners would continue to be exempt from the tax for 2022 and will not be subject to a failure to file penalty if a return is not filed.
At the time of writing, we had not received a response to our recommendation.
We will continue to provide updates as new information becomes available.
March 8, 2023
Latest tax blog: CRA e-services – Key updates for tax practitioners
As the CRA continues to enhance its online processes for interacting with taxpayers and practitioners, we’ve collated some of the recent key changes introduced. Read our latest blog to know more
March 7, 2023
New alternative authorization process for sole proprietors
Sole proprietors who may want to use the same representative for both their business and personal taxes may now be eligible to do so without them having to register for the Canada Revenue Agency’s My Business Account and go through the Confirm my Representative process. Under this new alternative authorization process, new business authorization requests for sole proprietors submitted electronically by their representative will be approved automatically if certain conditions are met. These conditions include:
- The business must be a sole proprietorship
- The social insurance number of the sole proprietor is linked to the business account
- The sole proprietor already has the representative authorized on their individual account
- The sole proprietor does not have access to My Business Account to confirm their representative
The request will need to be made through Represent a Client (RAC) or certified tax software (EFILE). If the sole proprietor has access to any of CRA’s portals related to their business, then they will need to go through the confirm my representative process.
If eligible requests are made through RAC, the advisor will need to:
- Log into RAC
- Go to the authorization request section
- Select business
- Provide the requested information including the sole proprietor’s business number
- Send the system generated form to your client for their signature, and upload it within 30 days from the request
- Once the signature page is uploaded, access is generally granted within five business days.
If eligible requests are e-filed through certified tax software, these requests will also be processed without an online taxpayer confirmation if the conditions above are met. For more information on the EFILE process, check with your software vendor.
February 15, 2023
More updates to our Underused Housing Tax (UHT) blog
As noted in our February 8, 2023, news item, the CRA recently published additional UHT Notices (UHTN6 through UHTN11). As such, we’ve updated our UHT blog to provide further information on determining the primary place of residence, as well as continuous occupancy for UHT purposes. We’ve also added a new section that highlights some considerations for partnerships versus co-ownerships.
February 14, 2023
CRA updates Form T1134 Q&As
As noted in our October 26, 2022, news item, the CRA had provided us with their responses to questions we posed to them on the new Form T1134. The CRA has recently updated its Questions and answers about Form T1134 webpage to include these questions and responses.
February 13, 2023
Latest tax blog: 2023 personal tax season – Key changes to consider
As T1 season approaches, it is important to take note of new tax measures and other changes for 2022 personal income tax returns so you can better serve your clients. Read our latest blog to learn more about key considerations for this year’s filing season.
February 8, 2023
Recent CRA updates – Underused Housing Tax
Registration for an Underused Housing Tax (UHT) program account (RU) is now open. For owners who will be required to file a UHT return for 2022 and will need to register for an RU program account, we recommend you do this soon.
In addition, the CRA indicates that beginning March 14, My Business Account users will be able to file the UHT return electronically. For My Account users that are required to file a UHT return, the CRA indicates that electronic filing will be available sometime in March.
Finally, the CRA has released six new UHT notices (UHTN6 through UHTN11) to provide additional information on the tax.
February 3, 2023
Underused Housing Tax (UHT) – Recent updates
The CRA has recently published the Underused Housing Tax Return and Election Form (UHT-2900) on its website. The form instructions contain additional details including how to file the UHT-2900 on paper and how to make UHT payments. We have updated our recent UHT blog with these new details.
It should also be kept in mind that the UHT-2900 requires information on the affected owner and the residential property that may not be readily available. Be sure to review the form sooner rather than later to ensure you have sufficient time to gather all the information that will be required.
January 27, 2023
Tax Identifier Number for the Underused Housing Tax
As you may have read in our latest blog, the new Underused Housing Tax (UHT) is aimed primarily at non-residents of Canada, but others may also be caught. It’s important to understand the rules to ensure you, or your clients, are not subject to the tax, and/or required to file the UHT return.
The CRA indicates on its website that owners subject to the UHT rules must have a valid CRA tax identifier number to file the UHT return. The tax identifier number for individuals is a social insurance number (SIN), or, if the owner does not have a SIN, it is an individual tax number (ITN). Owners who do not already have an ITN must apply for one. We understand that the CRA will expedite the processing of ITN applications that are received for the purposes of filing a UHT return.
For corporations, the tax identifier number is a Canadian business number (BN) with an Underused Housing Tax (RU) program account identifier code. If the owner already has a BN, they will have to register for an RU program account before filing the UHT return. Where the owner does not have a BN, they must apply for one and register for an RU program account before filing. The CRA indicates that registrations for RU program accounts will open online after February 6, 2023.
For property held in trust, please keep in mind that the UHT filing will be done using the tax identifier of the trustee. An existing trust account number cannot be used for UHT filings.
For owners who will be required to file a UHT return for 2022 and will require an ITN, or will need to register for an RU program account, we recommend you do this soon. For further details on this process, please see CRA’s website.
January 25, 2023
Reminder: Enhanced security requirements to CRA’s Represent a Client could impact access
As many firms and practitioners prepare for the upcoming 2023 tax filing busy season, we wanted to remind you of the new security requirements that CRA implemented to Represent a Client (RAC) last fall. See our October 17, 2022, news item for more details. As noted in the item, it is possible that some representatives did not provide certain personal information to the CRA in the past and, starting last fall, their ability to access RAC has been restricted until specific steps were taken.
These changes could impact RAC access, so if you or any of your team members have not yet provided the additional personal information required as part of this security enhancement, we recommend logging in to Represent a Client now to ensure you aren’t held up with the new process in the midst of busy season. This will be particularly important if you bring in temporary personnel who have a RepID during tax season as it may have been some time since they have tried to access RAC.
January 23, 2023
Latest tax blog: Underused Housing Tax (UHT)
The federal government’s new Underused Housing Tax (UHT) will primarily impact non-residents of Canada but may also apply to Canadian owners in some situations. For example, where a residential property is held in trust for Canadian resident beneficiaries, there may be a requirement to file a return even though no non-residents have an interest in the property and no tax is payable after applying an exemption. The penalty for not filing a return can be significant. Read our latest blog post to know more about the requirements and exemptions applicable to the UHT.
January 12, 2023
CRA responds to questions from CPAs across Canada
During 2022, CPAs across the country were canvassed to pose the top questions they have for the CRA. View the CRA’s responses to these questions.
January 4, 2023
Year-end Finance Canada and CRA announcements – in case you missed it
Finance Canada and the Canada Revenue Agency (CRA) announced several updates as 2022 came to a close, including the following:
- 2023 Automobile Deduction Limits and Benefit Rates – Due to inflation and higher interest rates, the automobile limits were increased for all amounts other than the $300 deduction limit for new automobile loans.
- UHT guidance – The CRA released guidance on the Underused Housing Tax (UHT), which applies a 1 per cent tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022. The tax usually applies to non-resident, non-Canadian owners. But, in some situations, it also applies to Canadian owners. We understand that the CRA will issue further guidance and we have provided suggestions on areas where more information will be needed. CPA Canada will also release a tax blog on the UHT later in January or early February.
- New filing options for special elections and returns – The CRA has released information on new filing options for “special elections and returns”, such as the T2054 election for capital dividends. At present, the CRA page only refers to filing these elections and returns electronically using My Account, My Business Account, or Represent a Client. We understand that efiling using tax preparation software will also become available at a later date. We have sent a number of suggestions and queries to the CRA and we will provide more information as it becomes available.
- EFILE / RepID update – On December 19, the CRA posted an update to its EFILE news and program updates page with more information on a new CRA initiative involving the transmission of RepIDs with returns where the EFILE system is used. In particular, the CRA stated that “starting February 20, 2023, as an additional level of security, you will be asked to enter a valid RepID when you file a return of income through EFILE software. This field will be optional during the upcoming filing season and it should be left blank if you do not have a valid RepID within the list of EFILE applicants.”
December 12, 2022
In case you missed it
As we wrap up 2022, here is a summary of some significant tax developments that took place in the second half of the year. (See our July 19, 2022 In case you missed it news item for the last time we provided this round-up.) For ease of access, we’ve included the original news items referenced here in the attached PDF.
Reporting requirements for trusts – The original proposals introduced in 2018 were expanded to include bare trust arrangements. The application of the rules was recently deferred and will now apply to trust taxation years ending after December 30, 2023. See our November 7, 2022 news item.
Mandatory reporting – The effective date of the Reportable Transaction and Notifiable Transaction proposals will be delayed until the date the implementation bill receives Royal Assent. The Uncertain Tax Treatment proposals will apply to taxation years beginning after 2022 as previously announced. See our November 4, October 6, and August 22, 2022 news items.
Tax-Free First Home Savings Account (FHSA) – As part of Budget 2022, the government introduced the new FHSA and, subsequently, revised legislation on the new program was released as part of Bill C-32 (Fall Economic Statement Implementation Act, 2022). Contrary to the original program details in Budget 2022, the latest version of the legislation allows account holders to make use of both the Home Buyers’ Plan and the FHSA to fund the same qualifying home purchase. See our November 11, 2022 news item as well as our blog.
Canada Revenue Agency (CRA) Campaign Focusing on Personal Service Businesses (PSB) – The CRA announced a new campaign focused on PSBs earlier this year. The campaign concentrates primarily on industries that commonly hire service providers who may operate a PSB including trucking, IT consulting, accounting, construction and catering. We understand that the campaign is still underway.
Electronic Notices of Assessments (ENOA) – In Budget 2021, the government proposed legislation that would allow the CRA to provide a notice of assessment (NOA) electronically to an individual who filed their personal income tax return electronically, and has authorized that notices or other communications may be made available in this manner. The original proposals would have affected EFILERs as they would be required to provide NOAs to their clients not using CRA’s My Account. It is our understanding that any changes to the process for issuing personal NOAs will be deferred until at least 2024. See our August 22, 2022 news item.
Excessive Interest and Financing Expenses Limitations – Revised draft legislation was released and is subject to a consultation period that ends on January 6, 2023. It is now proposed that these rules will apply to taxation years beginning on or after October 1, 2023.
In addition to these major developments, some other notable developments that occurred in the latter part of 2022 included:
- Canada Emergency Business Account (CEBA) – Eligibility notices and tax treatment of repayments (November 16, 2022 news item)
- Updated CRA taxable benefit guidance on social events, gifts and awards (November 15, 2022 news item)
- The 2022 Fall Economic Statement that included updates on a number of tax measures and, in particular, a brief update on the OECD Pillar 1 and 2 initiatives (November 4, 2022 news item)
- New questions and answers on Form T1134 (October 26, 2022 news item)
- New process for EFILE authorization requests for My Business Account access (October 7, 2022 news item)
- Questions on the new Form T2054 – Election for a Capital Dividend Under Subsection 83(2) (September 12, 2022 news item)
We know that many are watching for developments related to Bill C-208 that dealt with intergenerational transfers, but there have been no updates at the time of writing.
We’ll continue posting important and relevant news updates on this page so be sure to bookmark this page and check back often. Happy holidays and all the best for 2023.
December 06, 2022
Watch Now: CRA Update on Scientific Research and Experimental Development (SR&ED) Program
CPA Canada co-hosted a webinar with the CRA to review updates to the SR&ED program. In this session, the CRA provided an overview of the program and highlighted upcoming initiatives that will transform it. Watch this video to learn more about the most common trends seen on the field and hear the answers to some of the top questions from CPA Canada's SR&ED Committee.
November 23, 2022
Latest tax blog: Tax-Free First Home Savings Account
The federal government has released new details about the Tax-Free First Home Savings Account, a new registered account to help individuals save for their first home. Read our latest blog post to find out who qualifies and other key features of these plans.
November 16, 2022
Canada Emergency Business Account (CEBA) – Eligibility notices and tax treatment of repayments
It has come to our attention that some businesses have received notices stating they don’t qualify for the CEBA loan. Impacted businesses will have no portion of the CEBA loan forgiven and must repay the full amount of the loan by the end of 2023. It appears that these notices represent final determinations, and no appeals process is in place. We spoke to other business stakeholder groups and were told that they have expressed concern to the federal government on the fairness of not having the ability to correct the original application or appeal the determination (along other concerns).
A legal requirement to repay the forgivable portion of the CEBA loan will require impacted business and their advisors to consider the resulting tax implications. As you may recall from our January 2021 blog post 2020 Round Up: Income tax impacts of key COVID-19 support programs, pursuant to paragraph 12(1)(x) of the Income Tax Act, impacted businesses should have already included in income the part of the loan that was potentially forgivable in the year the loan was received. Alternatively, under subsection 12(2.2), an election could have been made that would have offset the forgivable portion against certain non-deferrable operating expenses. Where an impacted business no longer qualifies for forgiveness of a portion of the CEBA loan, a deduction can be claimed in the taxation year in which the forgivable portion is repaid. Therefore, the prior year tax return that contains the income inclusion for the forgivable portion of the CEBA loan should not be amended.
If the CEBA loan is repaid over more than one taxation year, the Canada Revenue Agency (CRA) confirms in technical interpretation 2020-0862931C6 that it will be necessary to determine to what extent the forgivable portion was repaid as part of each repayment. According to the CRA, reference should be made to the loan agreement to determine if it is the intent of the parties that repayments are first applied to reduce the forgivable portion. If so, an impacted business could claim a deduction under paragraph 20(1)(hh) with respect to the amount repaid in the taxation year in which the reimbursement is made, up to the amount included in its income previously under paragraph 12(1)(x) or where an expense was reduced. However, if the intent of the parties is unclear, then the CRA states that deduction under paragraph 20(1)(hh) should be prorated based on the amount of the partial repayment.
We will continue to keep you informed of any important developments.
November 15, 2022
Updated CRA taxable benefit guidance on social events, gifts and awards
The CRA has recently updated its webpages, Gifts, awards, and long-service awards and Social events and hospitality functions, which include a number of new or revised CRA administrative policies that address the following scenarios:
- Employer provided in-person (or hybrid) social events for employees
- Employer provided virtual social events for employees
- Gift cards provided by an employer to employees and, in particular, situations where these cards will not be considered “near cash” gifts
For further information, please see the CRA webpages.
November 11, 2022
Tax-Free First Home Savings Account (FHSA) Changes
As part of Bill C-32 (Fall Economic Statement Implementation Act, 2022), proposed legislation to implement the new FHSA program was included and there were several revisions from the previous draft legislation released on August 9, 2022. Notable changes include:
- A taxpayer can now access both the FHSA and Home Buyers’ Plan (HBP) in respect of the same qualifying home.
- If a deceased taxpayer who is the last holder does not close their FHSA before its “cessation date” (when the plan is no longer an FHSA), a deemed income inclusion will arise and will be taxable to the plan beneficiaries (or the estate if there are no named beneficiaries). The cessation date is generally the end of the year following the year of death.
- The definition of a “qualifying individual” is revised such that it no longer includes an individual who has a beneficial interest in a qualifying home, and it adds a test relating to ownership by a spouse or common-law partner (spouse).
- In cases where a surviving spouse becomes the successor holder of an FHSA and the deceased holder had excess contributions immediately before their death, the survivor is deemed to have contributed to the FHSA thereby reducing the spouse’s FHSA contribution or potentially putting them into an overcontribution position.
- The revised legislation also includes additional changes so that the overall framework for FHSAs is better aligned with other registered plans by adding a deduction denial for FHSA fees and interest on money borrowed to make a contribution, and rules for the taxation of FHSAs that carry on business.
As a result of these changes, it should be noted that the August 9, 2022 backgrounder is no longer fully accurate. Further details on these changes are available in the draft legislation and explanatory notes released by the Department of Finance Canada.
Finally, look out for our upcoming blog that will cover the basics of FHSA as well as answer common questions that may arise.
November 7, 2022
Proposed trust reporting rules postponed for one year under Bill C-32
On November 4, 2022, Bill C-32 (Fall Economic Statement Implementation Act, 2022) was tabled in the House of Commons. This bill implements some of the tax proposals from the 2022 Fall Economic Statement, along with several previously announced tax changes. In one major change, the coming into force date for the trust reporting rules has been postponed by one year. These rules will now apply to trust taxation years that end after December 30, 2023. Otherwise, it appears that the legislation for the trust reporting rules is unchanged.
We are in the process of reviewing the legislation and will provide more information as it becomes available.
November 4, 2022
Federal government releases Fall Economic Statement
On November 3, the Deputy Prime Minister and Minister of Finance released the federal government’s 2022 Fall Economic Statement (FES) which contained several new tax announcements along with an update on previously announced tax measures. We have provided a summary of the key changes/updates below along with links to the relevant sections of the FES, accompanying news release and draft legislation where further details are available.
Personal tax changes:
- Extension of the Residential Property Flipping Rule to assignment sales – The original rule introduced in Budget 2022 will be extended to apply to profits arising from dispositions of residential property via an assignment sale if the rights to purchase a property were assigned after having been owned for less than 12 months (subject to various life event exceptions).
- Automatic advance for the Canada Workers Benefit (CWB) – The government will automatically provide individuals who received the CWB last year an entitlement for the current year through quarterly advance payments based on their prior year tax return if it was filed and assessed prior to November 1, 2022. The payments start in July 2023.
- Alternative Minimum Tax (AMT) – The FES reiterates that the government will examine a new minimum tax regime as outlined in Budget 2022. More details will be released in Budget 2023.
Business tax changes:
- Investment Tax Credit for Clean Technologies – The FES proposes to introduce a refundable Clean Technology Investment Tax Credit of up to 30 per cent of the capital cost of eligible equipment. To incentivize companies to create good jobs, those that adhere to certain labour conditions will be eligible for the full 30 per cent credit, while those that do not will only be eligible for a credit of 20 per cent. Specific details will be announced in Budget 2023.
- Income reporting by digital platform operators – Draft legislation was released for public comment to incorporate the OECD Model Rules for income reporting by digital platforms into the Income Tax Act and is proposed to come into force on January 1, 2024. The consultation period will end on January 6, 2023.
- Tax on stock buybacks – The FES introduces a 2 per cent corporate-level tax on the net value of share buybacks by public corporations in Canada. This new tax is proposed to come into force on January 1, 2024, and more details will be released in Budget 2023.
Updates on previously announced tax measures:
- Excessive Interest and Financing Expenses Limitation – Revised draft legislation was released and is subject to a consultation period that ends on January 6, 2023. It is now proposed that these rules will apply to taxation years beginning on or after October 1, 2023.
- Mandatory reporting rules – In order to fully assess the feedback received on the mandatory reporting rules consultation, the effective date of the Reportable Transaction and Notifiable Transaction proposals will be delayed until the date the implementation bill receives Royal Assent. The Uncertain Tax Treatment proposals will apply to taxation years beginning after 2022 as previously announced.
- Scientific Research and Experimental Development (SR&ED) tax program –A review of the SR&ED program, including consideration of a patent box regime, was announced in the 2022 Federal Budget. The government indicated that further details would follow in the 2023 Budget.
- OECD Pillar 1 and Pillar 2 initiatives – The government confirmed that the OECD’s intention is to complete multilateral negotiations so that the treaty to implement Pillar 1 can be signed in the first half of 2023, with a view to it entering into force in 2024. On Pillar 2, an update to the timeline was not provided although the Government reaffirmed its commitment to the initiative.
- Investment Tax Credit for Clean Hydrogen – The government announced its intention to move forward with this tax credit, which was announced in the 2022 Federal Budget, including an upcoming consultation.
- Other outstanding tax proposals – The government also confirmed its intention to move forward with a lengthy list of previously announced measures.
October 31, 2022
Update on electronic notices of assessment
As mentioned in our August 22, 2022 news item, “Update on electronic notices of assessments”, Finance Canada recently proposed legislation that would allow the Minister of National Revenue to provide a notice of assessment (NOA) electronically to an individual who filed their personal income tax return electronically, and has authorized that notices or other communications may be made available in this manner.
From a recent discussion with the Canada Revenue Agency (CRA), it is our understanding that there will be no changes in the process for issuing personal NOAs until at least 2024. We will keep you posted as we get additional information.
October 26, 2022
New questions and answers on Form T1134
We received a number of questions regarding the revised version of form T1134, which we passed along to the CRA. The CRA has responded to all our queries and plans to update its T1134 Q&A page as soon as the French translation has been completed. The CRA has asked us to share the English responses with our members as it recognizes the October 31 filing due date for many reporting entities is fast approaching. We will post an update when these responses are on the CRA’s website in both languages.
October 19, 2022
New T2054 capital dividend account election form – follow up
As a follow up to our September 12, 2022 news item, “Questions on the new Form T2054 – Election for a Capital Dividend Under Subsection 83(2)”, the Canada Revenue Agency (CRA) has responded to our question on whether taxpayers can continue to use the previous version of the T2054 until tax software developers have incorporated the new T2054 into their products.
The CRA has confirmed that the old T2054 can be used on an interim basis until the tax software is updated and, in particular, the CRA will accept the filing of the old form as a valid capital dividend election. However, the CRA also stated that it may contact taxpayers for additional information (i.e., any new information that would be reported on the new form) and this may slow down processing. The CRA has indicated that using the most current version of the T2054 will ensure that the CRA has the information required, reduce the need for client contact, and improve processing time. We have communicated the need to better coordinate the release of forms such as the T2054 so that new forms can be incorporated into tax preparation software before a new form is required to be filed to the CRA.
Questions around the process to file the form electronically remain outstanding. We will continue to keep you updated on relevant developments around this issue.
October 17, 2022
CRA’s Represent a Client enhanced security requirements could impact access
As you may be aware, the Canada Revenue Agency (CRA) has enhanced security requirements in Represent a Client (RAC), which could impact your ability to log into RAC and access client data. Representatives who haven’t already provided certain personal information will be impacted. Such information includes:
- social insurance number
- date of birth
- current postal code
- an amount from your income tax and benefit return
If you can fully access My Account or My Business Account, then you have already provided the required information to the CRA and have the enhanced authentication.
For those who have not provided the required data, you will be denied access to RAC – the CRA will request this information and send you an access code by mail within 10 business days. You’ll be able to log in again once you provide the access code.
October 13, 2022
Further details released on the Canada Emergency Benefit Account (CEBA) repayment extension
The CEBA website has been updated to reiterate that the December 31, 2022 forgiveness repayment deadline will be extended to December 31, 2023 for eligible CEBA loan holders in good standing. If CEBA participants are in good standing and qualify for the new extended term, they will be contacted by their financial institution with details regarding the new repayment date. The website also provides more guidance on repayment and forgiveness terms in the FAQ section.
October 7, 2022
New process for EFILE authorization requests for My Business Account access.
Due to increased concerns with identify theft, Confirm my Representative was introduced by the Canada Revenue Agency (CRA) as a new two-factor authorization process for confirming the representative and preventing client information from being given to unauthorized representatives. This new verification process was implemented last year for taxpayers to verify authorization requests submitted through Represent a Client.
The CRA has recently announced that beginning in October 2022, they will be rolling out the Confirm my Representative process to apply to authorization requests for business clients submitted through the Business Consent Service in certified tax software (EFILE).
While we understand this is a significant change to authorization requests that will likely require process changes for EFilers, we also understand the CRA’s need to increase security to mitigate risks of fraud and identity theft. We explored a number of different alternatives for the CRA to positively verify authorization requests with the taxpayers, and understand they have considered them. However, we were informed that the two-step process of Confirm my Representative is the method that best meets their security objectives at this time.
That said, we have asked CRA to provide guidance on how the new Confirm my Representative process will work with the following two groups of taxpayers:
- Non-resident businesses – Non-resident businesses do not have access to My Business Account and so it is unclear based on the announcement how Confirm my Representative would work in this case. CRA indicated to us that non-resident businesses would be exempt from this new process. In these cases, CRA may follow up with a phone call to the non-resident business owner to verify the authorization request.
- Taxpayers who cannot access My Business Account – There are taxpayers who just cannot use My Business account, such as those with disabilities, and so guidance is required as to how these taxpayers will be expected to verify authorizations requests. CRA indicated they are working on an accessible solution for such individuals.
We will keep you updated as we gather more information.
October 6, 2022
Update on mandatory reporting proposals
As discussed in prior news items and tax blog, the federal government has announced proposals that will require additional reporting for “reportable transactions” and “notifiable transactions.” Revised legislation for these rules was announced on August 9, 2022 (see our August 22, 2022 update below). Several concerns with these rules remain, in particular, on the reportable transaction proposals. Members of the Joint Committee on Taxation of the Canadian Bar Association and CPA Canada recently met with officials from the Department of Finance Canada, and the key issues raised during the online meeting included:
Application of the contractual protection hallmark remains broad – As the revised definition of “avoidance transaction” remains broad, the fact that the contractual protection hallmark also has broad application appears to mean that a filing requirement will arise in many commercial situations. For example, where a business is sold, and tax planning steps of any kind are undertaken prior to the sale, a reporting requirement appears to arise where pre-acquisition taxes are protected under an indemnity, insurance or some other commercial protection. Similar concerns may arise where tax planning advice is provided under engagement letter terms that include limitation of liability clauses.
Uncertainty around the fee hallmark remain – Concern remains on the broad definition of the fee hallmark, as that rule still refers to a fee that is to any extent based on the amount of a tax benefit or the number of taxpayers that participated in a transaction. Fees charged for transaction-based services can be based on several different factors and may be at least minimally related to the value of the tax benefit or the number of taxpayers.
Uncertainty on the application of paragraph 237.3(2)(c) for advisor reporting – Many are having difficulty reaching a conclusion on how the requirement to report for advisors operates. It appears that the fee may have to meet the fee hallmark conditions or be in respect of contractual protection to create a reporting requirement for the advisor, but this should be confirmed by the Department of Finance Canada.
Exception for employees/partners – The revised legislation includes a new exception for employees or partners of a firm, which is appreciated, but the operation of the exception is raising concerns as it will apply only if the firm reports. For partners and perhaps employees especially, this requirement causes concerns. For example, the employee/partner may not be able to confirm whether the firm filed, or they may not know that the work they performed was used as part of a notifiable transaction. Also, it is not clear whether the exception applies to former employees.
Exception for non-tax advisors – The revised legislation also includes a new exception for secondary or ancillary financial services in subsection 237.4(6). While this is helpful, it only applies in respect of banks, insurance companies and credit unions. There are many other types of secondary, non-tax advisors that should also be exempted.
We will continue to keep you updated on relevant developments on this new regime.
October 4, 2022
Latest tax blog: New rules for trust reporting are coming for 2022 returns
Trust reporting rules are changing for 2022 returns due in 2023. Under this new regime, trusts will be required to file a T3 Trust Income Tax and Information Return annually for tax years ending on or after December 31, 2022, including trusts that have never filed before. Our latest tax blog on trust reporting outlines the expanded reporting requirements for trusts set out in the August 9, 2022 draft legislation.
September 29, 2022
CRA provides relief for Canadians affected by Hurricane Fiona
Due to the widespread damage caused by Hurricane Fiona in Atlantic Canada and part of Quebec, the Canada Revenue Agency (CRA) has confirmed it will be providing relief to impacted individuals, businesses and charities, which includes:
- extending the due date for returns and balances to October 31 for all T2/T3 tax returns and GST/HST returns that would normally have been due between September 26 and October 30. Therefore, there will be no penalty nor interest for late filing if these returns are submitted after September 30.
- providing penalty and interest relief for taxpayers who were prevented from meeting their tax obligations due to the adverse event that submit a relief request. The CRA will review these requests on a priority basis.
Taxpayers should call the CRA if books and records have been destroyed as a result of a disaster.
Please see the CRA’s news release for further details.
September 12, 2022
Questions on the new Form T2054 – Election for a Capital Dividend Under Subsection 83(2)
The CRA recently posted a new version of Form T2054 – Election for a Capital Dividend Under Subsection 83(2) (“T2054”) to its website. In the T2054 instructions, it indicates that the form can be filed electronically and provides a link for further information, however, the link provided in the PDF version does not appear to be working and the link provided in the fillable PDF version does not provide any further information on how the T2054 can be electronically filed.
All this has raised some concerns on what the CRA’s expectations are on the new form. We have passed along the following questions and comments to the CRA:
- As most tax preparers use tax software (such as a T2 preparation program) to prepare the form, and updating tax preparation program by the software providers will take time, can the previous version of the T2054 continue to be used until the tax software developers have incorporated the new T2054 into their products?
- Can the CRA provide more information on how electronic filing will work? If a copy of the PDF T2054 can be transmitted electronically, can a digital signature be used on the form?
- If the expectation is that the new T2054 should be completed outside of tax preparation programs, we highlighted to CRA that logistical issues will arise for many tax preparers, and it could also result in an increase in errors
We will continue to monitor this issue and provide you with any relevant updates.
September 9, 2022
Newest tax blog: CRA campaign focuses on personal services businesses: Are you ready?
The Canada Revenue Agency is escalating their scrutiny of personal services businesses. In a recent stakeholder email, the CRA announced its newest educational campaign focusing on potential PSB arrangements. In response to this campaign, our newest tax blog presents an overview of the PSB rules and sets out some leading practices to consider for taxpayers that deliver services through a corporation.
August 22, 2022
Updates to electronic filing and certification of tax and information returns
The 2021 federal budget included measures that would amend electronic filing thresholds for prescribed information returns. These 2021 budget proposals were followed by draft legislation released on February 4, 2022. There was some concern with these proposals, in particular around their effective dates (they were to apply for calendar years after 2021). See our March 3, 2022 news items for further details.
The August 9, 2022 draft legislation has deferred the effective date for the following measures to now apply for taxation years beginning 2023 and payments made or information returns filed after 2023:
- Electronic filing thresholds for income tax returns
- Proposals to eliminate the mandatory electronic filing threshold for corporate income tax returns (i.e., all corporations except those exempted under ITR 205.1(2)) will be required to file electronically.
- Proposals for tax preparers to file returns electronically if, for a calendar year, they prepare more than five corporate income tax returns, more than five personal income tax returns, or more than five estate or trust income tax returns.
- Electronic filing and issuance requirements for information returns
- Reduction in the mandatory electronic filing threshold for income tax information returns, from 50 to 5 returns of a particular type for a calendar year.
- Electronic payments
- The requirement for electronic payments for remittances made under the Income Tax Act that are over $10,000.
August 22, 2022
Update on electronic notices of assessments
As we have previously reported, the government announced in the 2021 federal budget, followed by draft legislation released on February 4, 2022, that it would be providing the CRA with the ability to send certain Notices of Assessments (“NOAs”) electronically without the taxpayer having to authorize the CRA to do so (“NOA proposal”). See our February Tax Blog and our September 21, 2021, news item “Budget 2021 electronic notices of assessment proposal”, for further background.
Subsection 150.1(4.1) was the main provision dealing with the NOA proposal in the February 4, 2022, draft legislation. It provided the CRA with the ability to send NOAs electronically to the individual, or to the filer of the individual’s tax return, without the taxpayer having to authorize the CRA to do so. This would have been effective beginning January 1, 2023.
The draft legislation released by Finance Canada on August 9, 2022, includes significant changes to subsection 150.1(4.1). From our initial read of the latest version, it appears that the provision is no longer addressing the Budget 2021 NOA proposal but, instead, is allowing the Minister of National Revenue to provide an NOA electronically to an individual who filed their personal income tax return electronically and has authorized that notices or other communications may be made available in this manner. In particular, references to providing the NOA to the filer have been removed. We have asked the CRA and Finance Canada for more details on the government’s plans and we will provide an update as new information becomes available.
Revised Legislation – Mandatory Disclosure Rules
On February 4, 2022, Finance Canada released proposed mandatory disclosure rules, which would require more detailed reporting of certain transactions. These proposals were organized in three components that would:
- Expand the current rules for reportable transactions
- Introduce a new requirement to report notifiable transactions
- Add a new requirement for specified corporations to report uncertain tax treatments (UTT)
The Joint Committee on Taxation of the Canadian Bar Association and CPA Canada (the “Joint Committee”), made submissions in response to the government’s consultation on the February 4, 2022, mandatory disclosure rules. In addition, CPA Canada made a submission on the uncertain tax treatments proposals. For a detailed summary of these submissions, please see our May 2022 tax blog.
Included in Finance Canada’s August 9, 2022, release of revised and new legislation were revisions to the mandatory disclosure rules. Some notable revisions include:
- Deferral of the application date of the reportable transaction, notifiable transaction and UTT rules by one year – generally, the reportable transaction and notifiable transaction rules will apply to transactions entered into after 2022 and the UTT rules will apply to taxation years beginning after 2022.
- Narrowing and clarifying the confidential and contractual protection hallmarks of the reportable transaction rules so that bona fide commercial transactions are not impacted. The Joint Committee has raised concerns as to whether these changes will work effectively.
- Lengthening the re-assessment period for reportable transactions, notifiable transactions and UTTs to four years from three years for taxpayers that are mutual fund trusts or corporations that are not Canadian-controlled private corporations to align with subsection 152(3.1). Under the original draft, a three-year period would apply to all taxpayers based on the date the required information return was filed. The assessment period is not limited where a return is not filed.
- Alleviating multiple reporting obligations by deeming each employee of an employer to have filed an information return with respect to a notifiable transaction where the employer has filed the required return. Similarly, for partnerships, partners will be deemed to have filed the return where the partnership has filed. Employees and partners will also not be subject to any related late filing penalties provided proposed subsection 237.4(5) applies. Note that it appears that a similar rule was not included for reportable transactions despite the elimination of subsection 237.3(4).
- Clarification that reporting obligations will not apply to banks, insurance companies, and credit unions providing secondary or ancillary financial services. However, this exemption does not apply where the financial institution knows that the relevant transaction is a notifiable transaction. Again, a similar rule does not appear to apply for reportable transactions.
- Clarification that persons who offer clerical or secretarial services with respect to the planning are not required to file information returns (this exception is available for both notifiable transactions and reportable transactions).
- Removal of the definition of “solicitor-client privilege” used in the reportable transaction rules (as such, the meaning developed under applicable Canadian case law should be used).
While some of the issues and concerns raised in the Joint Committee submission have been addressed, others have not. We will be reviewing the rules in greater detail over the coming weeks and will continue to communicate any new or ongoing issues to the government
August 17, 2022
Update on trust reporting requirements
On August 9, Finance Canada released draft legislation on a broad range of initiatives including revised trust reporting rules. These rules were originally announced in the 2018 federal budget and draft legislation was previously released on February 4, 2022 (see our February 8, 2022 news item below for more information). Changes in the August 9 release include the following:
- the list of trusts not subject to the rules under subsection 150(1.2) has been expanded to include trusts under or governed by employee profit sharing plans, registered supplementary unemployment benefit plans and first home savings accounts (which were proposed in the 2022 federal budget)
- the situations described in proposed subsection 204.2(2) of the regulations where the filing requirement will be deemed to have been complied with has also been expanded to include:
- certain indigenous groups, communities or people if prescribed conditions are met
- trusts where some but not all of the units are listed on a designated stock exchange (in this case, only information on the unlisted unit holders must be reported)
Otherwise, the rules have not changed since the February 4 release. In particular, proposed subsection 150(1.3) remains and will create a reporting requirement to ensure that so-called bare trustee arrangements are subject to the rules. It was hoped that the government would consider a more streamlined approach for obtaining beneficial ownership information that would not involve filing a T3 return.
The effective date of the proposals has also not changed – they will apply for taxation years ending after December 30, 2022.
August 9, 2022
Department of Finance Canada releases draft legislation
On August 9, 2022, the federal Department of Finance (Finance Canada) released a large package of draft legislation covering several tax measures from the 2022 federal budget and previous announcements. This includes revised draft legislation on previously announced measures, including:
- enhanced reporting requirements for trusts
- mandatory disclosure rules
- avoidance of tax debts
- electronic filing and certification of tax and information returns
In addition, draft legislation was released for various technical amendments. The government also released a consultation paper on strengthening and modernizing the General Anti-Avoidance Rule (GAAR). A number of other initiatives were announced as well. A full summary of the measures with links to underlying information is available in Finance Canada’s August 9, 2022 news release. The deadline for providing Finance Canada with comments on the draft legislation and the GAAR consultation is September 30, 2022.
We will be analyzing the legislation, consulting with members and following up with the government on key measures. Further information will be provided in future updates.
July 25, 2022
CRA opens registration for luxury tax
The CRA has recently opened registration for the new luxury tax, which will come into effect on September 1, 2022. To help impacted businesses determine the application of the luxury tax, the CRA has launched a dedicated phone line, a rulings and interpretations process and has also published some technical guidance.
July 19, 2022
In case you missed it
We know you’re busy and it can be hard to keep track of what’s new. We’ve put together a list of some past news items and blogs that you may have missed but are still worth a read:
- New T2 Schedule 141 included in May tax software updates. The new Schedule 141 is a response to issues we raised with the CRA in light of recent accounting changes, and our June 8 news item below provides suggestions on completing the new form.
- Reporting Requirements for Trusts. See our May 30 news item below for an update. Also, look out for a blog this Fall where we will summarize the new trust reporting requirements once final draft legislation is released.
- Joint Committee Submission on the Excessive Interest and Financing Expenses Limitation (EIFEL) Proposal and Avoidance of Tax Debts. See the May 31 news item below that highlights the key issues and where to find more information.
- New mandatory tax reporting: Problems and solutions. Our blog contains a rundown of how these new rules may affect you and your clients, and our feedback to the federal government.
- Update on Bill C-208 and filing requirements. Our April 12 news item below contains more information on what needs to be filed for business transfers subject to the new rules.
- CRA responds to the top questions from CPAs across Canada. In December 2021, the CRA responded to a wide variety of questions posed by members across the country. We are just in the process of gathering questions to the CRA from members across the nation, so look out for the 2022 version of this to be published later this year.
- Tips on running a high-quality tax practice. Our blog and recorded presentation provide suggestions on improving your tax practice to reduce risk and improve profitability.
We’ll continue posting important and relevant news updates on this page so be sure to bookmark this page and check back often. Have a great summer!
July 14, 2022
CRA updates T2 Schedule 63 – Return of Fuel Charge Proceeds to Farmers Tax Credit
Further to our June 13 news item, the CRA has now published an updated T2 Schedule 63 – Return of Fuel Charge Proceeds to Farmers Tax Credit which appears to now correctly compute the credit. We understand that tax software providers have included the update, or will soon be including it, in their software.
July 8, 2022
CRA will not require GST information return for platform operators
As part of the digital economy measures the government introduced as part of Budget 2021, certain accommodation and digital platform operators are required under the Excise Tax Act to file an information return with the CRA each year. As we previously reported in a news item on November 15, 2021, the CRA had announced that they were deferring the filing requirement for the first calendar year information return (i.e., the 2021 calendar year) and that the information return reporting requirement will be in effect for all other calendar years.
The CRA recently updated their website regarding this requirement and now indicates “…the federal government proposed implementing the Model Rules that the Organisation for Economic Co-operation and Development developed for reporting by digital platform operators on platform sellers. Because of this and until further notice, the Canada Revenue Agency (CRA) does not require platform operators to file the information returns outlined in Budget 2021.”
As such, it appears that businesses will no longer need to capture the data that was required for the information return for 2022 (and potentially onwards, until CRA indicates otherwise).
July 7, 2022
CRA updates Q&A on Disability Tax Credit promoter fee cap
As reported in our November 9, 2021, news item, the Disability Tax Credit Promoters Restriction Act (DTCPRA) has been suspended until further notice due to a court injunction.
While the court case has not yet concluded, the CRA has updated its interpretation of the services to be included in the $100 DTC fee cap. Question 7 on the CRA Q&A to the DTCPRA webpage now indicates that the $100 DTC fee cap on promoters will not apply to work done to assist with the filing of notices of objection, where previously the CRA only listed work related to appeal to the Tax Court of Canada.
July 4, 2022
CRA updates Disability Tax Credit form and other related resources
The CRA has updated Form T2201, Disability Tax Credit Certificate, Guide RC4064 Disability-Related Information, and other online resources and tools to reflect amendments included in Bill C-19 (Budget Implementation Act, 2022, No. 1) to improve access to the Disability Tax Credit (DTC). The CRA has indicated that it will continue to enhance the DTC webpages to make it easier for individuals to review eligibility for the credit, to apply and to learn what other benefits they may have access to if they qualify.
We continue to provide feedback to the CRA on the DTC forms, tools and resources and will keep you informed of relevant new developments.
June 28, 2022
CRA provides guidance on executive compensation and CEWS
CPA Canada had submitted several questions to the CRA with respect to the determination of an eligible entity’s “executive compensation repayment amount” in subsection 125.7(1) of the Income Tax Act for the purposes of computing the Canada Emergency Wage Subsidy (CEWS) and other COVID-19 subsidies. The CRA has recently published a new technical interpretation (2021-0913401E5), which responds to some of these queries.
In this interpretation the CRA provides guidance on the determination of the executive compensation repayment amount when the eligible entity is controlled by a foreign public parent corporation. In such a situation, the executive remuneration of the public parent corporation is used. The CRA also comments on what would constitute a “similar disclosure” under the definition of “executive remuneration” in subsection 125.7(1) in this scenario. The CRA states that a foreign disclosure should generally contain information that is similar to a Canadian Statement of Executive Compensation.
June 15, 2022
Bill C-8 receives Royal Assent
On June 9th, 2022, Bill C-8, An Act to implement certain provisions of the economic and fiscal update tabled in Parliament on December 14, 2021 and other measures, received Royal Assent.
This Bill enacts previously announced tax measures including changes to the Northern Residents Deduction, Eligible Educator School Supply Tax Credit and the Return of Fuel Charge Proceeds to Farmers Tax Credit. It also enacts the annual 1 per cent tax on the value of vacant or underused residential property directly or indirectly owned by non-resident non-Canadians.
As noted in our previous news items (see April 22 and March 3, 2022), 2021 T1 returns filed claiming either the Eligible Educator School Supply Tax Credit or the Return of Fuel Charge Proceeds to Farmers Tax Credit credits prior to the legislation receiving Royal Assent would be held by CRA until Bill C-8 has passed. With the passage of this Bill, we expect that the CRA should begin processing such returns soon. We will provide an update if more information becomes available.
June 13, 2022
CRA T2 Schedule 63 – Return of Fuel Charge Proceeds to Farmers Tax Credit
We have learned that there is an issue with new T2 Schedule 63 (Return of Fuel Charge Proceeds to Farmers Tax Credit) as the calculation on this form does not appear to agree with the draft legislation for the credit contained in Bill C-8 (Economic and Fiscal Update Implementation Act, 2021). For corporations that are allowed to claim the credit, the credit is based on the total of all amounts deducted in the year by the corporation in computing Part I income from farming activities, excluding inventory adjustments and non-arm’s length transactions. However, on Schedule 63, the CRA has used line 9898 from T2 SCH 125 as the starting point for the calculation. This is incorrect, as this line represents total farm expenses for accounting purposes from the corporation’s financial statements which may not necessarily agree with what the corporation actually deducted for tax purposes. The CRA is reviewing the issue.
We will provide an update as more information is obtained.
June 8, 2022
New T2 Schedule 141 included in May tax software updates
We understand that the CRA has released a new version of T2 Schedule 141 in the May 2022 tax preparation software updates. The new form allows CPAs to better describe their involvement in T2 preparation. We have summarized how we assume the new form will be completed for the following common engagements (other than for financial statement engagements, which will be dealt with in the same manner as before):
Corporate client prepares financial statements and provides them to the CPA (along with other records where applicable) for T2 preparation:
- Answer “Yes” in box 111. Then answer box 95 and 97 from the perspective of the corporation that prepared the financial statements.
- If the answer to box 95 is “Yes”, then go to Part 2 where box 4, “Other” should be checked off.
- If the answer to box 95 is “No”, go to Part 4 - Other information and complete the questions
- In Part 5, which is answered from the perspective of the CPA preparing the return, it appears that box 1 should be checked but not box 2 given that the CPA did not prepare the financial information contained therein.
Corporate client provides financial information (presumably accounting system information such as a trial balance or general ledger) but not financial statements to CPA for T2 preparation:
- Answer “No” in box 111 and go to Part 5.
- In Part 5, it appears that neither box should be checked as financial statements were not provided by the client and the CPA preparing the T2 did not prepare the financial information contained therein.
CPA provides bookkeeping services and prepares the T2 but does not prepare financial statements:
- Answer “No” in box 111 and go to Part 5.
- In Part 5, box 1 is left blank while box 2 is checked off.
At the time of writing, the new form had not been posted to the CRA’s website.
May 31, 2022
Joint Committee Submission on the Excessive Interest and Financing Expenses Limitation (EIFEL) Proposals
The Joint Committee on Taxation of the Canadian Bar Association and CPA Canada made a submission to the Department of Finance on the EIFEL proposals that were first announced in the 2021 federal budget. Draft legislation was released on these proposals on February 4, 2022. The Committee’s submission covers several technical issues, as well as concerns with respect to timing and the lack of grandfathering rules.
On timing, the proposals apply to taxation years beginning on or after January 1, 2023 (as originally announced in the 2021 federal budget), even though the release of draft legislation was delayed. Typically, technical legislation related to budget proposals is released in the summer or early fall of the same year. Without a change, the timeframe for affected taxpayers to deal with the new EIFEL rules has been significantly reduced. Therefore, the submission recommends deferring the implementation of the proposals so that affected taxpayers have time to properly incorporate the new rules.
Avoidance of Tax Debts
The Joint Committee on Taxation (JC) (Canadian Bar Association and Chartered Professional Accountants of Canada) made a submission in response to the government’s consultation on the draft legislation released on February 4, 2022, relating to the Avoidance of Tax Debts.
These proposals were first conceptually introduced in the 2021 federal budget. Based on the budget commentary, the JC has drawn the following conclusions on the proposals, which are tied into key recommendations:
- the proposals are aimed at complex plans or schemes that are designed to circumvent the rules in section 160 (i.e. a purpose test)
- the proposals are not intended to create a results test (i.e. a series of transactions or events that impair the Canada Revenue Agency's (CRA's) ability to collect a tax debt) where there is no evidence of an intention to establish a plan or scheme to achieve the result that arises
- the penalty should apply to those who devise and/or promote the plan or scheme that is designed to circumvent section 160, and not to those who unknowingly participate in, or implement, such a plan or scheme
The submission highlights examples of where the proposals can be read as extending beyond these legislative purposes, and provides recommendations on how the rules can be more narrowly focused.
For example, the submission looks at the use of holding company structures used for asset protection purposes. In such a situation, if a tax debt goes unpaid, it would result from external factors and not from steps taken for asset protection. As a key recommendation, the JC believes that the proposed penalty should only be implemented where there is a clear intention to frustrate or circumvent section 160 at the time the transfer of property occurs and not a results test related to other events. You can read the details of the submission online.
May 30, 2022
Reporting Requirements for Trusts
The Joint Committee on Taxation (JC) made a submission in response to the government’s consultation on the draft legislation released on February 4, 2022 relating to the Reporting Requirements for Trusts.
In the 2018 federal budget, the government announced its intention to amend the Income Tax Act (ITA) to impose new filing and reporting obligations for certain trusts. It also proposed that trusts that are subject to the new filing and reporting obligations would be required to report the identity of all trustees, beneficiaries and settlors of the trust, as well as each person who has the ability to exert control over trustee decisions. Draft legislation for this proposal was released on July 27, 2018 and the JC provided its comments on this draft legislation by way of a written submission.
As part of the draft legislation released on February 4, 2022, a revised version of the 2018 draft legislation was released. In addition to delaying the application of the rules and some relieving provisions, the government proposed a new reporting requirement. Under proposed ITA subsection 150(1.3), bare trust arrangements are subject to the reporting requirements and a T3 return would have to be filed for these arrangements.
Given how common bare trust arrangements are, the JC notes that the required filing of a T3 under proposed subsection 150(1.3) for bare trusts will be burdensome. It recommends that proposed subsection 150(1.3) not be enacted and that beneficial ownership information be obtained another way—for example, requiring the beneficial owners to provide beneficial ownership information respecting the bare trust arrangements when they file their own tax return. If this cannot be accommodated, the JC suggests that the government consider legislating a separate reporting requirement, in respect of a bare trust arrangement, for the information requested in proposed Regulation 204.2.
May 24, 2022
Updates to the Tourism and Hospitality Recovery Program (THRP)
The CRA recently updated its THRP webpages to provide additional guidance to applicants. This includes more examples of activities that qualify for the THRP, as well as information on how businesses can change their THRP or Hardest-Hit Business Recovery Program (HHBRP) claim online.
May 19, 2022
Prescribed form for shared immediate expensing limit
As noted in our April 27, 2022 news item, the CRA has indicated that since the final draft legislation on immediate expensing has been released, taxpayers can include immediate expensing in the calculation of their capital cost allowance (CCA) deduction. However, adjustment requests to recognize immediate expensing for returns that have already been filed cannot be processed until after Royal Assent has been received.
One question that has arisen from this relates to the prescribed form that needs to be filed when the immediate expensing limit is to be shared amongst an associated group of Canadian Controlled Private Corporations (CCPCs) (i.e., under proposed Income Tax Regulation (ITR) subsection 1104(3.3)). The CRA has communicated with us what taxpayers in this situation should do:
The prescribed form that will be used when an immediate expensing limit is to be shared amongst an associated group of CCPCs is the T2 Schedule 8, Capital Cost Allowance. Once the T2 Schedule 8 is updated, it will be published on Canada.ca and further information about immediate expensing, including how to claim it, will be posted on the What’s New for Corporations website.
The legislation for immediate expensing does not require that the prescribed form be filed at the time of filing – only that a person or a partnership has 30 days to submit after receiving notice that it is required:
ITR 1104 (3.4) If any of the eligible persons or partnerships that are associated with each other (within the meaning of section 256 of the Act, as modified by subsection (3.6)) in a taxation year has failed to file with the Minister an agreement described in subsection (3.3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under Part I of the Act, the Minister shall, for the purpose of this Part and Schedules II to VI, allocate an amount to one or more of them for the taxation year.
If claims are submitted prior to the revised T2 Schedule 8 being published, the CRA may contact the corporation to submit the information once the new schedule is available. Otherwise, an amended T2 Schedule 8 that includes this information is required with the corporation’s next T2 return.
May 2, 2022
CRA to be given discretion to accept late rent and wage subsidy applications
Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures, was introduced by the government on April 28, 2022 (it contains the draft legislation we referred to in our April 27, 2022 item).
Included in this Bill is proposed subsection 125.7(16), which appears to provide the CRA with the discretion to accept late rent and wage subsidy applications. If the Bill is passed, the provision will come into effect on April 11, 2020.
According to the explanatory notes to the legislation that was also released, this amendment “would provide the Canada Revenue Agency with the specific discretion to accept late filed subsidy applications on a case-by-case basis in exceptional circumstances, consistent with the more general existing fairness rules.”
We will provide further details as they become available.
April 29, 2022
CRA updates its guidance on transitional administrative relief for the GST/HST digital economy measures
The CRA recently updated Excise and GST/HST News – No. 110 to provide clarification and further details on the process for requesting administrative relief on the new GST/HST digital economy measures. In the update, the CRA provides that the following information should be included in the request to ensure a timely response:
- the activities of the affected business or operator, along with estimated annual sales figures in Canada and the GST/HST normally collected
- the issues encountered by the affected business or operator
- the steps to be taken to resolve those issues and their anticipated completion dates
- any extenuating circumstances that may prevent the business or operator from being compliant with the new GST/HST measures before a specified date
April 27, 2022
Notice of Ways and Means Motion for certain Budget 2022 measures released
The federal government has recently released a Notice of Ways and Means Motion (with draft legislation) to implement certain provisions included in the 2022 federal budget as well as some other previously announced measures. Included in the release are final draft rules on the immediate expensing rules first announced in the 2021 federal budget and then expanded in the 2022 budget.
In a communication to us, the CRA stated that since final draft legislation was released, taxpayers can include immediate expensing in the calculation of their capital cost allowance (CCA) deduction. However, adjustment requests to recognize immediate expensing for returns that have already been filed cannot be processed until after Royal Assent has been received.
April 22, 2022
Reminder on proposed refundable credits for individuals
On April 20, the Canada Revenue Agency (CRA) posted a reminder on the EFILE news and programs update page on the proposed Return of Fuel Charge Proceeds to Farmers Tax Credit and the Eligible Educator School Supply Tax Credit. The CRA has again stated that returns containing a claim for these credits cannot be assessed until Bill C-8 (Economic and Fiscal Update Implementation Act, 2021) receives Royal Assent. We provided more background information on this issue in our March 3 news item and considerations for taxpayers who are in a refund position.
April 14, 2022
Impact of Bill C-2 on public company CEWS claims: Effective date
As noted previously in our December 21, 2021 news item, Bill C-2 (An Act to provide further support in response to COVID-19) contained a change that may restrict Canada Emergency Wage Subsidy (CEWS) claims made by a publicly traded company or a subsidiary of such a company that paid dividends to an individual who held common shares. One area of confusion was on the effective date of the change.
On April 11, the CRA updated a COVID-19 wage and hiring support for businesses page with the following statement which provides more clarity:
“Publicly traded companies and taxable dividends: For claim period 23 and onward, if you are a publicly traded company or a subsidiary of such a company, you are not entitled to any wage subsidy for that claim period in which you paid taxable dividends to an individual who is a holder of common shares of the company or of the subsidiary of the company.”
April 12, 2022
Update on Bill C-208 and filing requirements
The Canada Revenue Agency (CRA) recently posted an update on the filing requirements for individuals who are applying the tax changes in Bill C-208 for intergenerational transfers. As the CRA points out, under the enacted legislation, the individual who transfers the shares must provide the CRA with:
- a valuation report that is an independent assessment of the fair market value of the transferred shares, and
- an affidavit signed by the individual and a commissioner of oaths or notary public, attesting to the disposal of the shares.
On the update page, the CRA provides a sample affidavit and lays out the conditions to be met for a valuation report so that it would be acceptable to the CRA. The CRA also describes how to file the documentation (for returns that are filed electronically, the taxpayer is required to keep the documentation in their records in case the return is selected for review).
April 8, 2022
2022 Federal Budget
Watch now: 2022 Federal Budget Tax Highlights webinar
Deputy Prime Minister and Minister of Finance Chrystia Freeland tabled Canada’s federal budget on April 7, 2022. CPA Canada hosted a webinar in English and French to provide an overview of the most important tax measures contained in this year’s budget and to address some key questions raised by members. In addition, you can download the Tax Highlights.
March 21, 2022
Updated CRA Audit Guidance Documents
The Canada Revenue Agency (CRA) publishes its audit manuals and policy documents on the following page. The CRA has recently published 3 updated policies:
- Informal Disclosure Guidelines – this document provides information and guidance to CRA auditors about responding to informal requests for the disclosure of confidential information and taxpayer information.
- Privilege Claims – this document describes the CRA’s views on the types of privilege, in the context of legal advisers, that exist within Canada and explains the CRA’s approach to addressing claims of privilege.
- Requesting Information from Lawyers and Notaries – this document outlines the CRA’s views on what can and cannot be sought by the CRA when requesting information from lawyers in Canada and lawyers and notaries in Quebec, in light of two key Supreme Court of Canada decisions.
March 16, 2022
CRA Revised Guidance on Submitting T3 Return Notes
The CRA has recently informed us that it has revised its guidance, which we originally summarized in our March 8 update, on how to deal with questions 1, 3, 4, 6, 7, 8 and 9 where a note must be attached to a T3 return that is being EFILED. The CRA has now advised us that this information only has to be retained by the taxpayer in their records in the event the CRA asks to see it at a later date.
March 15, 2022
Update on filing tax returns electronically
Further to our March 8 update on T3 EFILE, we have received a communication from the CRA on the proposed changes on electronic filing for tax preparers contained in subsections 150.1(2.2) and (2.3) of the Income Tax Act. According to the CRA:
“In this transition year, the CRA will not assess the penalty for tax preparers who are liable to the penalty solely as a result of the proposed reduction of the threshold from 10 to 5 returns or the removal of the exemption for trust returns.”
Consequently, T3 returns for the 2021 taxation year can be filed on paper without penalty.
March 14, 2022
Draft legislation released for Luxury Tax
On March 11, Finance Canada released draft legislation on the Luxury Tax that was proposed in the 2021 Federal Budget. Subject to parliamentary approval, the tax will apply beginning on September 1, 2022. Finance Canada’s news release states that “two notable new provisions” are included in the legislation:
- relief is proposed to be provided to after-sale improvements that are made to vehicles, aircraft or vessels purchased below the relevant price threshold; and
- relief for aircraft is proposed to be expanded to take into account qualifying flights that are conducted in the course of a business with a reasonable expectation of profit.
March 8, 2022
Update on T3 EFILE
We have received additional information from the Canada Revenue Agency (CRA) on T3 EFILE which we wanted to pass on along with some other issues to keep in mind with the introduction of T3 EFILE. As noted by the CRA on their EFILE website, the ability to EFILE T3 returns opened on March 4. Key considerations for filing T3s include the following:
- Given that the February 4 draft legislation will not become law until after the filing deadline for 2021 T3s, we have asked the CRA to confirm that penalties will not be charged for 2021 T3 returns that are paper-filed. We will provide an update when we hear back from the CRA.
- Where a T3 return is transmitted through the EFILE system (“EFILED”), it is important to keep in mind that the T3 Summary and slips still must be filed separately. The filing options for this have not changed. Note that the CRA has confirmed that the 50-slip threshold for electronic filing will not be reduced for 2021 slips despite the proposed changes in the draft legislation referred to above.
- If a T3 return is EFILED, one question that arose is how to deal with questions 1, 3, 4, 6, 7, 8 and 9 where a note must be attached to the return. The CRA communication to us stated that any additional information required to support the return (including the trust agreement, elections, and supporting information for questions 1, 3, 4, 6, 7, 8 and 9 on T3 return) should be submitted electronically as outlined on the CRA webpage, Submitting and filing documents online related to T3, or submitted by mail to your tax centre.
- For trusts that are also required to file a T1135, carefully check the features of your T3 preparation software. We understand that some T3 packages do not include T1135 EFILE capabilities, and for those that do, you should determine whether electronically filing the T1135 is a separate process.
- The EFILE process for T3 Returns is similar to that for T1s and T2s in that a signed T183TRUST form will be required (it must be signed in advance of filing by the trustee, executor, liquidator, or administrator).
- A trust will have to be assigned a trust number to EFILE. More information is available on the CRA’s webpage entitled, Application for a Trust Account Number – How to apply.
March 3, 2022
Update on Certain Proposals Impacting 2022 Tax Filings
As noted in our recent tax blog, there are several Budget 2021 proposed tax measures that would impact 2021 personal income tax returns. As these measures have not yet been enacted, there has been uncertainty on how affected taxpayers should file T1 returns. In an item dated February 18 on the EFILE news page of the Canada Revenue Agency (CRA), it stated that the refundable credits changes included in Bill C-8 (Economic and Fiscal Update Implementation Act, 2021) could not be processed until the Bill receives Royal Assent. Bill C-8 was at the Report Stage in the House of Commons at the time of writing and it is unclear when Royal Assent will be received. We followed up with the CRA to see if it could provide more details, and we now understand that proposed tax changes for 2021 T1s will be administered as follows:
As such, if a return is filed claiming either of these credits prior to the legislation receiving Royal Assent, there will be a processing delay as the entire return will be held by CRA until Bill C-8 has passed. Therefore, taxpayers and their advisors will need to decide on whether they want to file the T1 return with or without a claim for these credits. If they file without the claim, any refund due without the additional credit will not be delayed but a T1 adjustment will have to be filed later once Bill C-8 receives Royal Assent.
Proposals on Electronic Filing Thresholds for Prescribed Information Returns
The February 4, 2022 draft legislation includes measures which amend electronic filing thresholds for prescribed information returns. Proposed subsection 205.1(1) of the Income Tax Regulations requires a taxpayer to file prescribed information returns (such as T4s and T5s) electronically if more than 5 of one type of a prescribed information return are required to be filed in a calendar year (the current threshold is 50). This proposed amendment applies in respect of prescribed information returns filed after 2021 and there are associated penalties for non-compliance.
Since most 2021 tax year information returns will be filed by the time the legislation receives Royal Assent, the CRA has confirmed that the new mandatory electronic filing penalty under proposed paragraph 162(7.02)(a) of the Income Tax Act (i.e. $125, which applies to paper returns containing more than 5 slips and less than 51 slips), will not be assessed for returns filed in 2022. The CRA will publish additional guidance over the coming months.
We are still confirming with the CRA on how it will be administering the proposed measures with respect to electronic filing thresholds for tax preparers and electronic payments. These measures are also effective for 2022 and have associated penalties. We will provide you with updates on this page when more information is available.
February 11, 2022
Expanded access to Local Lockdown Program and Worker Lockdown Benefit extended
On February 9, the government announced it intends to extend the expanded access to the Local Lockdown Program and Worker Lockdown Benefit (originally announced on December 22, 2021) by one month, until March 12, 2022. In other words, the expanded access to both these programs is now being extended to cover qualifying period 26 which is from February 13 to March 12, 2022.
Implementation of T1 Notices of Assessment (NOA) changes deferred until January 1, 2023
As reported in our recent blog, the draft legislation released on February 4, 2022 indicates that the effective date for the measures on the electronic delivery of certain NOAs is January 1, 2023. The CRA has now confirmed that it will not be implementing this measure until this date.
February 10, 2022
Recent updates to CRA login services
Multi Factor Authentication (MFA) process – Further to a recommendation we made last spring, the CRA has recently updated its MFA process by allowing users to opt whether they want to input the MFA passcode each time they sign in, or to just input the “one-time” MFA passcode once every 8 hours if the user is using the same device. Users logging into Represent a Client, My Account or My Business account for the first time after this update will be prompted to make this selection. Once the 8-hour period elapses, a new code will have to be entered when logging in and you can again select the 8-hour option.
This should be welcome news for many members as we enter into the 2022 tax filing season.
New email address requirement for My Account (MyA) – As noted in our January 6, 2022 news item, the CRA’s requirement for taxpayers to provide their email address to use MyA is now live. Taxpayers logging in for the fist time to MyA after this update will be prompted for their email address if there is not one already on file. If an email address is not provided, the taxpayer will not be able to access MyA. Also, all taxpayers have the option to receive CRA correspondence by mail or an email notification (if you have an email address on file already, you will have to go under “Personal Profile” to select your notification preferences).
Finally, as previously noted, the CRA has confirmed with us that mandatory email addresses in My Business Account and Represent a Client are not required at this time.
February 9, 2022
Draft legislation on immediate expensing of eligible capital property released
On February 4, 2022, Finance Canada released draft legislation and a detailed backgrounder on Budget 2021’s proposal on immediate expensing of certain capital property of up to $1.5 million per year.
The draft legislation provides that immediate expensing is available to “Eligible Persons and Partnerships” (EPOPs) which include Canadian-Controlled Private Corporations (CCPCs) (as announced in Budget 2021) as well as individuals resident in Canada and Canadian partnerships with individuals and/or CCPCs as partners.
Eligible property under the proposed legislation, known as “Designated Immediate Expensing Property” (DIEP), generally includes long lived assets subject to capital cost allowance (CCA) other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51. Further, to qualify as DIEP, the property must be acquired and made available for use within certain time limits:
- For CCPCs: the property must be acquired after April 18, 2021 and available for use before January 1, 2024
- For individuals and Canadian partnerships with only individuals as members: the property must be acquired after December 31, 2021 and available for use before January 1, 2025
- For other partnerships: the property must be acquired after December 31, 2021 and available for use before January 1, 2024
It is important to note that the $1.5 million limit is shared among associated members of a group of eligible persons or partnerships (specific rules have been provided).
As mentioned in our news item dated January 26, 2022, the CRA previously told us the following on the application of these changes:
“The CRA will only allow claims related to immediate expensing once supporting legislation has been introduced. Taxpayers are advised to request an adjustment request to their return once the supporting legislation receives Royal Assent.”
Now that supporting draft legislation has been released for comment, we will follow up with CRA on its plans for implementation timing.
February 8, 2022
Revised draft legislation on proposed trust reporting rules
On February 4, 2022, Finance Canada released draft legislation that included revisions to the trust reporting rules that were originally announced in the 2018 Federal Budget. The rules generally apply in the same manner as originally announced and include a deferral of the rules for one year. Specific changes include:
- the rules will now apply for taxation years that end after December 30, 2022
- subsection 104(1) of the Income Tax Act (reference to a trust or estate) has been amended to refer to section 150
- a specific exception has been provided to ensure that information that is subject to solicitor-client privilege does not have to be disclosed
- a reference to trusts where all the units of which are listed on a designated stock exchange has been added as a specific exception and also under the exception for trusts which hold assets having a value of $50,000 or less under proposed paragraph 150(1.1)(b)
- proposed subsection 150(1.3) has been added to ensure that so-called bare trustee arrangements are subject to the rules (arrangements under which the trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property).
It should also be noted that the Quebec government has also deferred the new reporting rules for Quebec tax purposes for one year.
February 7, 2022
Government releases draft legislation
On February 4, 2022, Finance Canada released draft legislative proposals to implement previously announced tax measures. The proposals would implement various measures announced as part of Budget 2021 and previous budgets, including measures that would:
- allow the immediate expensing of up to $1.5 million of eligible investments by certain businesses
- increase access to the Disability Tax Credit
- implement the income tax mandatory disclosure rules
- allow for administration of, and compliance with, electronic filing and certification of tax and information returns
- enhance the CRA’s authority to conduct audits and undertake other compliance activities
- limit the amount of interest and other financing expenses that businesses may deduct
- introduce additional tax reporting requirements for trusts
Finance Canada has provided a detailed backgrounder on the proposed income tax mandatory disclosure rules along with sample notifiable transactions. A backgrounder has also been provided on the proposed immediate expensing measures.
Finally, the proposals also include measures which clarify the GST/HST treatment of crypto asset mining.
See Finance Canada’s news release for a complete list of measures included in the proposals.
Canadians are invited to provide comments on the draft proposals and the sample notifiable transactions. We will be reviewing the proposals in further detail and will continue to update you on key developments and findings.
January 26, 2022
CRA update on Budget 2021 immediate expensing proposal
The CRA has shared with us the following update on the Budget 2021 proposal which would allow for the immediate expensing of certain assets:
“On April 19, 2021, the Department of Finance tabled the annual federal budget, which contained a proposal regarding immediate expensing of certain assets. In addition to the enhanced CCA deductions available under existing rules, such as the full expensing for classes 43.1, 43.2, and 53, the budget proposed to provide temporary immediate expensing for certain property acquired by a Canadian-controlled private corporation. As of December 31, 2021, the legislation to support this proposed measure is pending. The Canada Revenue Agency will only allow claims related to immediate expensing once supporting legislation has been introduced. Taxpayers are advised to request an adjustment to their return once the supporting legislation receives Royal Assent.”
The CRA has indicated that they will update their What’s New for Corporations webpage once draft legislation is made available to the public.
January 24, 2022
CRA’s Dedicated Telephone Service for income tax service providers
The CRA has asked us to remind our members of their Dedicated Telephone Service (DTS) for small and medium-sized income tax service providers. The service connects income tax professionals with experienced CRA officers from the Income Tax Rulings Directorate who can help practitioners with their interpretative issues related to the Income Tax Act. Any income tax service provider can register and benefit from the service, provided they do not belong to a firm with greater than 50 partners.
The DTS currently has 6,700 income tax practitioners registered. According to a recent survey conducted by the CRA, approximately 68 per cent of the registrants are Chartered Professional Accountants. In addition, 93 per cent of survey respondents indicated they are satisfied with the DTS and would recommend it to a colleague. The survey results confirm that the DTS has been well-received by small and medium-sized practitioners and is helping them find answers to their interpretive income tax enquiries.
Note that we have received a number of member suggestions that CRA establish a similar service to address account-specific client issues, which are administrative in nature and not part of the DTS’s mandate. Such a service would allow practitioners to bypass the general phone lines for issues that can’t be resolved online. We have informed the CRA of our members’ interest in such a service on several occasions.
For further information, we encourage you to visit the CRA’s DTS web page.
January 19, 2022
CRA releases 2021 versions of forms T2200S and T777S for home office expense claims
The CRA released the 2021 versions of the T2200S Declaration of Conditions of Employment for Working at Home Due to COVID-19 (T2200S) and T777S Statement of Employment Expenses for Working at Home Due to COVID-19 (T777S) for employee home office expense claims. Both forms are similar to last year’s versions. The CRA has also highlighted the criteria that must be met for employers interested in automating the completion of electronic T2200S forms.
January 18, 2022
CRA makes further updates to guidance on employee benefits due to COVID-19
As noted in our January 4, 2022 news item, the CRA published their administrative positions for employer-provided benefits and allowances pertaining to home office expenses, commuting and parking for 2021.
The CRA has further updated their guidance with two key changes:
- The positions are now effective from March 15, 2020 to December 31, 2022 (the previous announcement indicated the positions were effective to December 31, 2021). Note that the $500 limit for certain equipment applies for the entire period.
- The guidance on employer-provided parking has been updated as follows: “When a regular place of employment is closed due to COVID-19, including situations where employees have been sent home by the employer, or have been given the option to work from home on a full-time basis due to the pandemic, employer-provided parking at the regular place of employment will not be considered a taxable benefit by the CRA.”
Bill C-2 explanatory notes released
Finance has recently published the explanatory notes for Bill C-2.
January 17, 2022
Clarification: CRA Q&A session on new COVID-19 support measures
It has come to our attention that during the CRA Q&A session on January 13, there was an issue with an answer provided in respect of T4 reporting, and, in particular, whether amounts are required to be reported for T4 codes 57 to 60 for 2021 T4s. The CRA has confirmed that this additional reporting requirement applied only for the 2020 calendar year and therefore, no additional reporting is required for 2021.
January 14, 2022
Further update on proposed trust reporting rules
The CRA has updated their webpage on the proposed trust reporting rules with the following message:
The legislation to support this proposed measure is pending. The CRA will administer the new reporting and filing requirements once there is supporting legislation that receives Royal Assent. The CRA will continue to administer the existing rules for trusts, under enacted legislation. The proposed beneficial ownership reporting requirements will not be part of the published 2021 T3 income tax return. This note will be updated when more information is available. You should not delay filing your 2021 T3 tax return.
January 13, 2022
Update on proposed trust reporting rules
Further to our update on December 20 (see “Update on trust reporting proposals”), there have been some developments on this issue. Although the final version of the 2021 T3 Trust Income Tax and Information Return (“T3 Return”) had not been posted on the CRA website at the time of writing, a PDF version of the form was distributed by tax publishers earlier this week. That version appears to contain no reference to the new trust reporting rules.
However, we also understand that a draft version of an earlier version of the 2021 T3 return was included in some software packages and this form did have references to the proposed rules. Similarly, some software packages contained a draft Schedule 15 which would be used to report the information required under the draft legislation. This would seem to indicate that the proposed rules were addressed in earlier versions of the CRA’s trust forms but has since been removed.
Given the ongoing confusion, we have again asked both the CRA and the Department of Finance to provide an update on the status of the proposed rules as soon as possible.
January 12, 2022
Canada Emergency Business Account (CEBA) loan forgiveness repayment deadline extension
Today, the government announced that the repayment deadline for CEBA loans to qualify for partial loan forgiveness is being extended from December 31, 2022, to December 31, 2023, for all eligible borrowers in good standing.
Repayment on or before the new deadline of December 31, 2023, will result in loan forgiveness of up to a third of the value of the loans (up to $20,000).
Outstanding loans would subsequently convert to two-year term loans with interest of five per cent per annum commencing on January 1, 2024, with the loans fully due by December 31, 2025.
The government also announced that the repayment deadline to qualify for partial forgiveness for CEBA-equivalent lending through the Regional Relief and Recovery Fund is extended to December 31, 2023.
January 11, 2022
CRA to host Q&A Session on new COVID-19 support measures
Yesterday afternoon, CRA sent an email notifying key stakeholders that the CRA is hosting interactive question and answer sessions on the Canada Recovery Hiring Program, the Tourism and Hospitality Recovery Program, and the Hardest-Hit Business Recovery Program. These sessions will be held in:
- English: Thursday, January 13, 2022, 1pm – 2pm ET, with closed captioning
- French: Thursday, January 13, 2022, 3pm – 4pm ET, with closed captioning
Affected businesses and organizations can register online for these sessions.
January 6, 2022
CRA My Account: New email address requirement
The CRA recently provided an important update to its My Account (MyA) services. Starting in February 2022, the CRA will require taxpayers to provide their email address to use MyA as an additional security measure to protect taxpayers’ personal information. When the changes are made, taxpayers will be prompted for their email address upon logging in to MyA if there is not one already on file. If an email address is not provided, the taxpayer will lose their access to MyA. The CRA is suggesting that taxpayers provide their email addresses before February to avoid delays.
Taxpayers should keep in mind that by providing their email addresses before February 2022, they will no longer receive paper correspondence from the CRA. Instead, they will be sent an email notification whenever they have received CRA correspondence which they can then download by logging into their MyA. However, starting in February 2022, all users (including taxpayers who provided their email addresses before February 2022) will be given the option to receive CRA correspondence by mail or an email notification by logging into their MyA and selecting their preferred option.
Finally, the CRA has confirmed with us that mandatory email addresses in My Business Account and Represent a Client are not required at this time.
January 5, 2022
Government launches applications for the expanded Canada Worker Lockdown Benefit
On December 30, the CRA launched the application site for the expanded Canada Worker Lockdown Benefit (CWLB), which includes its list of eligible lockdown regions. Designated lockdown regions currently include British Columbia, Alberta, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador and Nunavut. Affected Canadian workers in newly designated lockdown regions can apply for the benefit now. Payments will be retroactive to December 19, 2021.
CRA extends relief for cross-border workers to 2021 taxation year
On December 30, the CRA sent a communication to stakeholders to announce that the administrative relief that was provided to Canadian-resident cross-border workers in respect of their 2020 income tax obligations will now also apply to the 2021 tax year. The details are in Section VII of the CRA’s “International income tax issues” summary.
Error in wage and hiring support spreadsheet
On December 29, the CRA sent a communication to stakeholders to notify them that there is an error in a previous version of the wage and hiring support spreadsheet which may have shown claimants that they were not eligible for the Tourism and Hospitality Recovery Program for period 22 (October 24 to November 20, 2021) when in fact they were. For more information, please see the CRA’s website.
2022 automobile deduction limits and expense benefit rates for businesses
The federal government recently announced that the automobile income tax deduction limits and expense benefit rates will be increased for 2022. For further details, see Finance Canada’s news release.
January 4, 2022
Update on employment benefits due to the impact of Covid-19
As you may recall, the CRA announced a number of administrative rules to provide relief on employment benefits due to the pandemic for 2020. The CRA has now provided an update on how these rules will apply for 2021. Generally speaking, the original announcement for 2020 will now apply from March 15, 2020 to December 31, 2021 but some additional relief has been announced.
The following points should be noted in particular:
- The computer and home equipment reimbursement rule has a maximum threshold of $500, and this limit applies for the entire period. For example, if an employee purchases a computer for $400 in 2020 and an office chair for $250 in 2021 that they will keep after the pandemic and are fully reimbursed, the amount over $500 (that is, $150) must be included in the employee’s income in 2021.
- The CRA confirmed that accountable allowances are also eligible for the equipment reimbursement rule. An accountable allowance is one where the employee must account for their expenses by producing receipts and returning any amount they did not spend.
- For employer-provided parking relief, the CRA now states that relief is applicable in situations when “a regular place of employment is closed due to COVID-19, including situations where employees have been sent home by the employer.” This wording appears to be broader than the original announcement which simply referred to the place of employment being closed.
- The rules for commuting costs will also apply to employer-provided vehicles (specific reference should be made to the CRA page for more information).
We have asked the CRA to confirm that the additional relief applies to both 2020 and 2021. Note that the government had previously announced that the automobile standby charge relief applied to both 2020 and 2021. Finally, the CRA has published the 2021 T4130 Employers' Guide - Taxable Benefits and Allowances, which also includes these recent announcements.
December 22, 2021
Federal government temporarily expands access to Lockdown Program and Worker Lockdown Benefit
On December 22, the federal government announced its intention to temporarily expand eligibility for key support programs to ensure Canadians are protected and workers and businesses get the help they need to sustain them through new and necessary public health restrictions. More details on these measures are included in their backgrounder.
December 21, 2021
Update on Bill C-2
Further to our November 25 update, Bill C-2 received Royal Assent on December 17. Note that the Bill was amended by the House of Commons Standing Committee on Finance with a change that may restrict subsidy claims made by a publicly traded company or a subsidiary of such a company that paid dividends to an individual who held common shares.
December 20, 2021
Update on home office expense deductions and form T2200
The CRA has updated their main home office expense deduction page with the following message:
“For the 2021 and 2022 tax years, employees working from home due to the COVID-19 pandemic may be able to claim up to a maximum of $500 using the temporary flat rate method, to calculate their home office expenses as announced in the Fall Economic Statement by the Government of Canada. Web content and forms are currently being updated to reflect this change.”
As many employers offered flexible working arrangements during 2021 as pandemic restrictions were lifted, we have asked the CRA to provide guidance on how these arrangements will be dealt with as they update their resources.
We will provide updates as more information becomes available.
Update on trust reporting proposals
In the 2018 federal budget, the government announced new reporting requirements that will apply to certain trusts. Under the proposals, affected trusts will be required to report the identity of all trustees, beneficiaries and settlors, as well as the identity of each person who has the ability to exert control over specific trustee decisions. Significant penalties can apply for non-compliance. These proposed rules were scheduled to apply to returns required to be filed for the 2021 and subsequent taxation years. Draft legislation for these proposals was released but has not been passed into law.
We had hoped that more information on this would be released in the recent 2021 Economic and Fiscal Update, but no new information was communicated. We have again asked the CRA to confirm what will be required for 2021 T3 returns.
December 17, 2021
CRA responds to the top questions from CPAs across Canada
This year, CPAs across the country were canvassed to pose the top questions they have for the CRA. We received hundreds of questions which we were able to streamline into 29 key questions from our members to the CRA. View the responses from the CRA.
CRA updates guidance on transitional administrative relief for the GST/HST digital economy measures
The federal government previously announced that the CRA will work closely with affected businesses and platform operators to assist them in meeting their obligations under the new GST/HST digital economy measures. Where the affected businesses and platform operators show that they have taken reasonable measures but are unable to meet their new obligations for operational reasons, the CRA will take a practical approach to compliance and will exercise discretion in administering these measures during a 12-month transition period, starting July 1, 2021.
In Excise and GST/HST News - No. 110, the CRA now indicates that before the CRA exercises its discretion in the administration of the new measures, an affected business or platform operator must first make a submission to the CRA requesting forbearance and obtain the CRA’s written approval that such discretion will be exercised.
December 16, 2021
Tax highlights of the 2021 Economic and Fiscal Update
On December 14, 2021, the Honourable Chrystia Freeland tabled the federal government's 2021 Economic and Fiscal Update. Read our summary of the key tax measures.
December 7, 2021
CRA resuming CEWS post-payment program audits
In a stakeholder email dated December 7, 2021, the CRA announced it is resuming its Canada Emergency Wage Subsidy (CEWS) post-payment audit program as of Fall 2021.
The purpose of the audits is to identify claim errors and make sure those who received CEWS benefits qualified for them. During the audit process, CRA auditors will contact claimants with a request to submit the documentation needed to verify revenue and payroll. If you and your clients require additional time to gather the requested documentation, you should contact the auditor reviewing the file.
December 6, 2021
Government releases draft legislation on delivering Climate Action Incentive (CAI) payments quarterly
On December 3, the federal government released a backgrounder and draft legislation which will change the delivery of CAI payments from a refundable credit claimed annually on personal income tax returns to quarterly payments made through the benefit system.
Starting with the 2021 taxation year, the CAI would no longer be claimed on personal income tax returns. That said, individuals would still need to file a tax return in order to receive CAI payments for the upcoming fuel charge year and also indicate whether they live outside a Census metropolitan area (and thereby qualify for the rural supplement for the upcoming year).
To give the CRA sufficient time to develop the new system, payments would start in July 2022 with a “double-up” payment. This payment would return proceeds from the first two quarters of the 2022-23 fuel charge year.
December 1, 2021
Update on the completion of T2 Schedule 141
As discussed in our March 2021 tax blog, many members will be engaged to assist clients with their accounting, bookkeeping and tax compliance needs but they may not be performing an audit, review or compilation as part of their work. In these situations, the work performed by the member will have an impact on the client’s accounts that are used by the member to prepare the corporation’s income tax return (the federal T2).
Schedule 141, Part 1 of the form deals with information on the accountant who prepared or reported on the financial statements. Part 2 of the form must be completed unless the accountant does not have a designation or if the accountant is connected with the corporation. The nature of the questions in Part 2 creates uncertainty where a member is assisting the client in preparing their financial records (for example, doing bookkeeping) and preparing a tax return but are not performing an audit, review or compilation on the financial statements.
We have discussed the need to update the form with the CRA and we understand that a new version of the form will likely be released later in 2022. In the meantime, the CRA has confirmed with us that where the member provides bookkeeping and tax preparation services but does not perform an audit, review or compilation, the response to the two questions in Part 1 of the form can be “no,” which will eliminate the requirement to complete Part 2 of the form.
CRA provides guidance to taxpayers facing extreme weather events
The CRA has provided guidance to taxpayers who will not be able to deal with their federal tax obligations due to flooding in British Columbia and Eastern Canada. In its news release, the CRA has provided more information on the Taxpayer Relief Program and provided some suggestions to reduce the disruption caused by the recent catastrophes. In particular, the CRA states that Canadians facing such extraordinary circumstances will be treated fairly if they are unable to meet their federal tax obligations during this time.
We will provide more information if there are further developments.
November 29, 2021
Watch now: Webinar on running a high-quality tax practice from The ONE Conference 2021
Tax legislation and administration are increasingly complex, bringing more risk for those who provide tax services to their clients. During the 2021 The ONE Conference, Bruce Ball, vice-president of taxation at CPA Canada, Malcolm D'Souza, executive vice-president at CPA Professional Liability Plan Inc., John F. Oakey, national director of tax services at Baker Tilly, and Sandy Stedman, partner at Schibli Stedman King discussed strategies to run a high-quality tax practice. Watch the video to find out what the most common, current sources of insurance claims filed against tax practitioners are, and learn simple but effective strategies and best practices to mitigate these risks.
You can also learn more about this topic from our September tax blog: Tips on running a high-quality tax practice. Be sure to sign up for our tax blog to join our growing audience of over 25,000 tax professionals who receive updates on the latest tax blogs as well as resources and professional development opportunities.
Reminder: CRA no long collecting Ontario information returns for corporations
As a reminder, the CRA stopped collecting the following Ontario annual information returns as of May 15, 2021:
- T2 Schedule 546 for Ontario business corporations
- T2 Schedule 548 for foreign corporations that carry on business in Ontario
- Form RC232, for Ontario Not-for-Profit Corporations
According to information provided to us, the Ontario government took over responsibility for administering the annual information return required under Ontario law as part of the implementation of their new Ontario Business Registry system.
The Ontario government has revised their website to include new information on the annual return, the steps for filing it, and using the new site more generally. It is worth noting that the Ontario annual information return is due at the same time as the corporation’s T2 income tax return for federal income tax purposes under the regulations to the Ontario Corporations Information Act.
According to the Ontario government website, “from May 15, 2021 through October 18, 2021, corporations whose annual returns were due during that period were exempt, meaning those corporations did not have to file an annual return for 2021.” As it indicates the exemption applies to any return that was due during this period, this should mean that, for example, a return for the fiscal year ended December 31, 2020 qualifies for the exemption. The website goes on to state that “corporations who have an annual return due after October 18, 2021 must file their annual returns, which they can now do directly in the registry.”
For most Ontario corporations, some work will be needed before an annual return can be filed. The steps are outlined on the website. Basically, the person doing the filing (either the business owner or a representative) must be registered (obtain a “ONe-key Account”) and the corporation for which an annual return is needed must obtain a “company key” so that the corporation can be linked to the filer’s ONe-key account. More information and contact details for the Ontario government are included on the website.
November 25, 2021
Government introduces Bill C-2 to implement recently announced changes to COVID-19 business and worker support programs
On November 24, the federal government introduced Bill C-2 to implement the recently announced changes to its COVID-19 business and worker support programs which we summarized in our October 21st post. In addition, the government provided additional guidance on the types of business that would be eligible for the Tourism and Hospitality Recovery Program in its backgrounder.
Under the proposed changes, the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS), and the Canada Recovery Hiring Program will be extended until May 7, 2022. Support under the CEWS and the CERS would be available to the tourism and hospitality sector and to the hardest-hit organizations that face significant revenue declines. Eligible entities under these rules would need to demonstrate a revenue decline over the course of 12 months of the pandemic, as well as a current-month revenue decline.
In addition, organizations subject to a qualifying public health restriction would be eligible for support, if they have one or more locations subject to a public health restriction lasting for at least seven days that requires them to cease some or all of their activities.
The proposed legislation also allows the government to extend the subsidies by regulation but no later than July 2, 2022 and the programs will continue to be administered by the CRA.
The Canada Recovery Benefits Act will also be amended as previously announced.
We will provide more information as it becomes available.
November 22, 2021
Obligations under the new GST/HST rules for digital economy businesses
As reported in our November 15 news item, the CRA has deferred the filing requirement for the first calendar year information return under the new GST/HST rules for digital sales (the new rules) to help affected platform operators adjust to the new reporting requirement.
While the CRA has deferred the filing requirement of the information return for certain platform operators for the 2021 calendar year, we wanted to remind readers that businesses affected by the new rules are still required to register and comply with all other requirements. This includes:
Note that storage service providers that fall under the new rules are still required to provide the CRA with notification by January 1, 2022, that they supply the storage services in the course of a business carried on as of July 1, 2021 (or within six months after the day on which the business began supplying the storage services in the course of a business).
November 15, 2021
GST information return for platform operators not required for the 2021 calendar year
Under new GST/HST rules that became effective on July 1, 2021, distribution platform operators in respect of a supply of qualifying goods or an accommodation platform operator in respect of a supply of short-term accommodation situated in Canada are generally required to file an information return for the calendar year.
The CRA has recently updated their GST/HST for digital economy businesses webpages to indicate that they are deferring the filing requirement for the first calendar year information return to help affected businesses and platform operators adjust to the new reporting requirements. Thus, information returns will not be required for the 2021 calendar year. Going forward, the information return reporting requirement will be in effect for all other calendar years. For example, the information return for 2022 must be filed before July 2023. The CRA indicates that procedures for filing the information returns will be issued in advance of the filing deadline.
November 9, 2021
DTC promoters restrictions regulations suspended until further notice
The CRA has recently updated their Q&A webpage on the Disability Tax Credit Promoters Restriction Act (DTCPRA) with the following statement: “Due to a court injunction, the Disability Tax Credit Promoters Restrictions Regulations are suspended until further notice.”
We believe the court case being referred to is True North Disability Services Ltd. v Canada (National Revenue), 2021 BCSC 2142 where the B.C. Supreme Court recently granted an injunction suspending the Government of Canada from implementing the $100 fee restriction on promoters under the DTCPRA until a determination is rendered by the court of the constitutional question raised in the case.
October 25, 2021
CRA My Business Account (MyBA): Capital Dividend Account (CDA) issues
It has come to our attention that there were some issues with CDA information in MyBA. We have made the CRA aware of these concerns and they are working on resolving them. To avoid confusion, corporate CDA information won’t be available in MyBA until after the issues are resolved. The capital gain and loss summary has also been taken down. The CRA expects to resolve the issues and have this information available again by December. We will keep you posted once we get more information.
October 21, 2021
Federal government proposes changes to business and worker support programs
On October 21, 2021 the federal government announced proposed changes to both business and worker support programs. It was confirmed that the existing general support programs that were scheduled to end on October 23, 2021 will in fact end on schedule. However, more focused assistance will be made available as discussed below.
Changes to business support programs included:
- Extend the Canada Recovery Hiring Program until May 7, 2022, for eligible employers with current revenue losses above 10 per cent and increase the subsidy rate to 50 per cent.
- Since the wage subsidy, rent subsidy and lockdown support will expire on October 23, 2021, the government is introducing two new targeted support programs:
- Tourism and Hospitality Recovery Program, which would provide support through the wage and rent subsidy programs, to hotels, tour operators, travel agencies, and restaurants, with a subsidy rate of up to 75 per cent.
- Hardest-Hit Business Recovery Program, which would provide support through the wage and rent subsidy programs, would support other businesses that have faced deep losses, with a subsidy rate of up to 50 per cent.
Applicants for these programs will use a new “two-key” eligibility system whereby they will need to demonstrate significant revenue losses over the course of 12 months of the pandemic, as well as revenue losses in the current month.
Businesses that face temporary new local lockdowns will be eligible for up to the maximum amount of the wage and rent subsidy programs, during the local lockdown, regardless of losses over the course of the pandemic.
These programs will be available until May 7, 2022, with the proposed subsidy rates available through to March 13, 2022. From March 13, 2022, to May 7, 2022, the subsidy rates will decrease by half.
The government also proposed the following changes to worker support programs:
- Extend the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit until May 7, 2022 and increase the maximum duration of benefits by 2 weeks.
- Introduce the Canada Worker Lockdown Benefit which would provide $300 a week in income support to eligible workers should they be unable to work due to a local lockdown anytime between October 24, 2021 and May 7, 2022.
We will provide more information as it becomes available. Backgrounders are also available on the targeted business support programs and the new Canada Worker Lockdown Benefit on the Department of Finance site.
October 14, 2021
Update to Represent a Client authorization verification process
The CRA is introducing a new verification process when authorizing a representative using Represent a Client (RAC) beginning October 18, 2021 (see October 12 stakeholder email). This new process, called “Confirm my Representative,” will require individuals and businesses to verify who has access to their tax information by signing into My Account (MyA) or My Business Account (MyBA). Once a representative has made a request to be authorized or to increase the level of authorization through RAC, the taxpayer must verify the request online within ten business days for it to be accepted. The specific steps are highlighted in the email.
Please note that this new process applies only to new authorization requests submitted by representatives through RAC.
Another option for verification has been provided that applies to individuals only. When making the request in RAC, information from the individual’s notice of assessment for a return filed at least six months ago is included in the RAC submission. Although the individual will not need to verify the request in MyA, they may be contacted by the CRA to verify the request.
We previously passed along feedback to the CRA that many members found the verification call to clients from CRA to be problematic as clients may not answer the call from CRA, resulting in cancelled authorization requests. This new process is intended to address this issue while allowing for a second level of verification.
As a reminder, there are two other ways to authorize a representative which remain unchanged:
Efilers preparing tax returns
A registered electronic filer in good standing can submit an authorization request through their EFILE certified tax software for instant online access to an individual or business account. Before submitting an authorization request via EFILE, the taxpayer must sign a signature page and the representative must keep it in their records for six years following the date that the return was electronically filed.
When compared with the revised RAC approach, there are several key differences:
- the request is not subject to the CRA verification process discussed above
- the representative will not need to know whether their client has access to MyA or MyBA or has signed up for electronic notifications
- it will eliminate the potential need for the representative to follow up with clients should they delay signing into MyA or MyBA to complete the authorization
My Account (MyA) or My Business Account (MyBA)
Within MyA and MyBA, individuals and business owners can authorize a representative online, giving representatives immediate online access to an individual or a business account. The taxpayer will need the representative’s RepID, Business Number or GroupID (whichever is applicable) to provide the authorization. Authorizations made under this method will not require CRA verification. This method may work well for clients who are familiar with MyA or MyBA since it is a one-step process.
October 12, 2021
Update on the OECD’s Two Pillar Plan and contingent application of Canadian DST
On October 8, 2021, the Organization for Economic Cooperation and Development (OECD) announced that 136 out of the 140 countries of the Inclusive Framework have agreed on the elements of its two-pillar plan on international tax reform. In particular, all G20 and OECD countries now support the plan.
Details from the agreed upon plan include:
- Pillar One will be applicable to multinational entities (MNEs) with global sales of 20 billion euro and profitability above 10 per cent, with 25 per cent of profit above the 10 per cent threshold to be reallocated to market jurisdictions. Countries will continue to develop and sign a multilateral convention (MLC) during 2022 to allow effective implementation in 2023. Of note, the MLC will require all parties to remove all Digital Services Taxes (DSTs), commit not to introduce such measures in the future, and that no newly enacted DSTs will be imposed on any company from October 8, and until the earlier of 31 December 2023 or the coming into force of the MLC.
- As part of Pillar Two, a 15 per cent global minimum corporate tax rate for MNEs whose global revenues exceed 750 million euro will apply. The 15 per cent minimum tax will be effective in 2023 and the OECD is developing model rules to bring Pillar Two into domestic legislation during 2022.
For more information, please see the OECD’s statement page, which provides various resources on the two pillars and the changes made.
Department of Finance response
In response, Finance Canada announced it will move ahead with legislation and finalize the enactment of a Digital Services Tax (DST) by January 1, 2022. The DST will only be imposed if the global agreement has not come into force by January 1, 2024. However, if the tax does apply, it will be applicable to revenues that arise on or after January 1, 2022.
This is a very unusual provision as affected corporations may be subject to a tax beginning on January 1, 2022 but will not know whether the tax has to be calculated and remitted until January 1, 2024. Similarly, the CRA will not know until early 2024 whether it needs to actually administer the tax. Although greater flexibility on timing is appreciated, this approach could create compliance costs for both corporations and the government for a tax that may not apply.
We will continue to provide updates as developments arise.
October 7, 2021
CRA releases revised Disability Tax Credit Form T2201 and a new digital application for medical practitioners
CRA has recently made changes to the Disability Tax Credit (DTC) application process. The key changes include:
As a reminder, the Disability Tax Credit Promoters Restriction Act (DTCPRA) was enacted earlier this year and will limit the amount “promoters” can charge for preparing DTC claims to $100. The DTCPRA will come into force on November 15, 2021. In our discussions with the CRA, we outlined our key concerns with the new rules and asked for further clarity on the types of services that will be captured under the DTCPRA.
We will continue to keep you informed of developments in this area.
September 23, 2021
Update on trust reporting proposals
In the 2018 federal budget, the government announced new reporting requirements that will apply to certain trusts. Under the proposals, affected trusts will be required to report the identity of all trustees, beneficiaries and settlors, as well as the identity of each person who has the ability to exert control over specific trustee decisions. Significant penalties can apply for non-compliance. These proposed rules were scheduled to apply to returns required to be filed for the 2021 and subsequent taxation years.
It should be noted that draft legislation for these proposals was released but has not been passed into law. Based on feedback received, many want to start the data collection process well before the 2021 T3 filing deadline and they have asked us whether we have any insight on when the CRA will provide details on what will be needed. We have asked the CRA whether they can release a draft version of the new T3 schedule that will have to be completed, or a list of the specific information that will be needed to complete the form. We are awaiting the CRA’s reply.
We will also follow up with the CRA on the status of T3 efiling as it was our understanding that it will be possible to efile most 2021 T3 returns which should make the filing of these returns and the additional required information easier.
Status of key announcements from the 2021 federal budget
When implementing changes announced in a federal budget, two bills are generally tabled in Parliament to enact the changes. Changes that require immediate enactment are generally included in the first bill, which is normally passed into law before Parliament adjourns for the summer (this year, it was Bill C-30, Budget Implementation Act, 2021, No. 1). The balance of the legislative changes is typically released as draft legislation during the summer and tabled in Parliament as a bill in the fall. However, legislation was not introduced for the remaining 2021 federal budget proposals before the election was called.
As there was not a change in the governing party, our expectation is that the government will follow through on their previous proposals and draft legislation will be released soon.
Some of the key proposals for which legislation has not been released include:
Income tax proposals:
- interest deductibility
- immediate expensing of capital expenditures
- rate reduction for zero-emission technology manufacturers
- CCA for clean energy equipment
- new mandatory disclosure requirements
- avoidance of tax debt rules
- hybrid mismatch arrangements
- electronic filing and certification of tax and information returns
- tax on selected luxury goods
- digital services tax
- tax on unproductive use of Canadian housing by foreign non-resident owners
We will continue to track developments on these changes and provide updates as warranted.
September 22, 2021
Issue with CRA post assessment review letters
It recently came to our attention that some CRA post assessment review letters were being delivered directly to individual taxpayers instead of their authorized representatives despite instructions transmitted as part of the EFILE process. The main concern we have is that these taxpayers might assume their representative will respond to the letter, as they have historically. Since their representative is not receiving the letter, the required response may be late or even missed, resulting in a reassessment.
We passed this issue along to the CRA and they have indicated they have identified the source of the issue and are actively working to fix it. We understand that CRA agents will contact the representatives of the affected taxpayers before further compliance action is taken and an extension will be granted based on the date of this second contact attempt.
The CRA has also posted an item on their EFILE news and program updates webpage explaining the situation.
September 21, 2021
Reminder: Upcoming CERS, CEWS and CRHP deadlines
Given the significant workload this past year for practitioners, it is possible to lose sight of deadlines that are arising for three key COVID-19 programs: The Canada Emergency Rent Subsidy (CERS), the Canada Emergency Wage Subsidy (CEWS) and the Canada Recovery Hiring Program (CRHP). These deadlines are unlike most others in terms of what day they fall on and the implications of missing a deadline. Therefore, we wanted to provide you with a summary to help you track these key dates.
A CEWS, CRHP and CERS application must be filed no later than 180 days after the end of a claim period. The deadline to amend your application or increase the claim amount is also 180 days after the end of the claim period. Reductions can be requested after the deadline. The CRA also announced that they would allow certain late-filed claims and amendments – see the April 21 post “CRA announces they will accept certain late-filed CEWS and CERS applications” below. (Note that the CRA has indicated the conditions for accepting late CRHP applications are the same as CEWS). Note that we recommended to both the CRA and Finance Canada that the CRA should be allowed to use powers similar to those under the Taxpayer Relief program for late-filed CERS and CEWS claims. Unfortunately, there has been no legislative response to this request.
The upcoming deadlines to submit, amend or increase your clients’ CERS, CEWS and CRHP claims are as follows:
* CEWS claim periods 1 to 13 and CERS claim periods 1 to 6 are closed.
** Period 21 is currently the last claim period for the CEWS. The CRHP operates on its own for period 22. Period 14 is currently the last claim period for the CERS.
Key employment issues highlighted to CRA
As the pandemic continues to evolve there are number of important employment issues on which the CRA needs to provide guidance. Some of the key issues we have highlighted to the CRA include:
Will the pandemic rules apply for 2021?
The CRA will need to provide clarity on whether the “pandemic rules” it provided in 2020 will apply in 2021 and if so, how. For example:
How will the home office expense deduction work for a hybrid work environment?
Many employers have re-opened their offices and are allowing their employees to work from home and the office. Under this hybrid work model, employers aren’t necessarily requiring their employees to work from home, rather they are allowing them to choose based on various considerations. That said, employers would have difficulty meeting social distancing and other pandemic requirements if all their employees were to return at once. All these issues pose various interpretative and administrative issues including:
- Whether employees are “required” to work from a hybrid work model is unclear. Can employers attest in an employee T2200 that they are required by their employment contract to maintain a workspace in their home where the employer and employee reach a mutual agreement? If yes, how will the CRA determine whether the employee worked principally from their home office?
- Determining the home office expense amount could get even more complicated with hybrid arrangements, so will the CRA continue to allow a flat rate method similar to the 2020 calculation?
- Will there again be a need for employers to issue two T2200s where an individual is working at home due to the pandemic but has other unrelated expenses requiring the regular T2200?
Will 2021 be notionally split in a manner similar to 2020?
The CRA will need to consider whether these employment issues should be dealt with under a combination of “normal rules” and “pandemic rules.” It seems to us that determining a specific end to the pandemic may be difficult and it may make sense to apply “pandemic rules” to the full year.
These are just a few issues we have raised to the CRA which were based on member feedback. We will continue to update you as we get more information.
Budget 2021 electronic notices of assessment proposal
The 2021 federal budget contained several proposals that will change how the CRA communicates with taxpayers and their representatives. In particular, significant issues and concerns have been identified with respect to the Notices of Assessments (NOAs) proposal.
The NOA proposal would provide the CRA with the ability to send certain NOAs electronically without the taxpayer having to authorize the CRA to do so. This proposal would apply in respect of individuals who file their own income tax return electronically through NETFILE and those who employ the services of a tax preparer that files their income tax return electronically through EFILE.
We’ll focus on taxpayers whose returns are submitted through EFILE.
Based on our discussions with the CRA, the changes planned are more far-reaching as we understand the plan is to completely eliminate the mailing of paper NOAs where a return is efiled. Under this plan, there will be two ways that these individuals can get their NOA:
- The individual can access the CRA’s My Account service, and view or download the NOA there
- The tax preparer will download and provide the NOA to the individual, presumably as some sort of requirement placed on tax preparers given the importance of making sure that taxpayers receive their NOA.
The CRA has indicated that the intention is to implement the NOA proposal before the 2022 T1 tax filing season for 2021 tax returns.
This is a significant change and there are fundamental concerns and issues that we believe need to be discussed and dealt with before implementation. We are concerned that the government’s implementation date does not allow sufficient time for a discussion on these issues, for software developers to update their products, if needed, and for tax preparers to adjust their business practices given that the final details have not yet been released.
We have made a submission to the government which urges the government to delay the implementation of the NOA proposal until the 2023 T1 tax filing season for 2022 returns. We have also provided a detailed summary of the concerns and questions around the NOA proposals as a basis for further discussions. We hope the next step in the government’s process is to consult with key stakeholders on the issues raised and to discuss solutions together along with providing the time needed for this work. We will continue to keep you updated as new developments arise.
September 2, 2021
Update on immediate expensing proposal for CCPCs
One proposed change in the 2021 federal budget would allow Canadian-Controlled Private Corporations (CCPCs) to immediately expense certain capital expenditures, effective for property acquired on or after April 19, 2021 and put into use before 2024. We have learned that the CRA will not allow the proposed deduction as legislation had not been introduced and they have disallowed the claim for some taxpayers. If and when the federal government moves forward with this proposal, it should be possible to file an amended return at that time to claim the deduction.
Regulations released for recent business support announcement
On September 1, regulations (see page 3766) were released for the Canada Recovery Hiring Program (CRHP), Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS). The regulations deal with extension issues and also a technical change that will provide relief for newer employers using the general approach in situations that were outlined in the July 30 Department of Finance backgrounder.
August 16, 2021
Update regarding communications during the federal election period
Please note that, with a federal election underway, a number of Elections Canada regulations are now in full force until the end of polling day (September 20), when Canadians vote. During the election period, these rules will have a direct impact on CPA Canada’s online content in relation to government or policy issues. As a result, we may not be able to communicate in the manner to which you have become accustomed.
August 3, 2021
More information on July 30 Finance Canada support programs announcement
In its July 30 announcement, Finance Canada introduced a change that will deal with a technical issue related to the revenue decline calculation for employers that are using the general approach for the Canada Recovery Hiring Program (CRHP), Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS).
The issue was discussed in our recent webinar with the CRA on the CRHP. Under the general approach, an employer compares its current revenue with the same period before the pandemic. Once an approach is picked in period 5, then the employer must follow this approach for all remaining periods. In the question we asked the CRA, the employer was considering their claim for period 14 whereby revenue for March 2021 is compared with revenue for March 2019. This was problematic, as the employer in question was a new business that was commenced in May 2019. In its response, the CRA said that claiming the CEWS/CRHP in period 14 and subsequent periods would be problematic because the employer cannot switch to the alternative method. However, they also pointed out that the matter had been referred to Finance Canada.
Given the filing deadline for period 14 is October 7, there is a concern whether legislation will be enacted in time, and we will follow up with the CRA on how they plan to apply this change.
In addition to this change, the draft legislation also includes proposed amendments that will enact the June 2 Finance Canada announcement (see our June 3 news item).
July 30, 2021
COVID-19 benefits and business supports extension and proposed changes
On July 30, 2021 the federal government announced the extension of COVID-19 support measures for individuals and businesses. These extensions include:
- extending the eligibility period for the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and Lockdown Support until October 23, 2021, and increasing the rate of support employers and organizations can receive during the period between August 29 and September 25, 2021
- extending the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB), and the Canada Recovery Sickness Benefit (CRSB) until October 23, 2021
- increasing the maximum number of weeks available for the CRB, by an additional four weeks, to a total of 54 weeks, at a rate of $300 per week, and ensuring it is available to those who have exhausted their employment insurance (EI) benefits
The government is also proposing to offer businesses greater flexibility when calculating the revenue decline used to determine eligibility for the wage and rent subsidy programs and the new Canada Recovery Hiring Program. Further, it has released draft legislation that provides clarity on previously announced changes to the wage subsidy for furloughed employees.
More details on the extension and these proposed changes can be found in the government’s backgrounder.
July 27, 2021
Watch now: Canada Recovery Hiring Program (CRHP) webinar
CPA Canada co-hosted this webinar with the CRA focusing on the CRHP. During the webinar, the CRA provides an overview of the program and demonstrates their online CHRP tools and application portal. In addition, the CRA responded to some of the top questions that CPA Canada received on the CRHP.
July 26, 2021
CRA publishes guidance on remission review requests
The CRA has recently published guidance on its existing process for requesting a remission review, including information on:
- when to request a remission review
- how to make a request
- what happens after making a request
For further information, please refer to the CRA’s webpage.
July 23, 2021
Recent CERS rulings
The CRA recently provided some guidance with respect to the Canada Emergency Rent Subsidy (CERS) in two new technical interpretations:
In Technical Interpretation 2020-0872521I, the CRA was asked whether the owner of a qualifying property that operates a hotel, or other similar business, would be considered to use its qualifying property primarily to earn rental income and therefore not eligible to claim the CERS for that qualifying property. While a question of fact, the CRA provides some helpful guidance. The CRA indicates that generally, any income earned from the use or occupation of a property is considered to be rental income. However, where an entity also provides significant additional services that are integral to the success of its ordinary activities, it is the CRA's position that the operation of that entity would be earning income from the services provided instead of rental income. Finally, in determining whether the qualifying property is used primarily to earn rental income, the CRA confirms that “primarily" generally means more than 50 per cent and that various factors, such as the proportion of time the property is used to earn rental income, or the proportion of space, in relation to the total area of the property that the property is used to earn rental income, may be used.
In 2021-0893621E5, the CRA considers whether contents insurance is included in qualifying rent expense for the purposes of calculating the CERS. The CRA indicates that whether a particular payment for insurance made by an eligible entity in respect of a qualifying period is qualifying rent expense depends on the terms of the relevant insurance contract. Generally, if the insurance is on the qualifying property, then the amount paid for the insurance should be part of qualifying rent expense. In contrast, if the insurance is for content or personal property, then the amount paid for the insurance should not be included in qualifying rent expense.
July 21, 2021
Process for making a bulk taxpayer relief request released
The CRA has recently released guidance on how authorized representatives can make a bulk request for the cancellation of penalties and interest on behalf of multiple taxpayers, for which the request for relief have common reasons or similar facts. The CRA indicates the bulk request can be made with respect to penalties or interest under the Income Tax Act or the Excise Tax Act. When submitting a bulk request, representatives should ensure the following:
- authorization is on file for each taxpayer
- returns have been filed or remittances have been made
- penalties or interest have been charged
Further instructions can be found on the CRA’s webpage.
July 20, 2021
Revised news release: Bill C-208 and inter-generational transfers
The Department of Finance Canada issued a revised news release on July 19 on Bill C-208. The original release caused a significant amount of confusion and many questioned whether Finance Canada could change the coming into force date of the bill. The revised release sets out the federal government’s plans in more detail and the key highlights include:
Confirmation was provided that the bill is the law, and it currently applies as passed by Parliament.
Finance Canada believes that the bill allows for surplus stripping as it could apply where there is no genuine intention to transfer ownership of the business and as such, compromises the integrity of the tax system. In particular, reference is made to converting dividends into capital gains which are taxed at a lower rate. The same risk presumably applies to gains eligible for the capital gains exemption although that is not discussed specifically.
Further draft legislation will be released which will contain more rigorous rules that will deal with issues such as whether the new owners are active in the business. The goal will be to ensure that the rules are not used for “artificial tax planning.”
There will be a consultation on the proposals when they are released.
The final legislation will apply as of the later of either November 1, 2021 or the date of publication of the final draft legislation.
We will continue to monitor this issue and provide an update when there is new information.
Canada Recovery Hiring Program (CRHP) study: Participants needed
The CRA is seeking CPA participants for its CRHP study. The purpose of this study is to evaluate the web content, as well as the online calculator used in the CRHP application process. The study takes approximately 45 minutes. The study will be administered live by a User Experience Specialist and will focus on the CRHP application process to determine if and where participants may encounter/experience challenges.
If you are interested in participating, please take a moment to complete the CRA’s screener survey.
Upon completion of the survey, the CRA will contact selected participants regarding next steps.
July 7, 2021
Submit your questions now: Canada Recovery Hiring Program (CRHP)
CPA Canada is recording a webinar with the CRA focusing on the CRHP. During the webinar, the CRA will provide an overview of the program and demonstrate their online CHRP tools and application portal. In addition, the CRA will respond to some of the top questions that CPA Canada receives on the CRHP.
You can submit your questions on Slido (enter code #949225) until Sunday, July 11, 2021.
A recording of this webinar will be available on this page after July 14, 2021.
Update on Bill C-208: Intergenerational transfers
Bill C-208, which was a private member’s bill aimed at the issue of tax inequity for non-arm’s length intergenerational transfers of a business, received Royal Assent on June 29. When selling a corporation to another arm’s-length corporation, it is generally possible to realize a capital gain and if the shares qualify, a gain eligible for the capital gains exemption. However, if the same shares are sold to a non-arm’s length corporation, such a gain could be deemed to be a dividend under Section 84.1 of the Income Tax Act. Bill C-208 sought to eliminate this inequity.
Bill C-208 changed the rules that apply to non-arm’s length sales so that deemed dividend treatment would not apply if certain conditions are met. As the bill was considered by Parliament, the Department of Finance Canada expressed concerns that the draft changes could allow for inappropriate surplus stripping. Due to this, on June 30, Finance Canada announced that:
"The federal government is committed to facilitating genuine intergenerational share transfers, while preventing tax avoidance that undermines the equity of Canada’s tax system. The government proposes to introduce legislation to clarify that these amendments would apply at the beginning of the next taxation year, starting on January 1, 2022."
We will continue to monitor this issue and provide more information as it becomes available.
June 30, 2021
GST/HST registration for digital economy businesses now available
On June 29, Bill C-30 (Budget Implementation Act, 2021, No.1) received royal assent and the new GST/HST rules for digital economy businesses will be in effect on July 1. On June 30, the CRA launched its new registration system and is now accepting GST/HST registration requests under these new measures.
New Canada Recovery Hiring Program (CRHP) web page and calculator now available
On June 30, the CRA launched its CRHP online calculator and web page to help eligible employers prepare their CRHP applications.
The online calculator integrates the new CRHP with the Canada Emergency Wage Subsidy (CEWS), automatically showing applicants which subsidy will provide them with more support based on the information they enter. The CRHP web page includes detailed information about eligibility requirements, how payment periods are structured and how the CRHP is calculated.
Eligible employers will be able to apply for the CRHP starting July 7 through My Business Account and Represent a Client. The CRA will begin to issue CRHP payments to eligible employers during the week of July 12.
June 17, 2021
Update on simplified GST/HST registrations
The CRA has updated their webpage to indicate that they will now be opening the simplified GST/HST registration site for digital businesses on June 25, 2021 (previously June 21, 2021).
In addition, we wanted to highlight that the CRA indicates in their guidance that “a person other than the business owner, such as an accountant, lawyer or another company employee, can submit the registration form on behalf of the business.” We confirmed with the CRA that the representative does not need to be authorized to submit a request for registration under this approach. The CRA indicated, however, that after the registration is complete, a representative will have to provide proper authorization for any further communication with the CRA.
June 10, 2021
CRA to open simplified GST/HST registration for digital businesses on June 21, 2021
The CRA has recently updated their webpages relating to the new GST/HST obligations under the proposed measures that were announced by the Government of Canada last fall. The webpages include several tools and resources to help businesses determine if they need to register under the new regime, the options for GST/HST registration, determining place of supply, and what the compliance obligations are. Of note, the CRA has announced that the simplified registration site will open on June 21, 2021.
Lockdown support for closed travel agencies, stores, and food court restaurants
Two recently published technical interpretations, 2020-0873601I7 and 2021-0880401I7, deal with whether various mandated closures would qualify for lockdown support. The scenarios presented to the CRA were:
- a travel agency, which was required to close its office due to lockdown measures in effect in the city where it is located, but employees were able to perform their duties from home
- a retail store located in a shopping mall where a public health order mandates the closure of the store for in-person shopping but may provide sales online or by phone via curbside pick-up or delivery
- a food court restaurant in a shopping mall where a public health order requires the closure of the food court seating area
In its responses, the CRA provides a useful analysis of the various conditions of “public health restriction” under subsection 125.7(1). Of particular note, the CRA indicates that in determining whether a public health restriction requires that some or all of the activities of the eligible entity at the qualifying property are required to cease (i.e., "restricted activities"), the CRA provides that this determination is based on the type of activity rather than the extent to which an activity may be performed, or limits placed on the time during which an activity may be performed.
The CRA also notes that for a particular order to meet the conditions of a public health restriction under subsection 125.7(1), it requires that it is reasonable to conclude that at least approximately 25 per cent of the qualifying revenues of the eligible entity for the prior reference period that were earned from the qualifying property were derived from the restricted activities. The CRA indicates that the entity may have some flexibility in the method it can use to satisfy this condition, provided that it is appropriate for those particular circumstances.
Thus, in the case of a travel agency, if, prior to the closure, clients made in-person visits to the office to arrange travel bookings and in-person visits ceased upon closure of the office as the result of an order or decision, then those activities could be considered restricted activities and this condition could be satisfied. The fact that employees started working from home and started making travel bookings over the phone once the office closed would not preclude this condition from being met. The CRA applies this same rationale for the closed store in the shopping mall but still providing curbside pickup or delivery for its customers (i.e., the in-person shopping could be considered the restricted activity).
For the food court restaurant, where the public seating areas for customers of the restaurant are required to be closed, the CRA indicates that the "sit-down dining" activities could be considered restricted activities, and the fact that take-out service may continue would not preclude the restaurants from having restricted activities related to "sit-down dining". It is not clear to us how the 25 per cent of revenues condition noted above would be documented in this situation.
Finally, the CRA re-confirms that for the condition that the restricted activities are required to cease for a period of at least one week, there is no requirement this must be within a particular qualifying period.
June 9, 2021
CRA confirms federal SR&ED extension does not apply to British Columbia or Nova Scotia R&D claims
Further to our post on June 8, 2021, the CRA has now published its guidance on the impact of the federal Scientific Research and Experimental Development (SR&ED) extension to provincial R&D claims. The guidance specifically indicates that the federal extension does not apply to the British Columbia Scientific Research and Experimental Development Tax Credit and Nova Scotia Research and Development Tax Credit. As noted in our earlier post, the CRA recommends that affected corporations should file their federal and provincial claim forms without taking into account the federal COVID-19 extension.
June 8, 2021
SR&ED extension to September 1, 2021 for certain corporations
The CRA updated their Scientific Research and Experimental Development (SR&ED) Filing Requirements Policy in November 2020 to reflect legislative changes that had been announced and the extension of SR&ED reporting deadlines because of the COVID-19 pandemic. Appendix A of the policy provides a table which summarizes the CRA’s extensions to SR&ED filing deadlines. Of note, the table in section A.1 indicates that because the T2 filing due date for corporations with taxation year-ends from November 30, 2019, to February 29, 2020 were extended to September 1, 2020, the federal SR&ED reporting deadlines for these tax years have been extended to September 1, 2021. The CRA has reconfirmed that these due dates still apply.
We asked the CRA to confirm how this extension would apply to provincial and territorial research and development (R&D) credits. The CRA has indicated that in general, for provinces where the wording in their respective tax Acts for their R&D reporting deadline does not rely on the filing due date, the deadlines for the provincial R&D credit are not extended. The CRA recommends that such taxpayers should file their federal and provincial claim forms without taking into account the federal COVID-19 extension.
For provinces administered by the CRA that have the same or similar wording in their provincial income tax Acts, such as “12 months (or one year) after the taxpayer’s filing due date,” the CRA stated that the deadline to file for these R&D tax credits is extended in the same way as the extended federal SR&ED reporting deadline.
Please see the CRA’s Summary of provincial and territorial research and development (R&D) tax credits for further information on the deadlines that apply for each province or territory administered by the CRA.
We understand that the CRA will be publishing guidance on this issue on their website shortly and we have suggested that they confirm the due dates that apply in each province or territory.
June 3, 2021
Details of the New Canada Recovery Hiring Program and extension of business support programs released
On June 2, the Government of Canada released backgrounders providing details on the Canada Recovery Hiring Program, as well as on the extension and changes to the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs as announced in the 2021 federal budget. It appears that the details contained in the backgrounders are consistent with what was in the budget documents.
May 27, 2021
CRA publishes new technical interpretations on COVID-19 relief programs
The CRA continues to publish technical interpretations providing additional guidance related to the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS):
Owner-manager remuneration and CEWS
In CRA technical interpretation 2020-0865791I7(E), the CRA was asked to comment on whether certain amounts paid or credited by an eligible entity to an eligible employee, who is an owner-manager, are considered eligible remuneration for purposes of CEWS in a number of different scenarios.
The CRA confirmed that salary and wages paid to an owner-manager retroactively in respect of a week during a qualifying period can generally be considered eligible remuneration for purposes of the CEWS to the extent that the eligible remuneration reflects the actual amount paid in respect of the particular claim period. However, in the situation where an owner-manager’s salary expense is reflected by journal entry only, with a corresponding credit to the shareholder account, the CRA appears to indicate that such salaries and wages are not considered eligible remuneration. Finally, if the corporation pays the salaries and wages to an owner-manager which are then immediately returned to the eligible employer as either a shareholder loan or capital contribution, the amounts will not qualify as eligible remuneration for purposes of the CEWS.
We will be following up on the CRA’s comments with respect to remuneration credited to a shareholder loan account to clarify whether the comments relate to the specific situation in the interpretation or the practice of crediting salary amounts to a shareholder loan account more generally.
Claiming a lesser CEWS amount possible
In CRA technical interpretation 2020-0850231E5 (E), the CRA was asked whether an eligible entity can submit a CEWS application for a lesser amount than that determined by the formula in the Income Tax Act. The CRA indicated that since the Act calculates the subsidy amount for an eligible employee in respect of a week in the qualifying period, the qualifying entity has discretion to claim a lesser amount in its application by excluding any employees from the CEWS calculation under the Act.
Rent paid for a boat slip may qualify for CERS
Technical interpretation 2021-0875571I7(E) deals with whether a boat slip is considered real or immovable property such that rental expenses for the boat slip qualify for CERS. The CRA provides general comments and indicates that the taxpayer should look to common law principles (or the Civil Code of Quebec if the property was located in Quebec) to determine whether a particular property, such as a boat slip, would be considered real or immovable property.
CRA publishes guidance on how to tell if you’ve been contacted by the CRA
On May 26, 2021 the CRA published guidance that could help your clients determine whether they have been contacted by a legitimate CRA agent. To help protect your clients from scams, it’s important that they know when and how the CRA might contact them, especially as personal income tax return verifications resume.
May 25, 2021
CERS online calculator fixed for lockdown support
The CRA has made changes to the CERS online calculator regarding the calculation of lockdown support. See our April 14, 2021 posting for further details on the issue with the calculator. The CERS webpage now clarifies that if a lockdown period is one week or longer, a business may qualify for lockdown support even if the minimum lockdown period of one week overlaps two different claim periods.
The CRA notes that if the CERS calculator was used on or before May 20, 2021, it may not have accurately calculated lockdown support if the lockdown period overlapped two or more claim periods.
CRA publishes new technical interpretations on COVID-19 relief programs
The CRA has recently published a number of technical interpretations providing some new guidance related to the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS):
Guidance on “qualifying property” for CERS
In CRA technical interpretation 2020-0870041I7 (E), the CRA is asked whether the determination of a qualifying property depends on its legal title. The CRA was also asked whether a property that contains a self-contained domestic establishment (SCDE) can be a qualifying property for the purposes of the CERS.
The CRA concludes that while the legal title of a property may be relevant in determining whether a particular property is a qualifying property, it is not necessarily the case that a qualifying property of an eligible entity will always conform to its legal title. As such, a single legal title may, depending on the circumstances, contain more than one qualifying property. Similarly, a particular property may be a "qualifying property" for more than one eligible entity.
On SCDEs, the CRA indicates that the definition of qualifying property excludes property that is a SCDE used by the eligible entity. However, in some situations, a particular property may include a portion that is subject to the SCDE exclusion in the definition of qualifying property. In such a case, the fact that a part of a property is excluded may not, depending on the circumstances, preclude the remaining part of the property from being a qualifying property.
Rent on barber/hairdresser chairs may be eligible for CERS
In Technical Interpretation 2020-0869981I7 (E), the CRA indicates that where a barber or hairdresser (the “Stylist”) rents or leases space, a chair, or both, from the owner of a barbering or hairdressing establishment (the “Salon”), the rent may be claimed as a "qualifying rent expense" for the purposes of the CERS. The CRA provides that since the "chair rent" is rent for the use of, or right to use, an area within the salon that is real or immovable property such that it is capable of being a qualifying property, it may be a qualifying rent expense for the stylist, provided all of the conditions in the definition of qualifying rent expense are met. The CRA notes that this is a question of fact that must be determined by considering all of the circumstances of a particular situation, including the particular written agreement between the stylist and the landlord.
Business interruption insurance proceeds is qualifying revenue for CEWS
Technical Interpretation 2020-0852571I7 (E) deals with whether amounts received by an eligible entity from a business interruption insurance policy is included in an entity's qualifying revenue for purposes of the CEWS. The CRA indicates that since an entity would typically acquire business interruption insurance to replace lost revenue when the entity is unable to carry on its ordinary activities, insurance proceeds would generally be included in qualifying revenue and would not be considered an extraordinary item. The CRA was also asked where such insurance proceeds are included in revenue in a prior period, and are based on a gross revenue benchmark less cost of sales, whether an eligible entity can determine their qualifying revenue for the particular prior reference period based on the insurance proceeds plus a notional amount to represent what their revenue would have been during this period had they been able to operate. The CRA indicates that, since only amounts resulting in an inflow of cash, receivables or other consideration are included in qualifying revenue, therefore, an eligible entity would not be able to gross up their qualifying revenue by a notional amount.
May 10, 2021
CRA publishes guidance on new digital economy GST/HST measures
As of July 1, 2021, digital economy businesses may have GST/HST obligations under proposed measures that were announced by the Government of Canada last fall. To help affected businesses prepare for their new compliance obligations, the CRA has launched a new webpage which includes a questionnaire to help businesses determine if they need to register under the new regime, as well as instructions and examples.
The federal government had announced in the 2021 federal budget that the CRA will work closely with businesses to assist them in meeting their obligations. The CRA notes on their webpage that where the affected businesses and platform operators show that they have taken reasonable measures but are unable to meet their new obligations for operational reasons, the CRA will take a practical approach to compliance and exercise discretion in administering these measures during a 12-month transition period, starting July 1, 2021.
May 7, 2021
Update on discussions with the CRA on 2020 tax returns
As discussed in our April 27 update, while we are disappointed with the federal government’s decision to not provide an extension for personal tax returns, we are continuing our discussions with the CRA on issues related to personal tax returns and tax deadlines. Issues discussed with the CRA include the following:
We recommended that the CRA provide clear guidance on situations where relief will be provided for late-filed T1 returns through the Taxpayer Relief Program. Also, the process for requesting relief should be as simple as possible on the assumption that the number of requests for relief will be larger than normal. Some specific suggestions include:
- Determine whether there are situations where “proactive relief” could be provided by the CRA without an application made by the taxpayer, such as for those taxpayers who have filed on time in prior years. Such an approach could also be used for smaller amounts.
- For tax preparers, to the extent that proactive relief is not available, allow them to submit a list of relief requests to streamline the process.
- Look for other ways to simplify and speed up the process.
CRA verification processes
We asked the CRA to keep in mind that many incomplete T1 returns may have been filed since no extension was allowed and that it should expect that it will take more time to finalize these returns through T1 adjustments. We also reminded the CRA that other significant deadlines are approaching on June 15 for T1s for the self-employed (and spouses/partners) and June 30 for T2s for corporations with a calendar year end. Consequently, the workloads of many firms remain high. With this in mind, we asked the CRA to delay verification work until after June 30 where possible.
Corporate tax return deadlines
On corporate tax returns, the province of Quebec has announced that relief similar to that provided to individuals is not planned and we assume the same will be true federally for T2 returns. Since relief for corporations will likely need to come through the Taxpayer Relief Program, we will discuss how this program will be administered for late-filed corporate tax returns with the CRA.
Finance publishes explanatory notes for the 2021 budget bill
Finance Canada has recently updated their website to include the explanatory notes for the proposals included in Bill C-30 (which includes certain Budget 2021 measures and other previously announced measures).
May 3, 2021
Government introduces Bill C-30
On April 30, 2021, the federal government introduced Bill C-30, an Act to implement certain provisions of the budget tabled in Parliament on April 19, 2021, and other measures. As mentioned in our previous post, this bill contains some of the measures introduced in the 2021 federal budget, as well as some other previously announced measures.
April 30, 2021
Government tables Notice of Ways and Means Motion to implement certain 2021 budget proposals and other measures
On April 28, 2021, a Notice of Ways and Means Motion (NWMM) was tabled to implement some of the proposals included in the 2021 federal budget. It also includes a number of other previously announced measures, such as:
- changes to the tax treatment of employee stock options
- GST/HST measures on e-commerce supplies
- temporary adjustments to the automobile standby charge to take into account COVID-19
- changes to the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs
For further details, please see the NWMM.
April 21, 2021
CRA announces they will accept certain late-filed CEWS and CERS applications
On April 21, 2022, the CRA added questions 26-01 and 26-02 on their CEWS FAQ page. The CRA has provided guidance on the circumstances where it will accept late-filed amended or original CEWS applications.
In addition, the Canada Emergency Rent Subsidy (CERS) webpage has been updated to reflect that the CRA will also accept late-filed CERS claims under the same circumstances as provided for late-filed CEWS applications. Please review the CRA's CEWS FAQs and CERS webpage for further details.
CRA provides additional guidance on cross border tax issues
CPA Canada submitted a list of questions to the CRA which were gathered from members relating to our April 1 update of the CRA’s Guidance on International Income Tax Issues Raised by the COVID-19 Crisis. The questions have been reviewed and the CRA has provided responses to us which we are able to share. It is unclear at this time whether these questions and answers will be posted on the CRA website.
April 14, 2021
Issue with CERS calculator and lockdown support
It has come to our attention that there is an inconsistency in the way the CERS calculator is computing lockdown support amounts. In particular, the issue of concern arises when a lockdown period spans two qualifying periods.
The definition of “public health restriction” in subsection 125.7(1) states that the business must be in lockdown for a period of at least one week. While not totally clear, our interpretation is that the one-week period does not have to be fully within the qualifying period for which a claim is being made. Accordingly, a one-week period that straddles the end of one qualifying period and the beginning of another may still satisfy the requirement and a claim can be made in both periods. The CRA has confirmed with us that this is also their interpretation.
Unfortunately, the CERS calculator currently does not reflect this interpretation. Currently, the calculator only allows a lockdown support amount where the lockdown period within the claim period is at least seven days.
The CRA is aware of this inconsistency and has indicated they will be updating the calculator to address this situation shortly.
April 9, 2021
Computing qualifying revenues for businesses claiming the CERS and CEWS
During the CRA Roundtable (2021-0879631C6 E) at the Tax Executives Institute (TEI) Virtual Midyear Conference, the CRA was asked a number of questions. In one question, the CRA was asked whether an eligible entity would have to compute its qualifying revenue using the same approaches and elections for both the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rental Subsidy (CERS). The CRA confirmed that an eligible entity would have to calculate its revenue reduction for both subsidies using the same rules (i.e., the same elections and approaches) that are applicable to the qualifying period.
The CRA provided an example where Corporation A and Corporation B, both eligible entities, are members of an affiliated group and have jointly elected that the qualifying revenue of the affiliated group be determined on a consolidated basis under paragraph 125.7(4)(b) for qualifying period 9 for purposes of the CEWS. This election apparently allowed Corporation A to apply for the CEWS for its employees. Corporation B did not apply for the CEWS for qualifying period 9 but wishes to apply for the CERS for period 2 (the corresponding qualifying period for CERS). Since Corporation A and Corporation B have jointly elected that the qualifying revenue of the affiliated group be determined on a consolidated basis for that qualifying period, the consolidated amount must be used as the qualifying revenue by Corporation B in determining its revenue reduction for the CERS.
April 1, 2021
CRA launches dedicated hotline for new digital economy GST/HST measures
The CRA has informed us that effective March 31, 2021, they have launched a dedicated GST/HST hotline and generic email address for businesses that are affected by the proposed new GST/HST digital economy measures. These businesses and their representatives are encouraged to contact the CRA at the numbers and dedicated email address below, should they have any technical enquiries on the proposed measures or should they require assistance navigating the simplified GST/HST registration, reporting and remittance framework.
Canada and the U.S.: 1-833-585-1463 (toll-free)
Elsewhere: 1-613-221-3154 (collect calls are accepted)
March 18, 2021
CRA publishes further guidance on the Canada Emergency Wage Subsidy (CEWS)
The CRA recently published two new technical interpretations that provide some further guidance relating to the CEWS.
Business assets acquired during a reference period: In technical interpretation 2020-0870981E5(E), the CRA addresses a situation where the business assets are acquired during a reference period and whether a proration is necessary when determining qualifying revenue. Assuming the election under paragraph 125.7(4.1)(e) is being made and the acquirer is claiming the CEWS, the acquirer will include the vendor’s revenue from the acquired assets in the current reference period (along with its own). Similarly, the vendor’s revenue from the acquired assets for the prior period will be added to the acquirer’s revenue for that period. There is no proration for either calculation and these amounts will be excluded from the vendor’s revenue for CEWS purposes. Also, where both the vendor and the acquirer have eligible remuneration during the current reference period, they can both claim the CEWS if they otherwise qualify.
Eligible remuneration and outsourced staff: In technical interpretation 2020-0856781E5 (E), the CRA provides guidance on the implications to CEWS in scenarios between an outsource staffing company and their clients. The CRA indicates that generally, a staffing company's staff are employees of the staffing company and not that of its client. Therefore, a payment made by the client to a staffing company would not be considered eligible remuneration paid to an eligible employee of the client for CEWS purposes. The CRA is also asked to comment on the implications of the situation where the outsource staffing company has received the CEWS and the client receiving the staffing services has received an offsetting discount for the subsidy received. For the client, the discount offered by the outsource staffing company should not, in and by itself, reduce the amount of its eligible remuneration for the wage subsidy.
IRS extends the U.S. filing deadline for individuals to May 17
The U.S. Treasury Department and Internal Revenue Service announced on March 17 that the U.S. federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.
On the personal tax deadline for Canada, we are continuing to discuss the issue with the CRA.
March 4, 2021
CRA provides guidance on definition of “qualifying rent expense” for Canada Emergency Rent Subsidy (CERS)
In a recent CRA technical interpretation (2020-0873491E5), the CRA provides some guidance on what additional expenses would meet the definition under paragraph 125.7(1) “qualifying rent expense” of the Income Tax Act.
The CRA confirms that where a lease is not a net lease, only the gross rent would meet the definition of qualifying rent expense. As a result, the CRA indicates that even if the lease contains a requirement for a tenant to pay for utilities, any payments made by the tenant for utilities will not be a qualifying rent expense.
With respect to net lease arrangements, the definition provides that additional amounts required to be paid under the net lease by the eligible entity may be a qualifying rent expense. For example, if a net lease requires a tenant to pay utilities as part of regular instalments of operating expenses customarily charged to the tenant, the CRA indicates that this payment is a qualifying rent expense.
The CRA notes however, to be considered a qualifying rent expense, the lease must require the payment; a lease that is silent with respect to a particular item does not, in the CRA’s view, satisfy this condition. Similarly, where a lease states that a tenant is “responsible for” a certain cost (but paying the cost is not a requirement of the lease), this would generally not constitute a qualifying rent expense. An example is provided by CRA to illustrate this.
March 3, 2021
Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) amounts to remain unchanged through to June 2021
On March 3, the federal government announced new details on the CEWS and CERS that will be applicable from March 14, 2021 to June 5, 2021. The backgrounder to the news release included the following:
- The rate structures for the CEWS for active employees, the CERS, and lockdown support that are currently in place until March 13, 2021, will be extended from March 14 to June 5, 2021.
- The CEWS rate structure for furloughed employees will also remain the same as the rate structure currently in place.
- For the revenue-decline reference periods, to ensure that the general approach continues to calculate an organization's decline in revenues relative to a pre-pandemic month, the prior reference periods will be based on calendar months from 2019, effective as of the qualifying period from March 14 to April 10, 2021. (See the backgrounder for a table which summarizes the proposed reference periods.)
An additional elective alternative baseline remuneration computation for March 14 to June 5, 2021 is proposed to ensure that the baseline remuneration comparator remains appropriate. In particular, an eligible employer would be allowed to elect, for qualifying periods from March 14 to June 5, 2021, to use the period of March 1, 2019 to June 30, 2019, or July 1 to December 31, 2019 to calculate baseline remuneration. The CRA will administer this measure on the basis of draft legislative proposals released with the announcement.
February 26, 2021
CRA follow-up calls on RAC authorization requests
The CRA recently announced on the Represent a Client main page that all electronic authorization requests made by representatives for individuals and business clients will not be activated until the representative has been verified. And more specifically, clients may be contacted by the CRA to verify the representative’s authorization request.
Members have reached out to us, expressing significant concerns around the specific methodology that is being used. We have been told that the CRA is calling their clients to verify the representative’s authorization request and if no one answers these calls, the authorization request is cancelled. Although we appreciate that the CRA has a duty to ensure access to taxpayer data is properly authorized, the newly implemented process poses various efficiency and privacy concerns for firms and their clients. One common observation is that many have trained their clients not to provide details over the phone when called on an unannounced basis by anyone due to the current high level of phone fraud.
We have provided feedback to the CRA and we will continue to provide updates on any developments on this issue.
February 23, 2021
New requirements for electronic signatures on Form T183
As previously reported, the CRA will continue to accept an electronic signature on Form T183, Information Return for Electronic Filing of an Individual’s Income Tax and Benefit Return, for the 2021 tax filing season. CRA has now posted information on additional requirements relating to electronically signed Form T183s. In particular, Form T183 has been updated to include a date and timestamp, and three new EFILE fields have been added (electronic signature indicator, signature date, and signature time), which must all be transmitted when Form T183 is electronically signed.
We understand this may impact workflow for some tax practices. Note that we asked the CRA last fall and again more recently to not change processes related to Form T183 for this tax filing season due to the pandemic. We will provide an update if more information becomes available.
February 18, 2021
Update on CRA multi-factor authentication
On February 5, we posted an item on the CRA’s plan to introduce multi-factor authentication for electronic access to most electronic services. Last week, we had a discussion with the CRA on considerations to keep in mind and our recommendations. Although it does appear that strengthened security is a long-term need, we recommended that mandatory implementation not go forward during the tax filing season that is about to begin. Although the CRA has not announced specific timing, they did provide the update below to us. With a reference to the “coming months,” it appears that the CRA may follow our recommendation on timing. We will pass on more information as it is received.
Multi-Factor Authentication for representatives
The CRA is introducing a Multi-factor authentication (MFA) process to enhance the security of its online services and ensure the safety and protection of taxpayer information. As part of the EFILE community, in the coming months you will be asked to enrol in MFA before gaining access to online services.
We understand you may have questions about how MFA will impact your day-to-day work. As we progress with implementing MFA for representatives, we’re working to ensure that your feedback is addressed and questions are answered. We will be sharing more details in the coming months, but for now please visit our questions and answers webpage on Multi-factor authentication to access CRA login services.
We would also like to take the opportunity to remind you of the value of changing passwords and user IDs regularly. As we head into tax-filing season, we encourage you to change your password if you have not done so recently. This will help protect the personal and tax information of yourself and your clients. Learn more about how you can improve the security of your online CRA accounts.
February 09, 2021
Federal government announces CERB repayments for self-employed individuals and 2020 income tax debt interest relief
On February 9, the federal government announced that self-employed individuals who applied for the Canada Emergency Response Benefit (CERB) and would have qualified based on their gross income will not be required to repay the benefit, provided they also met all other eligibility requirements.
CRA and Service Canada will return any repaid CERB payments to self-employed individuals whose net self-employment income was less than $5,000 and who have already voluntarily repaid their CERB payments. Additional details will be available in the coming weeks.
The government will also provide interest relief to Canadians who received COVID-related income support benefits. Once individuals have filed their 2020 income tax and benefit return, they will not be required to pay interest on any outstanding income tax debt for the 2020 tax year until April 30, 2022.
To qualify for targeted interest relief, individuals must have had taxable income of $75,000 or less in 2020 and have received income support in 2020 through one or more of the following COVID-19 measures:
- the Canada Emergency Response Benefit (CERB);
- the Canada Emergency Student Benefit (CESB);
- the Canada Recovery Benefit (CRB);
- the Canada Recovery Caregiving Benefit (CRCB);
- the Canada Recovery Sickness Benefit (CRSB);
- Employment Insurance benefits;
- or similar provincial emergency benefits.
The CRA will automatically apply the interest relief measure for individuals who meet these criteria.
Additionally, any CRA-administered credits and benefits normally paid monthly or quarterly, such as the Canada Child Benefit and the goods and services tax/harmonized sales tax credit, will not be applied to reduce individuals’ tax debt owing for the 2020 tax year.
We will be providing more information as additional details become available.
February 5, 2021
CRA introduces client multi-factor authentication to access online services
The CRA is introducing a Multi-Factor Authentication (MFA) process to enhance the security of its online services. When enrolled, the user logging in to CRA online services will receive a one-time passcode by text message or telephone call, which will need to be entered in order to continue the login process. As an authorized representative, you will be asked to enroll in MFA before gaining access to your client’s online services such as Represent a Client and Auto-Fill T1 and T2 functionality, plus My Account and My Business Account for your own personal tax information.
The enrollment process includes providing the CRA with a telephone number where the one-time passcode will be delivered, choosing a method of delivery and the language of the message.
After enrollment, a passcode will be sent each time you log on to a CRA service which will have to be entered and re-authentication will be needed if your session times out. This will occur following a period of prolonged inactivity.
We are following up with the CRA on a number of issues, including when the new process will begin, and we will provide updates as more details become available. For more information, go to the multi-factor authentication to access CRA login services.
January 14, 2021
Canada Emergency Wage Subsidy (CEWS) FAQs updated
On January 13, the CRA updated its FAQ page on the Canada Emergency Wage Subsidy (CEWS). Many of the updates relate to the extension of CEWS to March 13, 2021, however the CRA provides new guidance on some key issues. Some of the highlights of the latest update are as follows:
- Clarification on cost sharing arrangements (CSAs) (Question 3-9): The CRA previously confirmed in this question that each of the separate eligible employers in a CSA may qualify for CEWS in respect of their portion of eligible remuneration paid to each eligible employee by the agent, as long as all of the other eligibility criteria have been met. In the recent update, the CRA adds that this may be the case even though the business number is attached to an administrator of the payroll that is not a ‘person or partnership’ for any other purpose under the Income Tax Act.
- Deeming rule for Period 11 (Question 5-03.2): Generally, to determine if the deeming rule under subsection 125.7(9) applies, an eligible employer must compare its reduction in revenue for the current claim period with its reduction in revenue for the immediately preceding claim period. However, the relevant reference periods for claim periods 10 and 11 are the same (this is to better align the reference periods with the claim periods). Thus, for the purposes of the deeming rule, the immediately preceding claim period for claim period 11 will be claim period 9 and not claim period 10.
- Qualifying revenue and Canada Emergency Commercial Rent Assistance (CECRA) (Question 6-2.2): The CRA indicates that the forgivable CECRA loan is not considered an extraordinary item and would be included in the property owner’s qualifying revenue. The rationale provided by the CRA is that this is because the CECRA loan replaces a property owner’s regular rental revenue from their normal operations.
- Qualifying revenue and the forgivable portion of a Canada Emergency Business Account (CEBA) (Question 6-2.3): The CRA indicates that the forgivable portion of a CEBA loan meets all the characteristics of an extraordinary item and thus, the forgivable portion of a CEBA loan is not included in qualifying revenue.
- Bonuses (Question 17-5): The CRA provides some clarifications around the payment of bonuses and determining eligible remuneration and baseline remuneration. In particular, the CRA indicates that in determining the baseline remuneration of a non-arm’s length employee, a proration will generally be necessary to determine a weekly amount if a bonus was paid in the baseline period.
November 3, 2020
More on the CEWS changes in Bill C-9
Bill C-9 was introduced on November 2 and contained amendments to the Canada Emergency Wage Subsidy (CEWS) and legislation for the new Canada Emergency Rent Subsidy. On the CEWS amendments, it generally implements the changes announced in the October 14, 2020 Finance Canada backgrounder . Some additional changes were also included:
- Application deadlines – As the program was extended to June 2021, the deadline for applications was amended to be the later of January 31, 2021 and 180 days after the end of the particular qualifying period.
- Asset purchases: The asset purchase rule has been broadened for arm’s-length acquisitions. Rather than having to acquire all or substantially all of the business property, the condition can be met by acquiring all or substantially all of the property of the seller that can reasonably be regarded as being necessary for the eligible entity to be capable of carrying on a business of the seller, or part of a business of the seller, as a business.
- Elections under paragraphs 125.7(4)(c) and (d): The technical issue that prevented elections under these paragraphs after period 4 has been corrected.
- Amending or revoking elections: An eligible entity may now amend or revoke an election made on or before the date that the application is due for the first qualifying period in respect of which the election is made.
- Eligible employees: an eligible employee will include employees employed primarily in Canada and this requirement is restricted to the period the individual is employed by the eligible entity.