COOK ROBERTS LLP TAX GROUP: COVID UPDATE
Andre Rachert, Shelley Spring and Craig Young
APRIL 6, 2020
Pro Bono Assistance: Wills Drafting
- The Cook Roberts LLP wants to help B.C. residents. Getting infected with the COVID virus increases social isolation, and will have severe health consequences for many of the infected people.
- Effective immediately, the Tax Group will provide Wills drafting services on a pro bono basis for any person in B.C. who tests positive for the COVID virus. Also, if you have clients who are front line medical professionals, we will extend them the same courtesy.
- The witnessing requirements for creating a valid will could be quite complicated in the circumstances. We have worked out protocols to meet those witnessing requirements.
- Anyone who fits one of the categories described above or any other client who wants a will drafted can call Andre, Shelley or Craig at the Tax Group general telephone line 250-413-8803.
COVID and Tax Compliance
Staying up to Date
Information about the government’s financial response to the COVID virus is everywhere on the internet. The quality of the information on a particular site cannot be guaranteed. However, there are a few places to search where the information is up to date and trustworthy.
- The Department of Finance (DOF) sets fiscal policy. The DOF has a COVID website. https://www.canada.ca/en/department-finance/news/2020/03/canadas-covid-19-economic-response-plan-support-for-canadians-and-businesses.html.
DOF refers matters to the CRA for implementation.
- The CRA has set up a COVID page. https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html
- CPA Canada is in contact with the CRA. The CPA website has regular updates. The website is located at https://www.cpacanada.ca/en
CPA members can get more detailed information by logging in.
- The Canadian Tax Foundation is also providing regular updates. Their website is located at https://www.ctf.ca/CTFWEB/EN/Pages/Covid19.aspx. The membership area contains more details.
One thing to remember is that the COVID responses are fluid. If a taxpayer is relying on a government statement, that statement should be printed and kept with tax documents. Once a website is updated old statements disappear into the ether.
Always go back to the source material websites listed above for updates. They will be the most current and will be free of speculation.
Everyone is interested in the wage subsidy. The details are still unfolding. Please go to the following DOF link for more information. https://www.canada.ca/en/department-finance/news/2020/04/government-announces-details-of-the-canada-emergency-wage-subsidy-to-help-businesses-keep-canadians-in-their-jobs.html
GST and Withholding Taxes
Resist deferring GST remittances and withholding tax remittances.
If a company is going broke there is always a temptation to dip into the GST account and the payroll remittance account to keep the company up and running. GST and payroll remittances are considered trust funds. Corporate directors will be personally liable for any shortfall in the payment of those taxes. The same rule applies to PST. Directors are liable for unpaid PST. One of the main reasons for incorporating is to limit the liability of the investors. When a director dips into the GST or payroll tax account that limited liability is lost.
- If you have a choice of paying GST, payroll remittances, or corporate tax (but not all three), the funds should be directed at GST and withholding tax.
- If you are in a personal shortfall situation you should set up a shareholder loan with your company or include the amount in income – even if you cannot pay the tax. Do not just remove funds from the company without recording the transaction. Under subsection 15(1) of the ITA a removal of funds or the payment of personal bills with corporate money will create a taxable benefit and no corresponding expense in the company.
- A loan to a shareholder will eventually taxed under subsection 15(2). Under this provision shareholder loans are not converted into income until one year after the year in which the loan was made. A repayment in that time frame will only result in an interest charge under section 80.2. The loan is converted to income after the limitation period for repayment. However, by operation of paragraph 20(1)(j) of the ITA if the loan is repaid after it has been included in income, the taxpayer will get a credit against current tax payable.
In summary, if your company has a choice of paying a trade creditor or remitting GST or withholding taxes, pay the GST and withholding taxes. Historically, the CRA does not allow for discounting tax payable or an extended repayment period for GST and withholding taxes. It is easier to work out a payment arrangement or a payment reduction for the unpaid electric bill than the unpaid GST bill.
Updates to this Information Memo will be provided as the COVID response develops.