In-depth: economic response measures to COVID-19
*Last updated: April 9, 2020
The provincial and federal governments are working in tandem to provide support to businesses during the outbreak of COVID-19, and all of the economic stress related thereto. Both have been rolling out updates on a daily basis.
The below summarizes high points for businesses regarding the response first from Nova Scotia, and second from the federal government, specific to businesses and maintaining economic stability. This includes tax considerations and responses from the Canada Revenue Agency that directly benefit businesses, and should be kept in mind as businesses wade through uncertain financial future.
Borrowers and lenders should take a close look at their lending instruments, secured assets, and any relevant timeframes regarding current or potential legal proceedings and consult with us regarding next best steps.
Further Stewart McKelvey Thought Leadership is available on the Federal Government Aid Package, specific to Employers, for questions concerning Business Interruption Insurance, for questions of Contractual Review, and for general information concerning COVID-19 itself.
Nova Scotia’s Economic Response Measures
On March 22, 2020, Nova Scotia declared a State of Emergency. Industry support measures were rolled out on March 20, 2020, and continue to be updated on a regular basis. Stewart McKelvey will continue to stay appraised of all updates and provide information and support related thereto.
To ensure businesses are abiding by the State of Emergency, businesses not in conformity with social distancing rules may be fined $7,500.00, with the possibility of multiple fines in a given day for non-compliance. The Province has declared that the following essential service sectors are exempt from the five-person-or-fewer gathering rules:
- Food, agri-food and fisheries;
- Transportation, including trucking, rail and transit;
- Construction and manufacturing;
- IT, telecommunications and critical infrastructure;
- Public services, such as police, fire and ambulances.
Nova Scotia’s Minister of Business Geoff MacLellan announced the “first wave of support” for small and medium-sized businesses, announcing a $161 million investment in the following initiatives:
- Deferred Loan Repayments, Interest-Free
Deferred payments and interests until June 30 on all government loans, including those under the Farm Loan Board, Fisheries and Aquaculture Loan Board, Jobs Fund, Nova Scotia Business Fund, Municipal Finance Corp. and Housing Nova Scotia; and
Deferral of principal and interest payments until June 30 on the Small Business Loan Guarantee Program, as administered through credit unions.
- Updated Small Business Loan Guarantee
Enhancement of Small Business Loan Guarantee Program such that it will be easier for small businesses to access credit up to $500,000. For those businesses that wouldn’t normally qualify, the government will guarantee the first $100,000.
- Deferred Government Fees
Deferred government related fees, including business registration renewal fees and workers compensation premiums, until June 30th.
- Prompt Payment of Government Contracts to Businesses
A “prompt payment process” such that businesses with contracts with the government for services will be paid in five days, and not the usual 30.
- Encouraging Commercial Rent Deferral
The Nova Scotia government has encouraged landlords of commercial leases to defer rent payments from their commercial tenants for three (3) months, spreading the deferred rent over the rest of the lease term. If landlords are unable to recover deferred rent because of a shut down or restriction flowing from the Health Protection Act, landlords may be eligible for up to $50,000 and $15,000 respectively in the form of a government-backed guarantee.
For further discussions on the Commercial Rent Deferral program, please refer to our Nova Scotia Rent Deferral Support Program: COVID-19 Economic Response.
- Worker Emergency Bridge Fund
A $20 million dollar program for individuals otherwise ineligible for employment insurance. This would provide individuals a one-time, $1,000 payment as a bridge while the federal government expands eligibility for the Canada Emergency Response Benefit. More information will follow regarding applications and payment time.
- Small Business Impact Grant
A $20 million dollar program for businesses, who can apply for a grant equal to 15% of their revenue from sales from either April 2019 or February 2020. This grant can be worth up to a maximum of $5,000 per business and can be used for any purpose.
This grant is stackable and can be used with any other provincial or federal economic relief. You are eligible for this grant if you are a “small business” that has been forced to close, or have had to substantially reduce your operations as a result of the health protection order. The guidelines do not define small business, but “typically have fewer than 200 employees”.
To apply, you will need:
- Your CRA business number;
- Banking information;
- Unaudited income statement for either April 2019 or February 2020;
- Some recent tax documentation (depending on your business type – more information to follow in this regard); and
- A void cheque (scanned image).
More information on eligibility and applications is available here.
These measures are “effective immediately” and are available to businesses as of March 20, 2020, with the exception of the Worker Emergency Bridge Fund and Small Business Impact Grant (both of which should become available in the coming days). The provincial government is remaining in close contact with the federal government to ensure a fulsome, united, and cohesive response to COVID-19 and the economic hardship imposed by such widespread change.
The above measures are designed to facilitate businesses staying afloat during this period of uncertainty, and seek to keep more money in the hands of businesses. Alongside the federal measures discussed below, expansive credit facilities and tax deferrals utilized together may allow for significantly improved business viability during this period.
As a final note, anyone who has travelled outside of the Province of Nova Scotia must isolate for 14 days upon return as of March 23, 2020. If this poses issues for your workplace, please refer to our Labour and Employment guides on maintaining business continuity with your employees during this time.
Federal Economic Response Measures
Since March 11, 2020, the federal government has been rolling out business aides in light of the COVID-19 outbreak to support businesses. These include changes to the Employment Insurance Sickness Benefit, Work-Sharing programs, and other employee-centric aides, as well as significant investment in small business loans, bridge programs, and deferrals of payments.
As a response to the ongoing economic hardships, the Prime Minister announced Canada’s COVID-19 Economic Response Plan on March 18, 2020. These include:
- Work-Sharing Program
Expanding the Employment Insurance Work Sharing Program, which allows businesses to reduce employee hours as a result of challenges beyond the control of employers, and relaxation of the eligibility requirements.
- Temporary Wage Subsidy
Providing a Temporary Wage Subsidy which is to equal 75% of remuneration paid between March 16, 2020 and June 20, 2020, up to $847 per week, per employee. Some important details to note are as follows, and were updated on March 30, 2020:
- You are an eligible employer for this program if you:
- (i) Are an individual, taxable corporation, partnership consisting of eligible employers, non-profit organization, or registered charity; and
- (ii) have suffered a decrease of more than 30% of revenue as a result of the COVID-19 pandemic.
- You will have suffered a decrease in revenue of more than 30% if:
- (i) The revenue lost is from business carried on earned from arms-length sources, as calculated by using the employer’s normal accounting method, and excluding revenues from extraordinary items and amounts on account of capital.
- The subsidy will be based on employees on eligible remuneration paid between March 15 and June 6, 2020, which is the greater of:
- (i) 75% of the amount of remuneration paid, up to $847/week; and
- (ii) the amount of remuneration paid, up to $847/week, or 75% of the employee’s pre-crisis remuneration, whichever is less.
- Employers may thus be eligible for up to 100% of the first 75% of pre-crisis wages/salaries of their employees.
- If you do not deal at arms’ length with an employee, the subsidy amount will be limited to eligible remuneration pay, up to a maximum benefit of $847/week or 75% of pre-crisis remuneration.
- Eligibility will be determined by the change in an employer’s monthly revenues, year over year, based on the following periods:
- You are an eligible employer for this program if you:
|Claiming Period||Reference Period for Eligibility|
|Period 1||March 15 – April 11||March 2020 over March 2019|
|Period 2||April 12 – May 9||April 2020 over April 2019|
|Period 3||May 10 – June 6||May 2020 over May 2019|
g. This program replaces the original 10% wage subsidy offered, and any contributions paid under that program will be deducted from any paid under the new program. However, organizations that do not qualify for the Canada Emergency Wage Subsidy (75%) may be eligible for the previous, 10% wage subsidy for the period of March 18 to June 20, 2020.
Businesses can apply for the Wage Subsidy through their CRA My Business Account portal. Employers must demonstrate the losses to arm’s-length revenues and remuneration paid to employees. More information on the application will be available in the coming days, but employers should work to collect this information in the interim.
For further discussions on the Emergency Response Act and the Temporary Wage Subsidy, please refer to our Tax Update – Response to COVID-19.
- Business Credit Availability Program
Establishing a Business Credit Availability Program allowing the Business Development Bank of Canada and Export Development Canada to provide more than $10 billion in additional support (mostly small and medium-sized businesses), allowing BDC and EDC to coordinate directly with private lenders for credit solutions for businesses – this is available immediately and interested borrowers should contact their financial institutions directly.
Involved financial institutions include: Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce, HSBC Bank Canada, Toronto Dominion Bank, Royal Bank of Canada, National Bank of Canada, Desjardins, Laurentian Bank of Canada, Canadian Bankers Association, and the Canadian Credit Union Association.
- Deferred Income Tax Payments and GST Remittances
Deferred payments of income tax obligations, as well as custom duties owed for imports, becoming due between now and September 2020, including balances owing, as well as installments, under Part I of the Income Tax Act – these amounts will not accrue interest or penalties during this period.
GST remittances by businesses otherwise in March, April, or May, 2020 are suspended until June 30, 2020.
- Suspension of CRA Assessments, Audits
No initiation of post assessment GST/HST or Income Tax audits for the next four (4) weeks, and suspension of audit interaction with taxpayers and representatives.
- Increasing Available Farm Credit
Increase of $5 billion in lending capacity to Farm Credit Canada for producers, agribusiness, and food processors.
- Deferral of Farm Loans Coming Due
All eligible farmers who have an outstanding Advance Payments Program loan due on or before April 30 will receive a Stay of Default allowing for an additional six (6) months of repayment, and farmers with outstanding loans will have the opportunity to apply for an additional $100,000 interest-free loan (as long as their total Advance Payments remain within the $1 million cap).
- Mobile Assistance
Over-the-phone assistance from the Liaison Officer to help small businesses understand their tax obligations and benefits under the various programs being offered during this time.
- Canada Emergency Business Account
A new program which will provide up to $25 billion to eligible financial institutions so they can provide interest-free loans to small businesses. Eligible financial institutions can then provide interest-free loans in the forms of line of credit of up to $40,000 to businesses with payrolls of less than $1 million. A quarter of this loan (up to $10,000) is eligible for complete forgiveness. Additional details on accessing this program are to be announced in the coming days.
- Small and Medium-sized Enterprise Loan and Guarantee
Up to $40 billion in lending, supported through Export Development Canada and Business Development Bank, for guaranteed loans to small and medium-sized companies that require greater help to meet their operational cash flow requirements. A “small and medium-sized business” in Canada is any business with fewer than 500 employees.
Export Development Canada will provide guarantees to financial institutions for the issuance of new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized businesses. These loans will be 80% guaranteed by Export Development Canada, to be repaid within one year.
Small and medium-sized businesses can also get support through a new Co-Lending Program provided by Business Development Bank of Canada in partnership with financial institutions to co-lend term loans to businesses for operational cash flow requirement. Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program, which will in turn be risk-shared at 80% between the Business Development Bank of Canada and the financial institutions.
- Other Economic Assistance:
- Domestic Stability Buffer
Lowering the Domestic Stability Buffer by 1.25% of risk-weighted assets, effective immediately, allowing banks to inject $300 billion in additional lending in the economy.
- Lowered Canada Interest Rate
Cutting the interest rate to 0.75% to facilitate extending credit to both households and businesses.
- Mortgage Purchase Program (Increasing Market Liquidity)
Launching the Insure Mortgage Purchase Program, where the government will purchase up to $50 billion of insured mortgage pools, providing long-term stable funding to banks and mortgage lenders, allowing liquidity in the mortgage market. With this, the Bank of Canada will also provide funding and broaden eligible collateral for its term repurchase agreement lending facilities, all of which is designed to promote lending and accessible capital to businesses and banks across Canada.
On an individual level, the Government of Canada has rolled out the Canada Emergency Response Benefit (“CERB“). This taxable benefit would provide $2,000 per month for up to four months for workers who lose their income as a result of COVID-19. This replaces the previously proposed Emergency Care Benefit and Emergency Support Benefit. This will operate in addition to many of the tax benefits and deferrals, including a delay of the filing deadline until August 30, 2020.
The above measures, as well as the CERB received Royal Assent on March 25, 2020 at an emergency convening of the House of Commons. If you need assistance applying to any of the above resources, please don’t hesitate to reach out to us.
The federal economic response plan is summarized by the federal government here.
The Canada Revenue Agency has prepared the following tax-filing and payment deadlines chart that may be of helpful reference for businesses and business-owners:
|COVID-19: Canada Revenue Agency Response|
|Individuals||The deadline to file your income tax and benefit return will be deferred until June 1, 2020.|
|The deadline to pay any balance due for your individual income tax and benefit return for 2019 has been extended from April 30, 2020, to September 1, 2020. This means you will not be assessed any penalties or interest if your balance due is paid by September 1, 2020.|
|Self-employed and their spouse or common law partner||For self-employed individuals or those who have spouses or common-law partners that are self-employed, the deadline to pay any balance due for your individual income tax and benefit return has been extended from April 30, 2020, to September 1, 2020.|
|Businesses||The deadline for businesses to pay any income tax amounts that become owing or due after March 18, 2020 and before September 1, 2020 has been extended to September 1, 2020. This means you will not be assessed any penalties or interest if your balance due is paid by September 1, 2020.|
|Trusts||For trusts with a taxation year end of December 31, 2019, the filing due date of March 31, 2020, will be deferred to May 1, 2020.|
|Charities||The Charities Directorate is extending the filing deadline to December 31, 2020, for all charities with a Form T3010, Registered Charity Information Return due between March 18, 2020 and December 31, 2020.|
More updates will follow in the coming days, if not hours, in this regard. We intend to keep apprised of the situation, as mentioned, and will be posting regular updates.
This update is intended for general information only. If you have questions about the above, please contact a member of our Commercial Transactions/Agreements group or your normal contact for business advice.
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