COVID-19 Brings Tax Changes To Ontario

written on behalf of Feigenbaum Law

Our last few blogs have focused on how COVID-19 has brought changes to how the Canadian and American governments are approaching tax issues at the height of the 2020 tax season. This week, we would like to turn our focus on Ontario specifically and the tax implications being felt here. Many of the updates we will share today can be found in the government document, Ontario’s Action Place: Responding to COVID-19, March 2020 Economic and Fiscal Update.

The province is implementing a number of relief measures in order to take as much burden off of individuals and businesses as possible while the province and the county face extreme economic challenges due to the pandemic. In an effort to allow businesses to keep as many people employed as possible during a dramatic economic downturn, the province is implementing the following measures that will enable employers to focus resources on payroll rather than provincial and municipal tax expenditures:

Temporary Doubling of the Employer Health Tax Exemption

The Employer Health Tax (EHT) is a payroll tax that is paid by employers and is based on their total annual remuneration in Ontario. It caps out at 1.95%. Private-sector employers in the province with remuneration of less than $5 million are eligible for an exemption on EHT of up to $490,000 of their payroll. Those with a total remuneration over $5 million and public-sector employers, do not qualify for this exemption.

For this year (retroactive to January 1, 2020), the government has raised the exemption level to $1 million for 2020, with the regular exemption to come back into place on January 1, 2021.

Interest and Penalty Relief for Businesses

As of April 1, penalties and interest will not apply to Ontario businesses who have missed filing or remittance deadlines for provincially administered taxes. This grace period of sorts will be in place until August 31, 2020. This relief applies to the following tax programs:

• Employer Health Tax;
• Tobacco Tax;
• Fuel Tax;
• Gas Tax;
• Beer, Wine and Spirits Taxes;
• Mining Tax;
• Insurance Premium Tax;
• International Fuel Tax Agreement;
• Retail Sales Tax on Insurance Contracts and Benefit Plans; and
• Race Tracks Tax.

It’s worth noting that no documentation to support late filing or payments is necessary, nor are businesses required to notify the Ministry of Finance about their inability to meet deadlines.

Regional Opportunities Investment Tax Credit

The government has proposed a 10% refundable Corporate Income Tax Credit for capital investments called the Regional Opportunities Investment Tax Credit. It is available to Canadian-controlled private corporations who make qualifying investments that become available for use on or after March 25, 2020.

Qualifying investments include expenditures for constructing, renovating or acquiring eligible commercial and industrial buildings and other assets (there are regional restrictions as well). The tax credit is available for expenditures in excess of $50,000 and has a limit of $500,000.

Postponement of planned property tax reassessment

Finally, the government has announced it is postponing the property tax reassessment originally planned for 2021. The idea behind this postponement is to allow municipalities to focus their resources on a response to COVID-19. This means that 2021 assessment rates will be the same as they were in 2020. This measure will provide assistance to both individual and corporate taxpayers with property holdings in the province for the current year. However, it remains to be seen whether rates will face a greater increase than normal in subsequent years to make up for the shortfall faced by municipalities in 2020.

At Feigenbaum Law we offer personal, confidential service to individuals and corporations with all manner of tax and legal issues in Canada and cross-border with the United States. We regularly assist high net-worth individuals with tax returns and complex tax planning and have a wealth of experience navigating the complexities of the U.S. and Canadian tax systems. Please call us at 1-877-275-4792 or reach us online to see how we can help you today.