Update: On March 27, 2020, the federal government announced that the temporary wage subsidy discussed in this article would be increased to 75% of wages paid, and backdated to March 15th. It is expected that further details will be released early next week. We will provide further updates as additional information becomes available.
Covid-19 will have a significant impact on our non-profit sector. Many charities and non-profit organizations (NPOs) will face financial and operational challenges, while also seeing demand for their services increase. The federal government has announced various measures to help individuals and businesses deal with the effects of the COVID-19 pandemic and it is expected that further announcements will be made as the situation continues to evolve. Below is a summary of the measures announced to date that relate to the non-profit sector.
Tax Filing Deadline
Registered charities are required to file their annual information return (T3010) within 6 months of their fiscal year end. For charities that are required to file their return between March 18, 2020 and December 31, 2020, the deadline has been extended to December 31, 2020. For charities that had a return due before March 18, 2020, there does not appear to be any relief.
The above measure does not appear to apply to the filing deadlines for NPOs that are not registered charities. NPOs are required to file an annual information return (T1044) if certain financial thresholds are met, and a corporate tax return (T2) if the NPO is incorporated. Both returns must be filed within 6 months of the NPO’s fiscal year end.
Temporary Wage Subsidy
The federal government announced a temporary wage subsidy for employers for a period of three months. Effective immediately, charities and NPOs that pay remuneration to an employee (such as salary, wages, or taxable benefits) are permitted to reduce remittances of federal, provincial, or territorial income tax by the amount of the subsidy. To be eligible, organizations must have an existing business number and payroll program account with the CRA on March 18, 2020. The amount of the subsidy is equal to 10% of the remuneration paid, to a maximum of $1,375 per employee and $25,000 in total. This measure will apply to remuneration paid on or after March 18th and before June 20th and only applies to remittances made to the CRA.
The CRA has a frequently asked questions page (available here) with additional information about the subsidy. In the FAQ, the CRA indicates that the measure does not reduce the amount of CPP contributions or EI premiums that are required to be remitted. The CRA also states that if an organization is eligible for the subsidy but chooses not to reduce payroll remittances during the year, the amount of the wage subsidy can be paid to the organization at the end of the year, or transferred to the next year’s remittance.
Given the amount of the subsidy, the measure may not provide much relief for larger charities and NPOs, but may have a more significant impact on smaller organizations.
The CRA has announced that the Charities Directorate has suspended all operations until further notice, including registrations and audit activity. Accordingly, any new charitable registration applications or changes to existing charitable registrations will not be processed at this time and will be considerably delayed. It is not clear whether completed applications will still be accepted by the Charities Directorate and held in queue for processing when operations are resumed.
Should you have any questions or require further information, please contact any member of the Clark Wilson Tax Group.