CANADA: COVID-19 VAT IMPLICATIONS

CANADA – Update 8^th July

Extensions of time for filing Manitoba retail sales tax, payroll tax returns (COVID-19

The filing deadlines for Manitoba’s retail sales tax returns and for returns related to the health and post-secondary education tax levy filed by eligible small and medium-size businesses are extended as relief measures in response to the coronavirus (COVID-19) pandemic.

Source Credit – KPMG

CANADA – Update 6^th July

GST/HST Update And End Of GST/HST And Customs Duties Deferral

On June 29, 2020, Finance Canada announced that there will be no extension of the relief that was announced by the CRA on March 27, 2020, which allowed all businesses to defer, until June 30, 2020, any GST/HST payments or remittances that became owing on or after March 27, 2020, and before July 2020.

Source Credit – osler.com

CANADA – Update 15^th June

Reminder, 30 June deadline for GST/HST and QST (COVID-19)

The Canada Revenue Agency (CRA) and Revenu Quebec in April 2020 announced that businesses may defer goods and services tax (GST) / harmonized sales tax (HST) and Quebec sales tax (QST) remittances related to returns due between 27 March 2020 and before June 2020, to 30 June 2020, without interest and penalties being assessed, in light of the coronavirus (COVID-19) pandemic.

There have not been any further extensions regarding GST/HST, QST and custom duties obligations. Accordingly, businesses are reminded of the 30 June 2020 deadline for filing returns and paying their GST/HST and QST (and customs duties) amounts. A failure to file returns or remit the taxes by 30 June 2020 could be subject to assessments of penalties and interest.

Extensions for sales tax in Manitoba and provincial taxes in Newfoundland and Labrador

Manitoba has extended the deadline to 20 July 2020 for retail sales tax (RST) and the health and post-secondary education tax levy (a payroll tax), applicable to certain small- and medium-sized businesses. The new relief was announced 29 May 2020.

Newfoundland and Labrador extended the filing and remittance deadline to 20 August 2020 for certain provincial taxes originally due between 20 March 2020 and 31 July 2020.

Source Credit – KPMG

CANADA – Update 25^th May

Delay on all GST/HST payments, including other import taxes, until June

The federal government has provided for a delay on all GST/HST payments, including other import taxes, until June.

Source Credit – Richard Asquith – (Avalara)

CANADA – Update 13^th May

Finance Canada provides relief on imports of certain medical goods incl. PPE

The Government of Canada continues to take immediate, significant and decisive action to protect Canadians’ health and safety, and to support Canadian jobs and the economy during the COVID-19 pandemic.

Today, Finance Minister, Bill Morneau, announced action to further ensure Canadians have access to personal protective equipment (PPE) and other necessary medical equipment. To keep Canadians safe, the government is waiving tariffs on certain medical goods, including PPE such as masks and gloves. This will reduce the cost of imported PPE for Canadian businesses, which face tariffs of up to 18 per cent in some instances, help protect workers, and ensure our supply chains can keep functioning well.

This action complements the government’s ongoing efforts to increase domestic PPE production by Canadian industry. Tariff relief for these goods will remain in place for as long as necessary to deal with the COVID-19 crisis.

Source Credit – Ottawa, Ontario – Department of Finance Canada

CANADA – Update 5^th May

Annual GST/HST returns of certain financial institutions due 30 June

 The deadline for annual goods and services tax (GST) / harmonized sales tax (HST) / Quebec sales tax (QST) information returns filed by financial institutions with a 31 December year-end is 30 June 2020.

 Entities that are not typical financial institutions may also have to file annual returns by 30 June 2020. The annual information returns are to be filed by financial institutions, and that term includes listed financial institutions, selected listed financial institutions, and other entities deemed to be financial institutions. The deadline is a date that is no later than six months after the year-end if they are registered for GST/HST/QST and have an annual income of more than $1 million* in the last tax year. Certain investment plans that qualify as selected listed financial institutions are exempt from filing the annual information returns.

Source Credit – KPMG

CANADA – Update 28^th April

Sales tax relief, property insurance contracts in Manitoba (COVID-19)

Manitoba will eliminate its 7% retail sales tax (RST) on certain residential and commercial property insurance contracts, effective 1 July 2020. This is tax relief being provided in response to the coronavirus (COVID-19) pandemic.

This new exemption will only apply to new or renewed insurance contracts that come into effect after 30 June 2020. Accordingly, insurers and brokers must adjust their systems to reflect this change, and will have to work to identify which contracts will be exempt from RST and which will continue to be RST taxable after June 30, 2020.

The province recently announced this change as part of its relief plan in response to COVID-19.

Source Credit – KPMG

CANADA – Update 14^th April

Reminder for businesses of indirect tax obligations (COVID-19)

Businesses may encounter certain challenges—such as cancelled transactions, supply chain changes, online sales from new jurisdictions, and employees working remotely—from the COVID-19 pandemic.

Indirect tax considerations may not drive these types of business decisions, but costs may be affected by indirect tax implications. Thus, it is prudent for businesses to keep the indirect tax rules in mind when working through these issues, and to determine that they continue to meet all of their indirect tax obligations. Canada’s federal government recently announced that taxpayers could defer GST/HST (goods and services tax / harmonized sales tax) remittances. Some provincial authorities have also announced extensions for indirect tax filing deadlines.

Source Credit – KPMG

CANADA – Update 14^th April

PST relief measures updated in Saskatchewan (COVID-19)

Saskatchewan updated and reposted a notice providing provincial sales tax (PST) relief measures for businesses—measures that are intended to support Saskatchewan businesses that are unable to submit their PST returns due to cash-flow concerns related to the coronavirus (COVID-19) pandemic.Saskatchewan updated and reposted a notice providing provincial sales tax (PST) relief measures for businesses—measures that are intended to support Saskatchewan businesses that are unable to submit their PST returns due to cash-flow concerns related to the coronavirus (COVID-19) pandemic.Businesses that are able have been directed to file their tax returns each month/quarter (with or without payment).

Deferral for PST payments

The relief measures provide automatic deferrals for:

Monthly filers—they may defer payment of amounts due for February, March, and April 2020 reporting periods to 31 July 2020

Quarterly filers—they may defer payment of amounts due for the 1 January 2020 to 31 March 2020 reporting period to 31 July 2020

Businesses are not required to submit a request for relief from penalty and interest charges for these returns.

Qualifying for automatic PST deferral

The relief notice stipulates that to qualify for the automatic PST deferral and waiver of penalties and interest, businesses must make full PST payments or have a payment arrangement in place by 31 July  2020. Taxpayers may request payment arrangements by submitting a request electronically through the Saskatchewan eTax Services (SETS) located at sets.saskatchewan.ca, or through email.The notice states that audit program and compliance activities have been suspended.

Source Credit – KPMG

CANADA – update 7^th April

Indirect tax measures in response to COVID-19

The federal government and the various provincial governments have been quick in responding to the COVID-19 situation with various indirect tax relief measures to help Canadian businesses through this difficult time. The following is a summary of the various measures that have been recently introduced as of 2 April 2020.

Federal measures

Goods and Services Tax/Harmonized Sales Tax (GST/HST) measures

On 19 March 2020, the government announced that collection activities on new debts will be suspended, and flexible payment arrangements will be available. A Request for Taxpayer Relief (form RC4288) may be filed to request to have interest and/or penalties waived or cancelled.

The government also announced that the Canada Revenue Agency (CRA) will not contact any small or medium enterprise (SME) to initiate a GST/HST audit for four weeks (i.e., until 19 April 2020).

On 27 March 2020, the government announced that it is postponing the deadline for filing GST/HST returns and the requisite payments from 27 March 2020 until 1 June 2020. In such cases, the deadline is postponed to 30 June 2020.

It is our understanding that this extension only applies to GST/HST remittances. The CRA encourages registrants to file their GST/HST returns on time, as required by statute. However, if the filing is not made on time, no penalties will be applied until after 30 June 2020. All payment and filing deadlines will be adjusted in CRA’s systems so there is no requirement to file for taxpayer relief. This extension applies to all registrants, including nonresidents.

Please note that paper copies of GST/HST returns will not be processed until normal operations resume. In addition, electronically filed housing and general rebate applications are manually assessed and will not  be processed until operations resume.

These measures will apply to the GST nationally and to the HST in the five participating provinces (Ontario, Newfoundland and Labrador, Nova Scotia, New Brunswick, and Prince Edward Island). At this time, there have not been any separate provincial announcements concerning the provincial component of the HST in the participating provinces (i.e., no changes to provincial point-of-sales rebates or federal public service body rebates for the provincial component).

It is important to note that excise taxes and duties are still required to be remitted by their prescribed due dates.

Customs measures

On 16 March 2020, the Canadian Border Services Agency (CBSA) released Customs Notice 20-08 concerning imported goods for emergency use in response to COVID-19, Goods for Emergency Use Remission Order (Order).

The Order, along with the application of Customs Tariff Item No. 9993.00.00, provides for the relief of duty and tax for goods required for an emergency that are imported by or on behalf of federal, provincial, or municipal entities (such as centres for health care) as well as by or on behalf of members of first response organizations (such as police, fire, and local civil defence groups, including medical response teams).This relief does not extend to persons other than those noted above.

As a result, GST/HST and any other taxes applicable under the Excise Tax Act will be covered by the Goods for Emergency Use Remission Order and therefore GST/HST and excise tax will not apply to imported emergency goods.

All goods for which this relief is granted must be exported from Canada whenever they are no longer required, except goods that are consumed or destroyed during the emergency.

The Temporary Importation (Tariff Item No. 9993.00.00) Regulations waive the requirement to provide proof of export for goods consumed or destroyed in an emergency.

It is important to note that importations may be subject to examination at the time of importation and to post-release verification for compliance with the Tariff Classification, Valuation, Origin and Marking programs, and any other applicable provisions administered by the CBSA.

On 18 March 2020, Customs Notice 20-09 announced that, effective immediately, the period of 90 days for submitting corrections following a CBSA trade compliance verification where errors were found, will automatically be extended by 30 days. While CBSA continues to process adjustments and conduct verifications, additional extensions have been provided on a case-by-case basis to respond to information requests.

On 19 March 2020, the CBSA issued Customs Notice 20-10 to waive late accounting penalties for a 45-business-day grace period for transactions released from 11 March 2020 to 14 May 2020, inclusive. It is our understanding from the CBSA that this applies only to administrative monetary penalties and not interest (however, note that the CSBA subsequently extended payment deadlines, as noted below).

On 27 March 2020, CBSA issued Customs Notice 20-11 to extend to 30 June 2020 all payments due to the agency (i.e., customs duties and GST on regular imports (commercial), reassessments, penalties, etc.). This also includes charges on the statement of account of March due on 1 April 2020. As many importers transact business with the CBSA through a customs broker, and may be set up for direct payment to the CBSA on duties and/or GST, close consultation will be required with customs brokers to understand how the deferment will be operationalized on particular accounts.

Importers should note there is no change to the accounting timeframes prescribed by the regulations. Importers are required to submit accounting declarations for imported goods released on minimum documentation within the required timeframes; however, note the late accounting penalty waiver specified in Notice 20-10.

Provincial measures

British Columbia

On 23 March 2020, the BC government announced filing and payment deadline extensions for the following taxes until 30 September 2020:

• Employer health tax;
• Provincial sales tax (including municipal and regional district tax);
• Carbon tax;
• Motor fuel tax; and
• Tobacco tax.

The following tax changes announced in Budget 2020 will be postponed until further notice:

• Elimination of the provincial sales tax (PST) exemption for carbonated beverages that contain sugar, natural sweeteners, or artificial sweeteners; and
• Expanded registration requirements for Canadian sellers of goods, along with Canadian and foreign sellers of software and telecommunication services.

Carbon tax rates will remain at their current levels until further notice. The tax measure announced in Budget 2020 aligning the carbon tax rates with the federal carbon pricing backstop is also postponed until further notice. On 1 April 2020, the BC Ministry of Finance announced that, effective 23 March 2020, tax return filing and payment due dates after 23 March 2020 and before 30 September 2020 will now be 30 September 2020.

• This deferral applies to carbon tax, motor fuel tax (including the International Fuel Tax Agreement), provincial sales tax (including municipal and regional district tax on accommodation), and tobacco tax.
• The deferral is automatic.
• In September, businesses will be required to make a lump-sum payment. However, separate returns will be required to be filed for each reporting period.
• Businesses also have the option of filing their returns according to the usual report periods and defer payment until 30 September 2020.
• After 30 September 2020 sales taxes returns and payments will follow their usual due dates.

 Saskatchewan

On 2 April 2020, the Government of Saskatchewan announced (in Information Notice IN 2020-03) the following measures for businesses that are unable to submit their PST returns due to cash flow concerns as a result of COVID-19:

• PST returns must be filed each month/quarter (with or without payment).
• Monthly filers may defer payment of amounts due for the February, March, and April 2020 reporting periods to 31 July 2020.
• Quarterly filers may defer payment of amounts due for the 1 January 2020 to 31 March 2020 reporting period to 31 July 2020. 
• There is no requirement to submit a request for relief from penalty and interest charges for these returns.
• Full payment must be made, or a payment arrangement must be in place, by 31 July 2020 in order to qualify for the automatic deferral and waiver of penalties and interest. 
• Payment arrangements may be made by submitting a request electronically through the Saskatchewan ETax Service (SETS) website located.

It should be noted that this relief is not extended to other provincial taxes at this time.

Manitoba

On 19 March 2020, the government of Manitoba announced that the PST rate would be reduced by 1 percentage point from 7% to 6%, effective 1 July 2020. On 26 March 2020, however, Manitoba’s premier announced that reduction would be pushed back to 2021.

On 23 March 2020, the government of Manitoba announced its intention to reintroduce a Manitoba alternative to the federal carbon levy. Starting 1 July 2020, the Manitoba government would implement a flat, CAD 25-per-tonne “made-in-Manitoba” Green Levy, replacing the current federal carbon price. On 26 March 2020, however, the Manitoba government announced the deferral by a year of the proposed Green Levy.  

Manitoba has extended the April and May filing deadlines for SMEs with monthly remittances of no more than CAD 10,000.  Businesses will have up to two additional months to file and remit retail sales taxes. A request to waive penalties and interest may be submitted in writing to Manitoba Finance, Taxation Division.

Ontario

On 25 March 2020, the Ontario government announced a five-month relief period for Ontario businesses that are unable to file or remit select provincial taxes on time.

Beginning 1 April 2020, penalties and interest will not apply to Ontario businesses that miss any filing or remittance deadline under select provincial taxes:

• Employer health tax;
• Retail sales tax on insurance contracts and benefit plans;
• Race tracks tax;
• Tobacco tax; 
• Fuel tax;
• Gas tax; 
• Beer, wine, and spirits tax;
• Mining tax;
• Insurance premium tax; and
• International fuel tax agreement.

If a business is unable to file its return or remittance during the relief period, they are not required to contact or notify the Ministry of Finance. Penalties and interest will be waived automatically for all late returns or remittances by Ontario businesses during the relief period. Ontario businesses are required to file any late returns or remittances by the end of the relief period.

The relief period does not apply to business accounts with outstanding taxes, or interest or penalties owing to the government from previous filing periods. Existing debts from before the relief period will continue to accrue interest. The government is also temporarily suspending audit interactions with most Ontario businesses and representatives for the month of April 2020.

Quebec 

In an attempt to harmonize with the federal GST/HST measures, the Quebec government announced that, as of 27 March 2020 and until 1 June 2020, for all QST returns, for reporting periods whose filing deadlines fall after 1 June 2020, the filing and payment deadlines announced federally will apply. This allows Quebec Sales Tax (QST) registrants to postpone filing until 30 June 2020 their returns and payments in respect of the 31 March, 30 April, and 31 May QST remittances, without interest or penalties.

For businesses that are filing the GST/QST through their financial institutions, both returns and payments must be filed at the same time. It is recommended to use the Revenu Québec portal.

Revenue Québec announced on 31 March 2020 that the deadline for remitting net GST/HST and QST has been extended to 30 June 2020 for all returns to be filed between 27 March 2020 and 1 June 2020. The same applies for installment payments.

In order to harmonize the QST system with the GST/HST system, the filing deadlines remain unchanged. Persons who are able to do so must file their GST/HST and QST returns by the normal deadlines to facilitate tax compliance and administration. No late-filing penalties will be charged if the returns are filed no later than 30 June 2020. All businesses are eligible for this deferral, including nonresidents. Other taxes, such as tax on insurance premiums, tobacco tax, and tax on gasoline and fuel, must be filed and remitted as usual. For QST purposes, a request to waive or cancel penalties and interest may be submitted using form FP4288-V (Application for the Cancellation or Waiver of GST/HST and QST Related Interest or Penalties or of QST Related Charges).

What should companies do?

In times like these, a plan to efficiently handle a company’s indirect taxes by utilizing the various government’s measures will assist in improving cash management.

In addition to the above government measures, now is the time for companies to be agile and actively consider various indirect tax areas that may assist in maximizing their cash flow and minimizing potential exposure. This is a good time to review the following areas:

• Invoice processing procedures;
• Intercompany charges and various elections;
• Contract review;
• Pricing adjustments;
• Net tax adjustments;
• Employee expense reports;
• Documentary requirements;
• Input tax credit allocation methodologies;
• Real property acquisition/dispositions;
• Bad debt relief;
• Self-assessment provisions;
• Temporary importations;
• Customs warehousing;
• Customs classification and valuation; and
• Indirect/accounts payable and customs recovery projects.

Source credit – Deloitte

CANADA – Update 26^th March ⁽¹⁾

Manitoba

Tax filing extension for small and medium enterprises (SMEs)

• Extension of April and May filing deadlines for SMEs
• 2 additional months to remit retail sales and payroll taxes for SMEs

Saskatchewan

PST remittance deferral and audit suspension

• Relief from penalties and interest charges for three months
• Request for relief from any penalties for late return submissions
• Audit program and compliance activities have been suspended for 3 months

British Columbia

Tax filing and payment deadlines extension

• PST, municipal and regional district taxes have been extended to 30^th September 2020
• The scheduled increase to carbon tax, as well as the new PST registration requirements on e-commerce has be delayed

Related services: