Canadian Tax Alert: 2020 Federal Fall Economic Statement

Prepared by Andersen in Canada, Montréal Partners Patrick Coutu and Simon Davari.

On November 30, 2020, Canada’s Deputy Prime Minister and Federal Minister of Finance, Chrystia Freeland, presented the 2020 Federal Fall Economic Statement (Economic Statement). We are pleased to provide you the summary below of the tax announcements that were addressed in this statement:

1. Canada Emergency Wage Subsidy (CEWS)

For the claim periods from December 20, 2020, to March 13, 2021, the maximum combined rate of the base subsidy and the top-up subsidy would be increased to 75% from 65%. This will benefit employers with revenue decline of at least 50%. The federal government will announce additional information related to claims after above period at a later date.

2. Canada Emergency Rent Subsidiary (CERS)

For the period from December 20, 2020, to March 13, 2021, CERS claims may be requested directly by commercial tenants. These claims would be based on the same rules as those for CERS claims and could reach up to 65% of eligible expenses. It is important to note that no minimum drop in income would be required to be eligible for CERS. The federal government will announce additional information related to claims after above period at a later date.

3. Lockdown Support Extension

For the period up to March 13, 2021, businesses facing significant restrictions due to COVID-19 could receive up to 25% of their eligible expenditure as a grant. The federal government will announce additional information related to claims after above period at a later date.

4. Taxation of stock options

A limit of $200,000 will be introduced on the value of stock options vested in a year that can be eligible for deduction from taxable income of an employee.

In case of such stock options exceeding the aforesaid limit, the employer would be entitled to a deduction equivalent to the taxable benefit of the employee. The employer can also elect for such a treatment on the vested stock option within the aforesaid limit.

It should be noted that Canadian-controlled corporations and corporations with gross annual income of less than $500 million would generally not be subject to these new rules. These new rules will apply to stock options granted on or after July 1, 2021.

5. Simplified home office tax deduction for 2020 for employees

A simplified home office expense deduction up to $400 has been introduced for employees working from home due to the COVID-19 pandemic, for which no documentation or form to support the claim is required to be filed or maintained. For the claims exceeding $400, a signed Form T2200 would be required from the employer.

6. Digital services tax

Introduction of taxation of digital services on corporation which would apply from January 1st, 2022, until an approach by the Organisation for Economic Cooperation and Development (OECD). The government will announce proposals in 2021 federal budget.

7. GST/HST and the digital economy

As of June 30, 2021, GST/HST could be applicable on the following supplies. These suppliers should register and remit under the applicable framework.

• Digital products and services supplied by non-resident suppliers to Canadian consumers;
• Goods supplied by non-resident suppliers through distribution warehouses located in Canada or shipped from a location in Canada to a purchaser in Canada;
• Goods supplied by non-resident suppliers to non-registered buyers; and
• Short-term accommodation in Canada facilitated through a digital platform.

8. GST/HST relief for face masks and face shields

With effect from December 6, 2020, it is proposed to temporarily zero-rate supplies of certain face masks and face shields.

For additional information, please do not hesitate to contact any of our offices for assistance.