Today the Federal Government provided the Economic Update. Here are some interesting items to note as follows;
Some Statistics
That federal deficit projection is considered Canada’s best-case scenario, and is up from the $343.2 billion forecast in July. However, should the pandemic situation continue to worsen and the country experiences extended restrictions, the deficit could hit $388.8 billion in 2020-21, or balloon to $398.7 billion if restrictions are escalated.
The government says the overall total federal debt will exceed $1.4 trillion by March 2021, up from the $1.2 trillion projected in July’s financial report.
The federal government now projects its debt-to-GDP ratio will be 50.7 per cent in 2020-21, up from the 49.1 per cent forecast in the July snapshot.
As of the latest update from Statistics Canada on the country’s unemployment rate, nearly one quarter of those who are currently out of work have been for at least six months.
In total, 1.8 million Canadians were out of a job in October, and the overall unemployment rate is sitting at 8.9 per cent.
Confidence Vote in House of Commons
Please note that all of the following proposed new measures will be voted on by Federal MPs in the coming weeks. The measures are set to be considered a confidence matter and if the opposition doesn't support them, the minority government could fall.
The Federal pandemic response
The total cost of the federal response to COVID-19 amounts to $490.7 billion, or nearly 83 per cent of federal and provincial aid. That means $8 out of every $10 in support comes from Ottawa, down from $9 out of every $10 from the July fiscal snapshot.
The “Netflix tax.” Coming July 1, 2021
For the first time, Netflix and other foreign streaming giants such as Amazon and Apple TV+ will be subject to sales tax in Canada, according to the fiscal update. The government says GST/HST will apply to all companies that provide digital services - which means Netflix would charge sales tax on subscriptions north of the border. While the European Union moved to tax digital platforms two years ago, Canada says it is prepared to act “unilaterally, if necessary.”
GST/HST Tax Rate Increase Amount
Where the consumer’s usual place of residence is in Canada, then the GST/HST would generally apply on taxable supplies and the tax rates (based on current rates) would be as follows:
5 per cent if the consumer’s usual place of residence is in Quebec, Manitoba, British Columbia, Saskatchewan, Alberta, Yukon, the Northwest Territories or Nunavut;
13 per cent if the consumer’s usual place of residence is in Ontario; and
15 per cent if the consumer’s usual place of residence is in Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador.
Work-from-home tax break.
Employees working from home with “modest expenses” in 2020 can claim up to $400 , as a tax deduction. Canadians can make the claim “without the need to track detailed expenses,” and the government “will generally not request” confirmation from employers, according to the fall economic statement.
$5,000 Grant for Home Energy Efficiency
Canadians will be able to qualify for grants of up to $5,000 for work to improve the energy efficiency of their homes.
Increasing fiscal-stabilization payments.
Responding to a call from provinces whose finances have taken beatings, the government say they'll increase the maximum payment under a program designed to help provincial governments deal with temporary economic shocks. The cap will go from $60 per resident, set in 1987, to $170 per person and increase with economic growth.
Support for the Troops.
The government is also proposing to sign off on an additional $600,000 to top up the Veterans Emergency Fund that would ensure more financial support for veterans whose well-being is at risk “due to an urgent and unexpected situation.”
Loan for Business Persons
A program that will provide low-interest loans of up to $1 million for badly hurt entrepreneurs is coming with details to follow.
CEWS Rate Change
To support businesses big and small through the second wave, increasing the maximum rate of the Canada Emergency Wage Subsidy to 75 per cent for the period beginning December 20, 2020 and extending this rate until March 13, 2021, and extending the current rates of the Canada Emergency Rent Subsidy and Lockdown Support until March 13, 2021. Both programs will be there for businesses until June 2021.
A $200,000 limit is proposed on the amount of employee stock options
A $200,000 limit is proposed on the amount of employee stock options that may vest in an employee in a calendar year and continue to qualify for the stock option deduction. For the purpose of the $200,000 limit, the amount of employee stock options that may vest in any calendar year would be considered to be equal to the fair market value of the underlying shares at the time the options are granted. An option vests when it first becomes exercisable. The determination of when an option vests would be made at the time the option is granted. If the year in which the option vests is not clear, the option would be considered to vest on a pro-rata basis over the term of the agreement, up to a five-year period.
The $200,000 limit on the amount of employee stock options that may vest in any calendar year and qualify for the stock option deduction would generally apply to all stock option agreements between the employee and the employer or any corporation that does not deal at arm's length with the employer. If an individual has two or more employers that deal at arm's length with each other, the individual would have a separate $200,000 limit for each of those employers.
Employee Treatment of Stock Options
If the amount of stock options that may vest in a year exceeds $200,000, those employee stock options granted first would be the first to qualify for the stock option deduction. Where an employee has a number of identical stock options and some qualify for the existing tax treatment while others are subject to the new tax treatment, the employee would be considered to first exercise the stock options qualifying for the existing tax treatment.
GST/HST for PPE Masks and Shilds Removed as of December 7, 2020
The zero-rating of the GST/HST would apply to face masks (medical and non-medical) and face shields designed for human use that meet certain specifications. The following face coverings would generally be eligible for this GST/HST relief:
A face mask or respirator that is authorized for medical use in Canada, or meets N95, KN95 or equivalent certification requirements and does not have an exhalation valve or vent.
A face mask or respirator for use in preventing the transmission of infectious agents, such as respiratory viruses, and that meets the following specified construction requirements:
is made of multiple layers of dense material, but may have a portion in front of the lips made of transparent and impermeable material that permits lip reading provided that there is a tight seal between the transparent material and the rest of the face mask or respirator;
is large enough to completely cover the nose, mouth and chin without gaping;
has ear loops, ties or straps for securing the face mask or respirator to the head; and
does not have an exhalation valve or vent.
A face shield that has a transparent and impermeable window or visor, covers the entire face and has a head strap or cap for holding it in place, but is not specifically designed or marketed for a use other than preventing the transmission of infectious agents, such as respiratory viruses.
This measure would apply to supplies of these items made after December 6, 2020, and is proposed to only be in effect until their use is no longer broadly recommended by public health officials for the COVID-19 pandemic.
HST Changes Short Term Rentals
The operator of an accommodation platform that facilitates the supply of short-term accommodation in Canada by third parties that are not registered for the GST/HST would be deemed to be the supplier of the accommodation for purposes of the GST/HST.
General Framework
Taxable short-term accommodation provided through a platform: The GST/HST would apply to all taxable supplies of short-term accommodation in Canada that are facilitated by an accommodation platform operator. Taxable short-term accommodation would generally include a rental of a residential complex or a residential unit (or part of a unit) to a person for a period of less than one month where the price is more than $20 per day.
Supplies by registered GST/HST operators: Underlying third-party suppliers of short-term accommodation (i.e., property owners or responsible persons) who are registered for the GST/HST would continue to be required to account for the tax on their supplies (i.e., to charge, collect and remit the GST/HST) that are facilitated by an accommodation platform operator.
Under the present GST/HST rules, a property owner (or responsible person) that makes over a 12-month period more than $30,000 in taxable supplies, including any supplies of short-term accommodation in Canada facilitated by an accommodation platform operator, is required to register for the GST/HST and to collect and remit the tax on their taxable supplies in Canada.
Taxable short-term accommodation provided through a platform: The GST/HST would apply to all taxable supplies of short-term accommodation in Canada that are facilitated by an accommodation platform operator. Taxable short-term accommodation would generally include a rental of a residential complex or a residential unit (or part of a unit) to a person for a period of less than one month where the price is more than $20 per day.
Supplies by registered GST/HST operators: Underlying third-party suppliers of short-term accommodation (i.e., property owners or responsible persons) who are registered for the GST/HST would continue to be required to account for the tax on their supplies (i.e., to charge, collect and remit the GST/HST) that are facilitated by an accommodation platform operator.
Under the present GST/HST rules, a property owner (or responsible person) that makes over a 12-month period more than $30,000 in taxable supplies, including any supplies of short-term accommodation in Canada facilitated by an accommodation platform operator, is required to register for the GST/HST and to collect and remit the tax on their taxable supplies in Canada.
Short-term accommodation in Canada to the extent that the consideration for the supply becomes due on or after July 1, 2021.
Hope you enjoyed the Economic Statement. If any questions or comments arise, please feel free to contact Peter at 905-898-3355
Copyright © 2020 by Peter Wiesner CPA, CA. All rights reserved.