The Canada Revenue Agency (CRA) has outlined new tax deferral measures to support businesses struggling with the impact of tariffs.
The federal government announced these deferrals on March 21, which will help companies manage their financial challenges in the coming months. Here’s an in-depth look at what these changes entail.
Tax Deferral Overview
The Canadian government has deferred corporate income tax payments and GST/HST remittances for businesses affected by tariffs. The deferral period spans from April 2 to June 30.
This initiative is designed to ease the financial pressure on businesses facing challenges due to international trade disputes. The government anticipates that this measure will provide up to $40 billion in liquidity to support businesses during this period.
Details of the Deferral
According to Rosenswig McRae Rosso LLP, businesses experiencing short-term financial difficulties can utilize this deferral to manage liquidity and focus on pressing operational needs.
In addition to deferring payments, the CRA has also announced it will waive interest on GST/HST and T2 instalment payments, as well as on arrears balances during the deferral period.
The CRA has clarified that businesses will not face any penalties if payments are made by the June 30 deadline.
However, if businesses miss this deadline, the CRA will apply interest retroactively, along with a 7-8% penalty for the deferral period, calculated from the original due date.
What Does This Mean for Businesses?
- Interest Relief: The CRA’s measures will include interest relief on payments due between April 2 and June 30, specifically on GST/HST and T2 instalment payments.
- Penalty Avoidance: To avoid penalties and interest charges, businesses must ensure payments are made before June 30.
- Impact on Small and Medium-Sized Enterprises (SMEs): This deferral period is especially significant for SMEs that are facing economic strain due to tariffs. Armando Iannuzzi, co-managing partner at KRP LLP, noted that regardless of the political party in power after the April 28 election, it is certain that the government will continue to roll out policies that help mitigate the financial threats facing SMEs.
Additional Government Measures for Affected Businesses
The government has introduced several measures beyond tax deferrals, including changes to employment insurance.
One notable change is the temporary waiver of the one-week waiting period for unemployment benefits, which aims to provide additional support to workers affected by economic disruptions.
Key Tax Deferral Details
| Tax/Payment | Due Date | Deferral Period | Interest Relief | Penalties for Late Payment |
|---|---|---|---|---|
| Corporate Income Tax | April 2 – June 30 | Up to June 30 | Waived | 7-8% penalty if missed |
| GST/HST Remittances | April 2 – June 30 | Up to June 30 | Waived | 7-8% penalty if missed |
| T2 Instalment Payments & Arrears | April 2 – June 30 | Up to June 30 | Waived | 7-8% penalty if missed |
The tax deferral measures introduced by the Canadian government provide crucial support to businesses facing the financial burden of tariffs. By extending deadlines for corporate income tax payments and GST/HST remittances, the government is helping businesses stabilize their finances and avoid immediate economic distress.
However, businesses must ensure they meet the June 30 deadline to take advantage of the deferrals without facing penalties or interest. This relief, coupled with additional government initiatives, is aimed at providing businesses with the financial flexibility they need to weather the ongoing trade challenges.
FAQs
Who is eligible for the tax deferral?
Any business affected by tariffs, including SMEs, can benefit from the tax deferral on corporate income tax payments and GST/HST remittances.
What is the deadline for making payments?
The final deadline to make all payments without incurring penalties or interest is June 30. Payments must be made by this date to avoid retroactive interest charges and a penalty of 7-8%.
Will interest and penalties be waived?
Yes, the CRA will waive interest and penalties on GST/HST and T2 payments due between April 2 and June 30, provided payments are made by June 30.
What happens if I miss the deadline?
If you fail to make payments by June 30, the CRA will retroactively apply interest and a 7-8% penalty from the original due date, not from July 1.