2020 Federal Economic Update Highlights

DECEMBER 2, 2020

The federal economic update was released Monday. Surprisingly, there were no substantial personal or corporate tax measures introduced. The economic update extended some COVID-19 measures and touched upon a few corporate tax measures. 

COVID-19 measures extended and increased 

There is a welcomed increase in the Canadian Emergency Wage Subsidy (CEWS) rate from 65% to 75% for the period beginning December 20, 2020 to March 13, 2021. Nothing else changed pertaining to the CEWS. 

For the Canada Emergency Rent Subsidy (CERS), the government is proposing that the maximum rate of 65% be extended to March 13, 2021. Under the Lockdown Support program, for businesses that must shut their doors or significantly restrict their activities, the government is proposing that the 25% top-up be extended until March 13, 2021. 

The application date for the CEBA Loan has also been extended to March 31, 2021. 

Corporate Tax Measures 

There are 2 new corporate tax measures with implementation dates of July 1, 2021. 

Stock Option Limits 

As previously announced in June 2019, the government intends to change the rules related to the employee stock option deduction. The government is proposing an annual limit on employee stock option grants of $200,000. Employee stock options granted by CCPCs and non-CCPCs with annual gross revenues of $500 million or less will not be subject to this new limit. 

Sales Tax Changes 

There were a number of changes made surrounding sales tax in order to begin taxing online services such as Netflix, online sellers, such as those selling through Amazon, as well as online short-term accommodations through digital platforms, such as Airbnb. Previously non-resident vendors did not need to collect GST/HST. Effective July 1, 2021, they will need to register, collect and remit GST/HST on taxable sales to Canadian consumers. 

Increased Tax Compliance 

CRA has proposed increased funding for audit activity specifically in the area of international tax evasion and aggressive tax avoidance. They will be expanding their review of higher risk tax filings, including those of high net worth individuals. Over the coming months, the CRA plans on “modernizing” the Canadian anti-avoidance rules and in particular the General Anti-Avoidance Rules so that they address sophisticated and aggressive tax planning. No further guidance was given as to how they plan on “modernizing” these rules. 

Personal Tax Measures 

In order to simplify the home office expense deduction due to COVID-19, the CRA will allow those working from home to claim up to $400 based on the amount of time working from home. There will be no need to track detailed expenses nor to obtain a signed T2200 from their employer. Further details are to follow.