COVID-19 Tax Update: Ontario tax measures

On March 25, 2020, the Ontario government released a one-year economic and fiscal update to respond to the COVID-19 public health crisis, in place of a full budget (see publication here). The update introduced the following tax measures designed to improve cash flow, protect jobs, and the budgets of businesses and individuals. The government intends to table a complete, multi-year budget on November 15, 2020.

Legislative amendments required to implement the measures were included in Bill 188, Economic and Fiscal Update Act, 2020, which passed all stages and received Royal Assent on March 25, 2020.

1. Temporary Doubling of the Employer Health Tax Exemption

The Employer Health Tax (“EHT”) applies to employers’ total annual Ontario remuneration. EHT has a top rate of 1.95%. Currently, employers with total annual Ontario remuneration of less than $5 million can take an EHT exemption on the first $490,000 of the payroll. This exemption is generally available to private sector employers and certain registered charities.

To provide financial relief for employers in Ontario, the government proposed to raise the limit of the exemption from $490,000 to $1 million for 2020. The increase to the EHT exemption is retroactive to January 1, 2020 and will be reduced back to $490,000 on January 1, 2021.

2. Interest and Penalty Relief for Ontario Businesses

Starting on April 1, 2020, penalties and interest will not apply for businesses in Ontario in respect of missed filings or remittances relating to the following taxes: EHT, Tobacco, Fuel, Gas, Beer, Wine and Spirits, Mining, Insurance Premium, International Fuel Tax Agreement, Retail Sales Tax on Insurance Contracts and Benefits Plans and Race Tracks Tax. Businesses are not required to provide reasons for late filings or remittances. This is scheduled to continue for five months, until August 31, 2020.

3. Regional Opportunities Investment Tax Credit

The update includes a new 10% refundable corporate tax credit for capital investments for eligible businesses. Eligible businesses are Canadian-controlled private corporations that build, renovate or purchase qualifying industrial buildings in designated regions in Ontario. The refundable tax credit is available for qualifying investments over $50,000 to the limit of $500,000. The eligible designated regions are generally located in Northern, Eastern, and Southwestern Ontario, but do not include Toronto, the Greater Toronto Area, or Ottawa.

4. Postponing Planned Property Tax Reassessment

Property tax in Ontario is determined in relation to the assessed value of properties. The assessment takes place once every four years by the Municipal Property Assessment Corporation, which was expected to assess over five million properties in the Spring of 2020. However, given the impact of COVID-19, the government is postponing the reassessment so that municipal governments would be able to discharge their resources to address the COVID-19 public health crisis. Assessments for the 2021 taxation year will be based on the same valuation date that was in effect for the 2020 taxation year.