On March 25, 2020, the Ontario government released a one-year economic and fiscal plan in response to the COVID-19 pandemic. The province’s plan focuses on responding to the ongoing pandemic in a manner that protects the health of residents and the economy of Ontario.
Under this plan and in related announcements, the province introduced several significant tax relief measures, as discussed below.
Employer Health Tax Exemption Increase
Ontario’s relief plan retroactively increases the Employer Health Tax (EHT) exemption threshold to $1 million from $490,000 for 2020. The exemption is available to private-sector employers with total annual Ontario remuneration not exceeding $5 million. The change to the exemption threshold will increase the maximum EHT exemption for eligible employers in 2020 to $19,500. The exemption threshold is expected to revert to its previous level of $490,000 on January 1, 2021.
Regional Opportunities Investment Tax Credit
The fiscal plan includes the introduction of a new Regional Opportunities Investment Tax Credit, which will be a 10% refundable corporate income tax credit. This credit will be available to a Canadian-Controlled Private Corporation (CCPC) that makes a qualifying investment in a designated region on or after March 25, 2020. The designated regions are located outside of the Greater Toronto Area. Capital expenditures in excess of $50,000 and up to $500,000 related to the construction, renovation, or acquisition of eligible commercial and industrial buildings [i.e., capital property included in Capital Cost Allowance (CCA) Class 1 and 6] would be considered qualifying investments. A mandatory review to evaluate the effectiveness of the proposed credit would take place every three years.
Further details on the Regional Opportunities Investment Tax Credit, including a list of designated regions, and the increase to the EHT exemption threshold can be found in the Ontario Action Plan Annex: Details of Tax Measures.
Property Tax Relief
Postponement of Reassessment
The province has decided to postpone the reassessment that was expected to be completed in 2020 for the 2021 taxation year. Hence, property tax assessments by municipalities in Ontario for the 2021 taxation year will be calculated based on the same valuation date as for the 2020 taxation year.
The next reassessment cycle was set to be based on a property valuation date of January 1, 2019. Originally planned to be in place for the taxation years 2021 to 2024, it is unclear whether the postponement of the reassessment will result in updated property values for taxation years 2022 to 2025 or for a three-year cycle ending in 2024.
There was no mention of changing the base date of valuation to a date other than January 1, 2019. However, if property values are to be in place for taxation years 2022 to 2025, this could certainly cause challenges for certain taxpayers—with 2025 property tax assessments based on values determined more than six years prior—particularly if there is a downturn in the market.
On a positive note, appeals that are currently scheduled into 2022 should be resolved before new appeals begin for the next assessment cycle. As the government and the Municipal Property Assessment Corporation (MPAC) adjust to the postponement, Ryan will continue to provide updates.
Request for Reconsideration Deadline Extended
A Request for Reconsideration (RfR) is one way to challenge your property’s assessed value. MPAC sets its own deadline by which an RfR must be filed each year. The deadline normally falls on the same date as the Assessment Review Board’s appeal filing deadline, which is March 31. Due to implications of the COVID-19 pandemic, MPAC has announced that it is extending the deadline to file an RfR until 16 days after the Ontario government’s Declaration of Emergency has been lifted. At the time of writing, the Declaration of Emergency is in place until at least March 31, 2020. Should the declaration be lifted on that date, the RfR deadline will be April 16, 2020.
When an RfR is filed, MPAC reviews the property’s assessment and determines whether or not it should be altered. If it decides that no change is warranted and rejects the RfR, or if the property owner is not satisfied with the changes proposed, the owner can file an appeal to the Assessment Review Board within 90 days of MPAC’s determination. With the extension to the RfR deadline, even if the Assessment Review Board does not extend the appeal filing deadline (currently set for March 31, 2020), an RfR may still be filed after that deadline. Consequently, if an agreeable settlement is not reached through an RfR, the deadline for a formal appeal has effectively been extended.
Interest and Penalty Relief
Ontario’s Action Plan proposes interest and penalty relief to support businesses in the province affected by the COVID-19 pandemic. Commencing on April 1, 2020, the province is providing a five-month interest and penalty free period for certain taxes. Continuing until August 31, 2020, interest and penalties will not be applied to late tax return filings or remittances for specified provincially administered tax programs, including:
- Employer Health Tax;
- Fuel and Gas Taxes;
- Insurance Premium Tax;
- Retail Sales Tax on insurance contracts and benefits plans;
- Tobacco, Beer, Wine, and Spirits Taxes;
- Mining Tax;
- Race Tracks Tax; and
- Taxes due under the International Fuel Tax Agreement.
Businesses will not be required to provide the Ministry of Finance with any notice or reasons for missing a tax reporting deadline. The interest and penalty relief will be applied automatically.
Similarly, the Workplace Safety and Insurance Board (WSIB) will also allow employers to postpone their reporting and payments for a six-month period. Specifically, Schedule 1 employers will be permitted to delay the remittance of WSIB premiums to August 31, 2020. In addition, Schedule 2 employers paying the WSIB for costs associated with workplace illness or injury claims will have their payments deferred. Interest and penalties that would otherwise apply will be waived during this period.
Economic Relief Measures
In addition to the tax relief discussed above, the province announced a few other economic measures of interest, including:
- Providing a one-time payment equal to $200 per child up to 12 years of age and $250 for children with special needs to assist parents with additional costs due to the closure of schools and daycares during the pandemic;
- Doubling the Guaranteed Annual Income System (GAINS) maximum payment for low-income seniors for six months, commencing in April 2020;
- Creating affordable electricity bills for eligible residential, farm, and small business consumers by setting electricity prices for these customers to the lowest rate (i.e., the off-peak price) at all hours for 45 days, in recognition of increased daytime electricity use by many customers; and
- Allocating additional funding for skills training programs to support workers.
Further information on Ontario’s Action Plan may be found on the province’s website at:
Ontario’s Action Plan: Responding to COVID-19
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.