Updated May 22, 2020 – The cash flow management and government incentives available for the real estate and construction industry for the COVID-19 crisis can provide relief. Right now, business owners are concerned about safety, cash flow and economic survival. The rules governing these programs, though, are changing regularly. Below, we have provided a summary for the real estate and construction industry, including a set of links for additional details. We recommend reaching out to your BDO team for assistance though, as the specific details of your situation could dramatically affect how and what programs are best for your business, how applications are filled out, and more. We are all in this together!
Government relief programs
Canada Emergency Business Account (CEBA)
These interest-free loans of up to $40,000 with 25% potentially forgiven are available from financial institutions. For more details, refer to Canada Emergency Business Account
Canada Emergency Commercial Rent Assistance (CECRA)
Small businesses, which are loosely defined as those paying up to $50,000 per month in rent per location and generating less than $20 million in gross revenues overall, can indirectly receive rental assistance which is paid directly to the property owner. The tenant or subtenant must have temporarily stopped generating revenues or have a 70% decline. The rent assistance relates to April, May and June consisting of a 50% potentially forgivable loan and a 25% payment from the tenant. For more information, refer to The Canada Emergency Commercial Rent Assistance (CECRA) to Bring Rent Relief to Small Business Tenants. To sign up for for details on applying once announced, go to CECRA for Small Businesses.
EDC and BDC financing programs
For a complete list of financing programs related to COVID-19, refer to Support for entrepreneurs impacted by coronavirus.
Programs for tenants and employees
Many programs may be useful for your employees, or your tenants. For a visual overview, refer to [Infographic] Business Owners: Navigating COVID-19 government relief.
Wage Subsidy Programs
Canadian Emergency Wage Subsidy (CEWS) – This program has been extended to August 29, 2020. Applications opened on April 27, 2020. There are strict compliance rules for the CEWS applications, so please consult your BDO advisor. For more details, refer to COVID-19 Wage Subsidy Programs.
Temporary Wage Subsidy (TWS) – Employers can receive between March 18, 2020 and June 19, 2020 a 10% reduction in payroll costs up to $25,000 per employer, with a maximum of $1,375 per employee. If eligible, businesses reduce their normal payroll remittances by the applicable amount. The TWS will offset the CEWS to ensure the maximum subsidy is 75% for the employer. For more details, refer to
COVID-19 Wage Subsidy Programs.
Canadian Emergency Response Benefit (CERB)
Up to $500 per week, for up to 16 weeks between March 15, 2020 and October 3, 2020, is potentially available to those who have to stop working as a result of COVID-19. This is available to employees or self-employed individuals who are at least 15 years of age and have earned at least $5,000 in 2019 or the 12 months prior to applying. Further, a recipient of “non-eligible” dividends (generally received from corporate income taxed at the small business rate or passive income such as rents or interest) can qualify for the program. For details, see The Canada Emergency Response Benefit (CERB) and Questions and Answers on the Canada Emergency Benefit
EI, Work Share, and Temporary Layoffs
A variety of government programs may also be applicable for employees. For details, refer to Employment Insurance and COVID-19: Q&A for Employees. and Work Share During COVID-19: Your Questions Answered.
Cash flow: Tax deadline deferrals for payments and filings
Whether federal, provincial, income taxes, GST/HST/QST or other taxes, stretching out payments without incurring additional interest costs can help manage cash flow. But, even with filing extensions, you should still try to determine what your taxes owing will to budget cash flow. And, speak to your accounting team—if everyone waits until the extended deadlines, there may not be enough resources to help. Further, not all tax payments have been extended including for example Part IV tax that may impact investors, payroll deductions (less the temporary wage subsidy where applicable), and various withholding taxes. For details, see:
- Governments Extend Tax Filing and Payment Deadlines (Federal and Provincial)
- Income tax filing and payment dates: CRA and COVID-19
A number of provincial taxes have had deadline extensions to September 1, which began on April 1, including the Employer Health Tax (EHT). Further, the EHT exemption has increased for 2020 from $490k to $1m. Your business may also qualify for deferrals of payments for Workplace Safety and Insurance Board (WSIB) amounts.
Non-residents selling real estate
Formally, the requirements for non-resident withholdings under section 116 are still applicable where a non-resident sells real estate. In attempting to contact the Ontario office responsible for processing the clearance certificates, a phone message indicates that the group is not working until further notice, messages cannot be left and we understand that the office is not accepting mail.
Mailing materials, drop boxes and making payments to the CRA
The CRA’s official position on how to forward documents and payments can be found at Tax services offices and tax centres. That said we have received reports that not all of the indicated offices or departments are receiving correspondence or working so this will, similar to developing rules, be subject to change.
Bank deferrals and low interest opportunities
Canada’s financial institutions have created a host of payment deferral and lower interest rate programs for both retail and commercial. Discuss these with your financial institution. The programs for businesses and investors are not automatic and have a high volume of applications. Many businesses and investors are being rejected or deferred based on their unique circumstances. Instances of decreasing valuations and changing interest rates must be factored in to refinancing considerations.
Contact BDO’s real estate and construction team members to find out what they have been hearing regarding how different financial institutions, and different departments within those institutions, are treating real estate and construction industry businesses.
Tax opportunities to make the most of a challenging situation
Whether your business, real estate, or liquid portfolio has, or will, decrease in value due to COVID-19, significant future tax savings can result with proper planning. For example, it may be possible, roughly speaking, to save approximately 25% of your losses. Hopefully the losses will be temporary, so timing will be critical as planning and execution must be completed prior to a rebound in value. Time is of the essence here, so please discuss with your BDO advisors.
Operating losses from a company over a fiscal year may be used against prior or future taxable income in a variety of instances. While not ideal, this can help you recover previously paid taxes to shore up your cash flow.
Please visit BDO’s COVID-19 Resource Centre for more information that can help you and your business.
How BDO can help
To save additional cash flow by reducing taxes, help with applications for various government programs, help with wage subsidy applications, and more, talk to your BDO advisor.
George E. Dube, CPA, CA
Tax Partner, Real Estate and Construction Industry, BDO Canada
The information in this publication is current as of April 27, 2020.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.Tags: construction, COVID-19, real estate investors, real estate tax