UPDATE July 31, 2020 – The Government of Canada has further extended the Canada Emergency Commercial Rent Assistance program.
The Canada Emergency Commercial Rent Assistance (CECRA) program has been further prolonged by one month, through to the end of August.
Those who qualified for CECRA for small businesses based on existing program parameters will be able to apply for the additional 1 month based on having a 70% revenue decline for April, May and June (for example, without reassessing whether they continue to have a 70% revenue decline in August). Participation in the one-month extension is voluntary. Both existing applicants to CECRA for small businesses and new applicants are able to apply for the August rent reduction.
UPDATE July 27, 2020 – The Canada Revenue Agency announces an extension to the payment deadline and offers interest relief on outstanding tax debts.
In addition to measures already announced, the CRA is extending the payment deadline and applying relief to interest on existing debt.
The CRA is extending the payment due date for current year individual, corporate and trust income tax returns, including instalment payments, from September 1, 2020, to September 30, 2020. Penalties and interest will not be charged if payments are made by the extended deadline of September 30, 2020. This includes the late-filing penalty as long as the return is filed by September 30, 2020.
The CRA is also waiving interest on existing tax debts related to individual, corporate and trust income tax returns from April 1, 2020, to September 30, 2020 and from April 1, 2020, to June 30, 2020, for goods and services tax/harmonized sales tax (GST/HST) returns.
The previously extended filing due dates for individual, corporate and trust income tax returns remain unchanged. However, the CRA will not impose late-filing penalties where a current year individual, corporation, or trust return is filed late provided that it is filed by September 30, 2020.
To ensure Canadians continue to receive their benefits and credits during the COVID-19 pandemic, the CRA temporarily suspended interruptions for those who were unable to file their income tax and benefit returns by the June 1 deadline. Currently, if a 2019 individual tax return has not been assessed, the CRA is calculating benefits and/or credits for the July to September 2020 payments based on information from 2018 tax returns. However, if 2019 individual tax returns are not received and assessed by early September 2020, estimated benefits and/or credits will stop in October 2020 and individuals may have to repay the amounts that were issued as of July 2020.
UPDATE July 27, 2020 – The 10% Temporary Wage Subsidy reporting feature now available.
After the eligibility period of the 10% Temporary Wage Subsidy (TWS) program ended on June 19, 2020, eligible employers are required to complete a self-identification form for each payroll program account, where remittances were reduced by an amount of the subsidy.
This self-identification form is now available for reporting. The reporting of the 10% wage subsidy claim and related election is now available through “Represent a Client” and “My Business Account”. Reporting can be done in the Payroll section by selecting “10% Temporary Wage Subsidy”.
Eligible employers who did not reduce their remittances must also complete this form, to allow the CRA to credit their payroll program account by the amount of the subsidy that they are eligible for.
If you elected for the 10% Temporary Wage Subsidy for Employers to be equal to a lower percentage of the remuneration you paid, you must indicate on your self-identification form that you reduced your remittances by a lower amount than what you were entitled to. If you fail to do so, you will be credited for the entire 10% subsidy and your CEWS claim may be reduced and recovered if necessary.
The CRA will use the information reported to reconcile the subsidy with your payroll program account. If you have a credit in your payroll program account after the subsidy is applied and your account is reconciled, the CRA will pay the amount to you or transfer it to your next year’s remittance.
UPDATE July 27, 2020 – The Canada Revenue Agency is experiencing processing delays.
CRA is experiencing delays in processing paper income tax and benefit returns.
CRA advises taxpayers to:
- file your 2019 taxes online as soon as possible and register for direct deposit to get refunds faster and avoid interruptions to benefit and credit payments.
- submit your requests for changes electronically, using Change My Return in My Account or ReFILE. If you have already submitted a request to change your return by mail that has not been processed yet, you may be able to submit it again electronically.
Temporary measure for paper returns
If you have already filed a 2019 paper return that has not been processed yet, you can file it again online using NETFILE certified tax software. This does not include returns that the software says must be paper-filed or returns that are excluded from electronic filing.
UPDATE July 24, 2020 – Additional guidance has been issued for Canada Emergency Business Account eligibility.
The Canada Emergency Business Account (CEBA) program was first made available for eligible entities that had total employment income paid in the 2019 calendar year between $20,000 and $1,500,000. Later, the program was expanded to include eligible entities with $20,000 or less in total employment income paid in the 2019 calendar year, provided these entities meet additional conditions; among them is that they have Eligible Non-Deferrable Expenses between $40,000 and $1,500,000. Additional guidance regarding the calculation of Eligible Non-Deferrable Expenses has recently been released.
An eligible entity’s total incurred and projected Eligible Non-Deferrable Expenses, used to determine whether such expenses are between $40,000 and $1.5 million, are measured as they stood on March 1, 2020. Under all expense categories, the amounts to be included in the total are those actually paid in January and February 2020, as well as those for which a legal or contractual obligation existed on March 1, 2020, for the applicant to pay the expense within the remainder of 2020 and which cannot be avoided or deferred beyond 2020, even during a period of shut down and depressed revenues as a result of COVID. For periodic or indefinite contracts that renew or continue with the passage of time absent intervention by the parties, such as a monthly phone contract, assume that the contract continues on the same terms beyond March 1 such that payments related to the later periods in 2020 are included as obligations provided for in contract as at March 1.
For example, assume your business signed an insurance policy on February 1, 2020. As at March 1, the business had paid the monthly insurance expense for February and a contractual obligation then existed providing for payments of the expense for the subsequent months of 2020. All 11 monthly insurance payments would be included in the total Eligible Non-Deferrable Expenses.
CEBA is intended to support businesses by providing financing for their expenses that cannot be avoided or deferred as they take steps to safely navigate a period of shutdown, thereby helping to position businesses for successful relaunch when the economy reopens.
For more information, visit our COVID-19 Hub.
UPDATE July 17, 2020 – The Government of Canada releases details on the redesigned Canada Emergency Wage Subsidy program.
The government has announced proposed changes to the CEWS that would broaden the reach of the program and help provide better targeted support. The draft legislative proposals would allow the extension of the CEWS until December 19, 2020, including redesigned CEWS program details until November 21, 2020.
The changes outlined in the draft legislative proposals would apply to Period 5 (beginning July 5) and subsequent periods. The same eligibility criteria for the initial three claim periods (March 15 to June 6, 2020) would continue to apply for Period 4 (June 7 to July 4, 2020). Effective July 5, 2020, the CEWS would consist of two parts:
- a base subsidy available to all eligible employers that are experiencing a decline in revenues, with the subsidy amount varying depending on the scale of revenue decline; and
- a top-up subsidy of up to an additional 25 per cent for those employers that have been most adversely affected by the COVID-19 crisis.
The two-part CEWS would apply with respect to the remuneration of active employees. A separate CEWS rate structure would apply to furloughed employees (as described further below). In addition, a safe harbour would be available to ensure that, through August 29 (periods 5 and 6), employers would have access to a CEWS rate that is at least as generous as they would have had under the initial CEWS structure, as described further below (see Safe harbour rule for Periods 5 and 6).
Base Subsidy for All Employers Impacted by the Crisis
The base CEWS amount for active employees would be a specified rate, applied to the amount of remuneration paid to the employee for the eligibility period, on remuneration of up to $1,129 per week. The rate of the base CEWS would now vary depending on the level of revenue decline, and its application would be extended to employers with a revenue decline of less than 30 per cent (see Table 1). This expansion would mean that all eligible employers with a revenue decline would now qualify for CEWS support.
The specified rate would be determined based on the change in an eligible employer’s monthly revenues, as described further below (see Reference Periods for the Drop-in-Revenues Test).
The maximum base CEWS rate would be provided to employers with a revenue drop of 50 per cent or more. Employers with a revenue drop of less than 50 per cent would be eligible for a lower base CEWS rate, as shown in Table 1. The maximum base CEWS rate would be gradually reduced from 60 per cent in Periods 5 and 6 (July 5 to August 29) to 20 per cent in Period 9 (October 25 to November 21).
Table 1 – Rate Structure of the Base CEWS
Top-up Subsidy for the Most Adversely Affected Employers
A top-up CEWS of up to 25 per cent would be available to employers that were the most adversely impacted by the pandemic. Generally, an eligible employer’s top-up CEWS would be determined based on the revenue drop experienced when comparing revenues in the preceding 3 months to the same months in the prior year. Under the alternative approach to the calculation of baseline revenues, an eligible employer’s top-up CEWS would be determined based on the revenue drop experienced when comparing average monthly revenue in the preceding 3 months to the average monthly revenue in January and February 2020.
Employers that have experienced a 3-month average revenue drop of more than 50 per cent would receive a top-up CEWS rate equal to 1.25 times the average revenue drop that exceeds 50 per cent, up to a maximum top-up CEWS rate of 25 per cent, which is attained at a 70‑per‑cent revenue decline. As with the base CEWS rate, the top-up CEWS rate would apply to remuneration of up to $1,129 per week. The top-up CEWS rate for selected average revenue drop levels is illustrated in Table 2 below.
Table 2 – Top-up CEWS Rates for Selected Levels of Average Revenue Drop Over the Preceding Three Months
The overall CEWS rate would be equal to the top-up CEWS rate plus the base CEWS rate. Table 3 shows the combined base and top-up CEWS rates for Periods 5 to 9 for the most adversely affected employers.
Table 3 – Rate Structure of the Combined Base CEWS and the Top-up CEWS for the Most Affected Employers (those that experienced an average revenue drop of 70% or more in the preceding 3 months)
Table 4 illustrates the interaction of the 3-month drop in revenue test for the top-up CEWS and the month-over-month revenue test for the base CEWS for Periods 5 and 6. For example, an employer that is recovering with a revenue drop of 20 per cent in Period 5 and a preceding 3-month average revenue drop of 60 per cent would benefit from a base CEWS rate of 24 per cent and a top-up CEWS rate of 12.5 per cent, which would provide a combined CEWS rate of 36.5 per cent.
Table 4 – Rate Structure of the Combined Base CEWS and the Top-up CEWS for Periods 5 and 6* Average Revenue Drop in the Preceding 3 Months
Safe Harbour Rule for Periods 5 and 6
For Periods 5 and 6, an eligible employer would be entitled to a CEWS rate not lower than the rate that they would be entitled to if their entitlement were calculated under the CEWS rules that were in place for Periods 1 to 4. This means that in Periods 5 and 6, an eligible employer with a revenue decline of 30 per cent or more in the relevant reference period would receive a CEWS rate of at least 75 per cent or potentially an even higher CEWS rate using the new rules outlined above for the most adversely affected employers (up to 85 per cent).
CEWS for Furloughed Employees
For Periods 5 and 6, the subsidy calculation for a furloughed employee would remain the same as for Periods 1 to 4. It would be the greater of:
- For arm’s-length employees, 75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
- 75 per cent of the employee’s pre-crisis weekly remuneration up to a maximum benefit of $847 per week or the amount of remuneration paid, whichever is less.
Beginning in Period 7, CEWS support for furloughed employees would be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI). This would ensure equitable treatment of employees on furlough between both programs, provide greater clarity to workers as to their compensation as compared to a changing subsidy rate based on their employer’s revenue in a given month and, when combined with draftlegislative changes to the interaction with the CERB (i.e., the elimination of the 14-days rule, as discussed below), make it easier to transition employees on to CEWS so that they are reconnected with their employer.
For Period 5 and subsequent periods, the CEWS for furloughed employees would be available to eligible employers that qualify for either the base rate or the top-up for active employees in the relevant period.
The employer portion of contributions in respect of the Canada Pension Plan, Employment Insurance, the Quebec Pension Plan, and the Quebec Parental Insurance Plan in respect of furloughed employees would continue to be refunded to the employer.
No changes are proposed to the definition of eligible remuneration.
For active arm’s-length employees, the amount of remuneration would be based solely on actual remuneration paid for the eligibility period, without reference to the pre-crisis remuneration concept used for earlier CEWS periods. A modified special rule would apply to active employees that do not deal at arm’s length with the employer. For Period 5 and subsequent periods, the wage subsidy for such employees would be based on the employee’s weekly eligible remuneration or pre-crisis remuneration, whichever is less, up to a maximum of $1,129. The subsidy would only be available in respect of non-arm’s-length employees that were employed prior to March 16, 2020.
For Period 4, the pre-crisis remuneration of an employee would be based on the average weekly remuneration paid to the employee from January 1 to March 15, 2020; from March 1, 2019 to May 31, 2019; or from March 1, 2019 to June 30, 2019. For Period 5 and subsequent periods, the pre-crisis remuneration of an employee would be based on the average weekly remuneration paid to the employee from January 1 to March 15, 2020 or from July 1, 2019 to December 31, 2019. In all cases, the calculation of average weekly remuneration would exclude any period of 7 or more consecutive days without remuneration. Employers can choose which period to use on an employee-by-employee basis.
Effective July 5, 2020, the eligibility criteria would no longer exclude employees that are without remuneration in respect of 14 or more consecutive days in an eligibility period.
Calculating Revenues – Reference Periods for the Drop-in-Revenues Test
For the purpose of the base CEWS, eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the applicable calendar month. Table 5 below outlines each claiming period and the relevant period for determining an eligible employer’s change in revenue. For Period 5 and all subsequent periods, an eligible employer would be able to use the greater of its percentage revenue decline in the current period and that in the previous period for the purpose of determining its qualification for the base CEWS and its base CEWS rate in the current period. This would provide certainty and be a continuation of the rules for Periods 1 to 4 that allowed an employer that met the revenue test in one period to automatically qualify for the following period.
Employers that have elected to use the alternative approach for the first 4 periods would be able to either maintain that election for Period 5 and onward or revert to the general approach. Similarly, employers that have used the general approach for the first 4 periods would be able to either continue with the general approach or elect to use the alternative approach for Period 5 and onward. Whichever approach they choose would apply for Period 5 and onward and would apply to the calculation of the base CEWS and the top-up CEWS. This would provide flexibility for employers to adjust their approach in light of new circumstances they may be experiencing as the CEWS is extended.
Table 5 – Reference Periods for the Base CEWS
Table 6 – Reference Periods for the Top-up CEWS
The government has shared draft legislative proposals to make the changes to the CEWS described in this backgrounder as well as changes in response to feedback received from stakeholders. These proposed changes, which would generally apply as of March 15, 2020, include:
- providing an appeal process based on the existing procedure for notices of determination that allows for an appeal to the Tax Court of Canada;
- providing continuity rules for the calculation of an employer’s drop in revenues in certain circumstances where the employer purchased all or substantially all the assets used in carrying on business by the seller;
- allowing prescribed organizations that are registered charities or non-profit organizations to choose whether to include government-source revenue for the purpose of computing their reductions in qualifying revenue; and
- allowing entities that use the cash method of accounting to elect to use accrual based accounting to compute their revenues for the purpose of the CEWS.
The government is also proposing to move forward with previously released legislative changes, including relieving changes for calculating pre-crisis “baseline” remuneration, for corporations that have amalgamated and for eligible entities that use payroll service providers. The government is also proposing to move forward with the amendment that would align the treatment of trusts and corporations for the purposes of the CEWS. Some of these proposed measures can be found in the May 15, 2020 backgrounder entitled Extending eligibility for the Canada Emergency Wage Subsidy.
Full details of the draft legislative proposals can be found in the Backgrounder.
UPDATE July 17, 2020 – The Government of Canada announces support for persons with disabilities.
Last month, the government announced a series of measures to help Canadians with disabilities navigate the effects of the outbreak, including a one-time, tax-free, non-reportable payment of $600 to assist with additional expenses incurred during the pandemic. The government intends to propose legislation that would make the benefit available to more people and expand the one-time payment to include Canadians with disabilities, who are recipients of any of the following programs or benefits:
- A Disability Tax Credit certificate provided by the Canada Revenue Agency;
- Canada Pension Plan disability benefit or Quebec Pension Plan disability benefit; and
- Disability supports provided by Veterans Affairs Canada.
If the draft legislative proposals are enacted, eligible Canadians would receive the payment automatically. Additionally, Canadians with disabilities who are eligible for the Disability Tax Credit but have not yet applied, would have a 60-day window of opportunity to do so after Royal Assent.
Seniors who are eligible for the one-time payment to persons with disabilities would receive a total of $600 in special payments. The one-time payment to persons with disabilities would be adjusted to provide a top-up for eligible seniors, including:
- $300 for Canadians who are eligible for the Old Age Security pension and who received the
one-time seniors payment of $300; or
- $100 for Canadians who are eligible for the Old Age Security pension and the Guaranteed Income Supplement or Allowances and who received the one-time senior’s payment of $500.
UPDATE July 13, 2020 – The Government of Canada will extend the Canada Emergency Wage Subsidy program until December.
The government has announced it will extend the Canada Emergency Wage Subsidy (CEWS) program until December. This is the second extension of the CEWS program since it was launched. The first extension was for an additional 12 weeks, to August 29. Potential adjustments (including the 30% revenue decline threshold) to the extended program are expected to be made. Further details to come.
UPDATE July 2, 2020 – The Government of Canada introduces draft Regulations Providing Relief for Registered Pension Plans.
Finance Minister Bill Morneau announced the release of draft regulations that would help employers who sponsor a Registered Pension Plan (RPP) or salary deferral leave plan for their employees to manage and maintain their benefit obligations through the crisis. It will also assure employees who participate in salary deferral leave plans that suspending their leave of absence (e.g., via a recall to essential-service work), or deferring their scheduled leave for up to one year, will not put their plan at risk.
The proposed draft regulations would support the effective administration of such plans through the COVID-19 pandemic, providing temporary relief from various registration rules and other conditions that must be complied with under the Income Tax Regulations by:
- adding temporary stop-the-clock rules to the conditions applicable to salary deferral leave plans for the period of March 15, 2020 to April 30, 2021;
- removing restrictions that prohibit an RPP from borrowing money;
- extending the deadline for decisions to retroactively credit pensionable service under a defined benefit plan or to make catch-up contributions to money purchase accounts;
- permitting catch-up contributions to RPPs to be made in 2021 to the extent that 2020 required contributions had been reduced;
- setting aside the 36-month employment condition in the definition “eligible period of reduced pay” for the purpose of using prescribed compensation to determine benefit or contribution levels; and
- allowing wage rollback periods in 2020 to qualify as an eligible period of reduced pay for prescribed compensation purposes.
UPDATE June 28, 2020 – The Government of Canada has extended the Canada Emergency Commercial Rent Assistance program.
The Canada Emergency Commercial Rent Assistance (CECRA) program has been prolonged by one month, through to the end of July.
Those who qualified for CECRA for small businesses based on existing program parameters will be able to apply for the additional 1 month based on having a 70% revenue decline for April, May and June (for example, without reassessing whether they continue to have a 70% revenue decline in July). Participation in the one-month extension is voluntary. Both existing applicants to CECRA for small businesses and new applicants are able to apply for the July rent reduction.
UPDATE June 26, 2020 – Applications are now open for the expanded Canada Emergency Business Account.
Applications are now open for the expanded Canada Emergency Business Account (CEBA) program. This means that more small businesses can access it.
As of June 26, 2020, businesses eligible for CEBA now include owner-operated small businesses that do not have a payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll. Applicants will have to demonstrate having eligible non-deferrable expenses between $40,000 and $1,500,000 in 2020. The expanded CEBA program is being made available gradually by more than 230 financial institutions across the country, starting with the larger banks. Other participating financial institutions will start offering the program over the coming weeks.
UPDATE June 18, 2020 – The Government of Canada has delayed the launch of the Canada Emergency Business Account program.
Finance Minister Bill Morneau has announced that the expanded Canada Emergency Business Account (CEBA) program will no longer launch on June 19th, as previously planned. According to Mr. Morneau, work continues around the clock to ensure the program can securely launch across over 230 financial institutions, and the goal is to launch it as quickly as possible.
UPDATE June 16, 2020 – The Government of Canada has extended the Canada Emergency Response Benefit program for an additional 8 weeks.
The Canada Emergency Response Benefit (CERB) program has been extended by 8 weeks and is now available for a maximum of 24 weeks. You would continue to apply as you have for prior CERB periods, either through CRA if you are not EI eligible, or through Service Canada if you are EI eligible.
Note, the 24 weeks do not have to be taken consecutively. For example, you could receive the CERB benefit for a 4 week period, take a break from the program if you find employment, and then reapply a few months later based on your situation. The 24 week count does not restart each time you reapply for the Canada Emergency Response Benefit after taking a break from the program. If you received 4 weeks of CERB, took a break and then reapplied, you would only have 20 out of the 24 weeks of the CERB program available to you.
UPDATE June 15, 2020 – The Government of Canada has announced that applications for the expanded eligibility Canada Emergency Business Account program will open Friday, June 19, 2020.
The government has provided additional details regarding the expanded eligibility criteria for the Canada Emergency Business Account (CEBA) loan program, which allows an eligible entity with $20,000 or less in total employment income paid in the 2019 calendar year to qualify, if it also meets certain additional conditions.
A new CEBA application stream is available for those that meet the expanded criteria: termed the Non-Deferrable Expense Stream. This stream is for businesses with total employment income paid to employees in 2019 of $20,000 or less and 2020 Eligible Non-Deferrable Expenses (subject to adjustments for support or subsidies under other Government of Canada COVID response programs) greater than $40,000 and less than $1,500,000.
CEBA applications under the 2020 Eligible Non-Deferrable Expenses Stream will follow a two-step process:
Step 1: Businesses will initiate applications directly at their primary financial institution where they hold their primary business chequing / operating account. The financial institution will then direct applicants to Step 2 of the application process.
Step 2: Following the initial application through the financial institution, applicants will be directed to a CEBA website to provide supporting documentation of the 2020 Eligible Non-Deferrable Expenses and to complete the application. Supporting documentation includes electronic or paper copies of receipts / invoices / agreements to be uploaded as evidence of 2020 Eligible Non-Deferrable Expenses.
The Government of Canada will assess application information submitted via financial institutions in Step 1 together with the supporting documentation and information provided in Step 2. If successful, the Government of Canada will notify the financial institution and provide funding for the CEBA loan.
Applications for the expanded eligibility CEBA program open June 19, 2020. If approved, funds can be expected to be received within 10-15 business days after all supporting documentation is received by the Government of Canada.
Visit our COVID-19 Hub for full details.
UPDATE June 11, 2020 – The Government of Canada has provided new details about payments resulting from amended Canada Emergency Wage Subsidy claims and added a new question to the program’s application.
Receiving Funds and Paying Owed Balances Resulting from Amendments to Canada Emergency Wage Subsidy (CEWS) Claims
Based on the CRA’s instructions, when a claimant or advisor selects ‘adjustment to a prior claim’ through My Business Account or Represent a Client, the CEWS interface will show the data originally filed and ask them to enter the amended data, not the adjustment amounts. If the change increases the CEWS amount, the claimant will receive the cash the same way they did when they originally filed. If there is an over-payment, the CRA recommends that the claimant repay the overpaid amount immediately. My Business Account has been updated to allow claimants to ‘view and repay CEWS balance’. The CRA website will soon provide more information regarding other options for CEWS repayments.
Also, the CRA has updated their website with further information about how it plans to review claims that may involve calls or letters from the CRA. The CRA offers advice on how claimants can verify that such CRA calls are legitimate.
Finally, the CRA indicates that any suspected misuse or abuse of the CEWS program can now be reported through the CRA’s Leads program.
A New Question in the CEWS Application: Revenue Calculation Elections
A new question has been added to the application for the second period of the CEWS program (May 10th – June 6th): “Has the employer made one or more elections or choices regarding revenue calculation under subsection 127.5(4) of the CEWS program rules?”
To answer this question, you must first examine whether you have made any of the elections (or choices) listed in Part 2 of the Attestation for owner/managers and/or senior employees form: CEWS Program Rules Elections. If any of the elections apply to you, the answer to the above question should be “yes” and if they do not, the answer should be “no”.
The elections are as follows:
1. joint election, along with each other member of the group that prepares consolidated financial statements, under paragraph 125.7(4)(a) of the Income Tax Act – revenue determined on a non-consolidated basis for members of the employer’s group.
2. a joint election, along with each other member of the affiliated group, under paragraph 125.7(4)(b) of the Income Tax Act – revenue determined on a consolidated basis for the employer’s group.
3. an election under paragraph 125.7(4)(c) of the Income Tax Act – joint venture election.
4. a joint election, along with each person or partnership with which the employer does not deal at arm’s length and from whom the employer earns all or substantially all of its qualifying revenue under paragraph 125.7(4)(d) of the Income Tax Act – non-arm’s length revenue.
5. an election under paragraph 125.7(4)(e) of the Income Tax Act – cash method. If you have chosen to calculate your revenue decrease when compared to a prior period using the cash method, this applies to you.
6. an election under subparagraph (b)(ii) of the definition “prior reference period” in subsection 125.7(1) of the Income Tax Act (prior reference period election). If you have chosen to calculate your revenue decrease by comparing to your average revenue of January 2020 and February 2020, this applies to you.
7. an election under subparagraph (a)(ii) or (b)(ii) of the definition “qualifying revenue” in subsection 125.7(1) of the Income Tax Act – election by registered charity or not-for-profit to exclude government funding. If you are a registered charity or not-for-profit organization and you choose to exclude government funding from your decrease in revenue calculation, this applies to you.
UPDATE June 1, 2020 – The Government of Canada has announced a mechanism to make adjustments to previously filed Canada Emergency Wage Subsidy claims.
The mechanism to make adjustments to your previously filed Canada Emergency Wage Subsidy (CEWS) claim is now available (Note – you cannot correct a CEWS claim by adjusting a subsequent CEWS claim – you need to make an adjustment to the original claim). See below:
To Change a Claim You Submitted
You may request adjustments to applications you have already submitted. To change a previous wage subsidy claim, visit:
If you applied using the Web Forms application and need to change your claim, you may call CRA’s business enquiries phone number.
You will need to make sure you continue to meet eligibility requirements for any updated claims and keep records supporting your wage subsidy claim adjustment.
When completing the adjustment, you will need:
• your payroll program account number (123456789RP0001, for example)
• to know which claim period you are adjusting
• all of the information necessary to change the amount on each line(s) you would like to adjust
Representatives who are changing a claim on behalf of an employer must be authorized at level 2 or 3. You will need to have an updated Attestation for owner/managers and/or senior employees form to support the amended application.
UPDATE May 19, 2020 – The Government of Canada has announced an expansion to the eligibility criteria for the Canada Emergency Business Account.
The Canada Emergency Business Account (CEBA) loans program will be expanded to:
- sole proprietors receiving income directly from their businesses
- businesses that rely on contractors
- family-owned corporations that pay employees through dividends rather than payroll
As well, the government is working on potential solutions to modify CEBA so as to become available to new businesses (those which have never filed a tax return) and businesses which do not have “business accounts” at the bank, but operate through personal accounts.
To qualify under the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:
- a business operating account at a participating financial institution;
- a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return; and
- eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities and insurance.
More details, including the launch date for applications under the new criteria, will follow in the days to come.
UPDATE May 15, 2020 – The Government of Canada has announced an extension to the Canada Emergency Wage Subsidy.
The Canada Emergency Wage Subsidy (CEWS) program will be extended an additional 12 weeks, to August 29. Further modifications are being considered to make the extended program more widely accessible, including a review of the 30% revenue decline test.
In addition, CEWS eligibility has been extended to the following groups:
- Partnerships that are up to 50% owned by non-eligible members
- Indigenous government-owned corporations that are carrying on a business
- Registered Canadian Amateur Athletic Associations
- Registered Journalism Organizations
- Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools and flight schools
As well, the following amendments will be proposed:
- Provide flexibility for employers of existing employees who were not regularly employed in early 2020, such as seasonal employees. This includes a proposal that an option would be added to calculate baseline remuneration as the average weekly remuneration paid to the employee from March 1 to May 31 of 2019;
- Ensure that the CEWS applies appropriately to corporations formed on the amalgamation of two predecessor corporations; and
- Better align the treatment of trusts and corporations for the purpose of determining CEWS eligibility.
Visit our COVID-19 Hub for full details.
UPDATE May 15, 2020 – The government of Canada has opened applications for Canada Emergency Student Benefit.
Applications are open for the the Canada Emergency Student Benefit (CESB), which provides financial support to post-secondary students, and recent post-secondary and high school graduates who are unable to find work due to COVID-19.
Visit our COVID-19 Hub for full details.
UPDATE May 15, 2020 – The government of Canada has announced an extension to certain support benefits and support measures for seniors.
May 15 – GST/HST credit and Canada Child Benefit payments will continue to the end of September even if 2019 returns have not been filed. Payment amounts will be based on information from 2018 tax returns (if the 2019 tax return is not yet assessed). Individuals are encouraged to file returns by June 1, 2020.
May 12 – Additional support for seniors will be made available through a one-time tax-free payment of $300 for seniors eligible for the Old Age Security pension, with an additional $200 for seniors eligible for the Guaranteed Income Supplement (GIS).
GIS and Allowance payments will be temporarily extended if seniors’ 2019 income information has not been assessed. To avoid an interruption in benefits, seniors are encouraged to submit their 2019 income information as soon as possible and no later than by October 1, 2020.
UPDATE May 14, 2020 – The Government of Canada has made updates to the Canada Canada Emergency Rent Assistance Program.
Updated information on the Canada Emergency Commercial Rent Assistance (CECRA) program was released, including who is eligible, how the program will work, information requirements for application, and an FAQ section.
Applications are expected to open in the second half of May. If you intend to apply for the program, you are advised to begin compiling your documents. More program details will be provided soon.
Visit our COVID-19 Hub for full details.
UPDATE May 14, 2020 – The Government of Canada has released details about the Regional Relief and Recovery Fund.
Details were released on nearly $1 billion in funding for regional business relief through the Regional Relief and Recovery Fund (RRRF). Generally, this initiative will provide interest-free loans to businesses not eligible for the Canada Emergency Business Account or other related funding.
The Regional Relief and Recovery Fund helps businesses and organizations continue their operations, including paying their employees. It will also help support projects by businesses, organizations and communities to prepare now for a successful recovery. This initiative, implemented by the six regional development agencies in collaboration with the national network of Community Futures Development Corporations, is targeted to support businesses that are unable to access other government relief measures. The RRRF has two components:
- $675 million to support regional economies, businesses, organizations and communities in regions across Canada
- $287 million to support the national network of Community Futures Development Corporations to provide funding and support to small businesses and the rural communities in which they operate
For more information, follow the links below on the region applicable to you:
UPDATE April 26, 2020 – The Government of Canada has provided further information with respect to the Canada Emergency Wage Subsidy application and the Canada Emergency Commercial Rent Assistance Program.
Release of the Canada Emergency Wage Subsidy Application Guide
A newly released application guide for the Canada Emergency Wage Subsidy (CEWS) is now available. The application guide provides detailed line-by-line instructions on how to apply for the long-awaited subsidy.
As well, a CEWS Frequently Asked Questions update has also been released, answering 35 key questions related to the CEWS program.
Additional Details on the Canada Emergency Commercial Rent Assistance Program
On April 24, Prime Minister Justin Trudeau provided further information with respect to the Canada Emergency Commercial Rent Assistance (CECRA) program.
The federal government has reached an agreement in principle with all provinces and territories to implement the CECRA for small businesses. This program will lower rent by 75% for small businesses that have been affected by COVID-19. Further details on the program are as follows, with additional details expected in mid-May:
- The program will provide forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
- The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75% for the three corresponding months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.
- Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID-19 revenues.
- This support will also be available to non-profit and charitable organizations.
UPDATE April 22, 2020 – The Government of Canada has provided further guidance with respect to the Canada Emergency Wage Subsidy application and information about new support programs for students.
Preparation for the Canada Emergency Wage Subsidy Application
Registration for the Canada Emergency Wage Subsidy (CEWS) will begin on April 27, 2020. Payments are targeted to begin on May 5.
If you intend to apply for the CEWS, you are advised to follow these important preparatory steps in advance:
- CALCULATE YOUR SUBSIDY AMOUNT: A revised CEWS website and new calculator is now available to help businesses determine the subsidy amount to expect from the CEWS program. If you intend to apply for the CEWS, you are advised to follow the guidance in this calculator.
- SET UP CRA MY BUSINESS ACCOUNT: Eligible employers will be able to apply for the CEWS through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. If you intend to apply for the CEWS, you are advised to ensure your My Business Account is properly set up and your direct deposit information is updated with CRA. For more information on how to do this, refer to our article, Preparation for the Canada Emergency Wage Subsidy Application.
For more information on the CEWS, refer to our updated article, COVID-19 Canada Emergency Wage Subsidy.
New Student Support Programs
On April 22, Prime Minister Justin Trudeau announced $9 billion in additional support programs for post-secondary students and recent graduates. These programs include:
Canada Emergency Student Benefit
The Canada Emergency Student Benefit will provide support to students and new graduates who are not eligible for the Canada Emergency Response Benefit. This benefit will provide $1,250 per month for eligible students or $1,750 per month for eligible students with dependents or disabilities. The benefit will be available from May to August 2020. Eligible students will include those who are post-secondary students right now, going to college in September or who graduated in December 2019. The benefit will be available even if the eligible student was earning up to $1,000 per month. Payments will be delivered through the Canada Revenue Agency.
Canada Student Service Grant
For students who choose to do national service and serve their communities, the new Canada Student Service Grant will provide up to $5,000 for their education in the fall.
Job Creation for Students
Existing federal employment, skills development, and youth programming will be expanded to create up to 116,000 jobs, placements, and other training opportunities to help students find employment and develop valuable skills this summer and over the coming months.
Student Grants and Other Support
- The Canada Student Grant will be doubled for all eligible full-time students, to a maximum of $6,000 and $3,600 for part-time students in 2020-21. The Canada Student Grant for Students with Permanent Disabilities and Students with Dependents would also be doubled.
- Eligibility for student financial assistance will be broadened by removing the expected student’s and spouse’s contributions in 2020-21.
- The Canada Student Loans Program will be enhanced by raising the maximum weekly amount that can be provided to a student in 2020-21 from $210 to $350.
- Additional support will be made available for First Nations, Inuit, and Métis Nation students pursuing post-secondary education.
- Extensions will be made to expiring federal graduate research scholarships and postdoctoral fellowships, as well as supplementation of existing federal research grants, to support students and post-doctoral fellows.
UPDATE April 16, 2020 – The Government of Canada has introduced a new rent relief measure for businesses, as well as new criteria for the Canada Emergency Business Account, Canada Emergency Response Benefit and Canada Emergency Wage Subsidy.
Canada Emergency Commercial Rent Assistance
On April 16, Prime Minister Justin Trudeau announced a new rent assistance program for businesses. The new Canada Emergency Commercial Rent Assistance (CECRA) program will help small businesses cover their rents for April, May, and June. The assistance is being rolled out in collaboration with the provinces and territories.
Canada Emergency Business Account
On April 16, Prime Minister Justin Trudeau announced the eligibility criteria for the Canada Emergency Business Account is being expanded. The Canada Emergency Business Account (CEBA) program provides interest-free loans of up to $40,000 to small businesses and not-for-profit organizations, to help cover their operating costs due to the economic impact of the COVID-19 virus. To qualify, previous criteria required these organizations to demonstrate they paid between $50,000 – $1 million in total payroll in 2019. New criteria requires these organizations to demonstrate they paid between $20,000 and $1,500,000 in total payroll last year. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25% (up to $10,000). Small businesses and not-for-profit organizations should contact their financial institutions to apply for these loans. Access to the CEBA application was made available on April 9..
Canada Emergency Response Benefit & Other Support
On April 15, Prime Minister Justin Trudeau announced further changes to expand the eligibility rules for the Canada Emergency Response Benefit (CERB) to:
- Allow individuals to earn up to $1,000 per month while collecting the CERB. The $1,000 threshold includes income from employment and/or self employment income, and includes tips earned while working, non-eligible dividends, honoraria, and royalties. Pension, student loans and bursaries are not employment income and should not be included in the $1,000.
- Extend the CERB to seasonal workers who have exhausted their EI regular benefits and are unable to undertake their regular seasonal work because of COVID-19.
- Extend the CERB to workers who have recently exhausted their EI regular benefits and are unable to find a job because of COVID-19.
Trudeau also announced a wage boost for COVID-19 essential workers who make less than $2,500 per month. Additional support measures for students and those paying commercial rent are expected soon. The Prime Minister also announced the launch of a web portal and app, called Wellness Together Canada, offering mental health resources for Canadians who need support during the COVID-19 pandemic.
Canada Emergency Wage Subsidy
On April 11, the Canada Emergency Wage Subsidy (CEWS) legislation was passed. The final legislation included some changes to earlier announced provisions, including future eligibility criteria (once an employer is found eligible for a specific period, the employer automatically qualifies for the next period) and special rules for corporate groups.
This program will provide a 75% wage subsidy (75% of remuneration paid, up to a maximum benefit of $847 per week) to eligible employers, for up to 12 weeks, retroactive to March 15, 2020. Eligible employers include individuals, taxable corporations, partnerships consisting of eligible employers, not-for-profit organizations and registered charities. This subsidy will be available to eligible employers who see a drop of at least 15% of their revenue in March 2020 and a 30% drop for the following months.
UPDATE April 9, 2020 – The Government of Canada has introduced changes to the Canada Emergency Wage Subsidy, a new refund of certain payroll contributions and new student supports.
Canada Emergency Wage Subsidy Eligibility
The eligibility criteria for businesses to access the Canada Emergency Wage Subsidy (CEWS) were expanded to address the realities faced by the not-for-profit sector, high growth companies and new businesses. The government proposed the following additional flexibility:
To measure their revenue loss, all employers have the flexibility to compare their revenue of March, April and May 2020 to:
-that of the same month of 2019; or
-an average of their revenue earned in January and February 2020.
For March, a reduction to the 30% benchmark to 15%. Employers are allowed to measure revenues either on the basis of:
-accrual accounting (as they are earned); or
-cash accounting (as they are received).
Registered charities and non-profit organizations are allowed to choose to include or exclude government funding in their revenues for the purpose of applying the revenue reduction test. Where an option is provided for revenue loss calculation / measurement methods, the selected method would be required to be used for the entire duration of the program. Special rules would also be provided to address issues for corporate groups, non-arm’s length entities and joint ventures.
Refund of Certain Payroll Contributions
As well, the government proposed that employers eligible for the CEWS be entitled to receive a 100% refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan. This refund would apply to the entire amount of employer-paid contributions in respect of remuneration paid to furloughed employees in a period where the employer is eligible for the CEWS.
Support for Students
‘The government also introduced enhancements to the Canada Summer Job Program, including:
- 100% subsidy for students;
- Extend job placements to winter to consider jobs starting later; and
- Extend program to allow for part-time workers.
This article has been written in general terms to provide broad guidance only. It should not be relied upon to cover specific situations and you should not act upon the information contained herein without obtaining specific professional advice. Please contact our office to discuss this information in the context of your specific circumstances. We accept no responsibility for any loss or damage resulting from your reliance on the information in this article.