Our understanding of the most important provision of the current relief programs is summarized below. This information is currently as of April 1, 2020 only.
Canadian Emergency Wage Subsidy (CEWS)
On April 1st, 2020 the government provided details on the 12-week
wage subsidy. The subsidy is 75% of annual employee salary, up to an annual
salary of $58,700 (i.e., up to $847 per week, per eligible employee). Here are
some new details:
- The CEWS subsidy will be available for both large and
small employers that have lost at least 30% of revenue due to COVID-19, regardless
of the number of employees.
- The 30% reduction will be determined by comparing the employer’s
gross revenue in March, April and May, 2020 to the same month in 2019. Each
month that employers experience a 30% reduction in revenue must be applied for
separately.
Eligibility would generally be determined by the change in an eligible employer’s monthly revenues, year-over-year, for the calendar month in which the period began. In determining monthly revenues, the wage subsidy would NOT be considered in revenues.
The Eligible Periods are as follows:
Each month will be a separate application. It may be possible that
a company is not eligible for Period 1, but is eligible for Periods 2 and/or 3.
- These changes will be retroactive starting from March
15, 2020 to June 6, 2020, and there is no overall limit on the amount of
subsidy than an eligible employer may claim.
- For qualifying employers to receive funds directly
from CRA, they must provide CRA the pre-crisis income and the earnings actually
paid per employee.
- Application can be made through the My Business
Account CRA portal, and the new links are expected to be available next week. All
employers should be certain they have a My
Business Account established with the CRA – your accountant CANNOT apply
for this relief for you!
- In the meantime, businesses should ensure they are set
up for direct deposit with CRA to expedite the payment process.
- The subsidy is fully taxable.
10% Temporary Wage Subsidy
Businesses who do not
qualify for the CEWS, may still qualify for the previously announced temporary
three-month taxable subsidy. This subsidy is available on up to 10% of eligible
employee salaries from March 18 to June 20, 2020, with a cap of $1,375 per
employee and a cap of $25,000 per employer. The subsidy is fully taxable.
For employers that are eligible for both the CEWS and the 10% Temporary Wage Subsidy for a period, any benefit from the 10% wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the CEWS in that same period. In other words, eligible employers can choose to reduce remittances up to 10% of the employee’s salary and then receive the CEWS. However, they cannot be added on top of each other. The benefit is limited to 75%, not 85%.
Credit Available to Small and Medium Size Business (SMEs)
Canada Emergency Business Account
This new account will provide interest-free loans of up to $40,000 to
small businesses and not-for-profits, to help cover their operating costs
during a period where their revenues have been temporarily reduced. To qualify,
these organizations will need to demonstrate they paid between $50,000 to $1
million in total payroll in 2019.
Loan Guarantee
Export Development Canada (EDC) is working with financial institutions
to issue new operating credit and cash flow term loans of up to $6.25 million
to SMEs.
Co-Lending Program
Business Development Bank of Canada (BDC) is working with financial
institutions to co-lend term loans to SMEs for their operational cash flow
requirements.
Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program. These programs will roll out in the three weeks after March 27.
Tax Filing and Payment Flexibility
Income Tax Extension
The government is providing the following extensions for tax deadlines.
Employer Health Tax Support for Ontarians
The Ontario government increased the Employer Health Tax
exemption for 2020 from $490,000
to $1 million and have introduced a five‑month relief period
for Ontario businesses who are unable to file or remit their provincial taxes
on time due to the special circumstances caused by the coronavirus (COVID‑19) in Ontario. This
is effective March 20, 2020.
Deferral of Sales Tax Remittance and
Customs Duty Payments
The government will allow businesses, including self-employed
individuals, to defer until June 30, 2020 payments of the Goods and Services
Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their
imports.
- HST Monthly Filers – the deferral will
apply to GST/HST remittances for the February, March and April 2020 reporting
periods.
- HST Quarterly Filers – the January 1, 2020
through March 31, 2020 reporting period.
- HST Annual Filers – the amounts
collected and owing for their previous fiscal year and instalments of GST/HST
in respect of the filer’s current fiscal year.
- GST and Customs Duty Payments – deferral will
include amounts owing for March, April and May. These amounts were normally due
to be submitted to the Canada Revenue Agency and the Canada Border Services
Agency as early as the end of this month.
All HST returns must continue to be filed on time.
If you have any questions regarding any of the above information, please feel free to contact us.