COVID 19 Summary of Canadian Economic Measures

COVID 19 Summary of Canadian Economic Measures

April 2, 2020
Dear Clients and Friends:
I hope your families are staying safe and positive during the challenging times we are all facing.   I have outlined and summarized latest update on the economic measures that the government of Canada has provided.  As outlined by Bill Morneau yesterday, the government is investing $71B to assist small businesses during the pandemic.

As a way of protecting jobs through the pandemic, Prime Minister Justin Trudeau, proposed the new Canada Emergency Wage Subsidy.   This wage subsidy aims to prevent further job losses, encourage employers to re-hire workers previously laid off as a result of COVID-19, and help better position Canadian companies and other employers to more easily resume normal operations following the crisis. While the Government has designed the proposed wage subsidy to provide generous and timely financial support to employers, it was done with the expectation that employers will do their part by using the subsidy in a manner that supports the health and well-being of their employees.  The application process will be available in about 3 to 6 weeks as per Minister Morneau’s address yesterday.  They will be setting up a microsite to allow for applications.  This would provide a 75%  temporary 12 week wage subsidy to eligible employers, retroactive to March 15, 2020.  The maximum amount eligible per employee is $847 per week up 75% of employees’ remuneration paid.  I have listed further details below under Subsidy Calculation.

Are You Eligible?

Eligible employers would include individuals, taxable corporations, partnerships, non‑profit organizations and registered charities.  This subsidy would be available to eligible employers that have experienced at least a 30% decrease in their revenue (see Periods of Eligibility). In applying for the subsidy, employers would be required to attest to the decline in revenue.

Eligible Periods

For eligible employers established after February 2019, eligibility would be determined by comparing monthly revenues to a reasonable benchmark.
Subsidy Calculation:

An employer’s revenue for eligibility would be based on revenue from business carried on in Canada earned from arm’s-length sources. Revenue would be calculated using the employer’s normal accounting method, and would exclude revenues from extraordinary items and amounts on account of capital.

The government subsidy for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:

• 75% of remuneration paid, up to a maximum benefit of $847 per week or,
• The lesser of:
• The amount of remuneration paid, up to a maximum benefit of $847 per week or
• 75% of the employee’s pre-crisis weekly remuneration

(Further guidance with respect to the definition of pre-crisis weekly remuneration for a given employee will be provided by CRA in the coming days)
Employers will also be eligible for a subsidy of up to 75 per cent of salaries and wages paid to new employees.
A special rule will apply to employees that do not deal at arm’s length with the employer. The subsidy amount for such employees will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration. There would be no overall limit on the subsidy amount that an eligible employer may claim. Employers must make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.

Periods of Eligibility:

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. The amount of wage subsidy received by the employer in a given month would be ignored for the purpose of measuring year-over-year changes in monthly revenues. For example, if revenues in March 2020 were down 50% compared to March 2019, the employer would be allowed to claim the Canadian Emergency Wage Subsidy (as calculated above) on remuneration paid between March 15 and April 11, 2020.

Application Process:

Eligible employers would be able to apply for the Canada Emergency Wage Subsidy through the Canada Revenue Agency’s My Business Account portal as well as a web-based application. Employers would have to keep records demonstrating their reduction in arm’s-length revenues and remuneration paid to employees. More details about the application process will be made available shortly.

Compliance Process & Penalties:
The government said that employers that do not use the subsidy as intended would face “stiff and severe” penalties. In particular, employers that do not meet the eligibility requirements will have to repay subsidy amounts. New anti-abuse rules will ensure that the subsidy is not inappropriately obtained and employees are paid the amounts they are owed. Penalties may also apply to taxpayers who make fraudulent claims.

10% Temporary Wage Subsidy:

The Temporary Wage Subsidy of $25,000 per employer and $1,375 per employee continues to be available. For employers that are eligible for both the Canada Emergency Wage Subsidy and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.

Canadian Emergency Response Benefit (CERB):

The government has indicated that the subsidy is not available for remuneration paid to an employee in a week that falls within a four-week period for which the employee is also eligible for the Canadian Emergency Response Benefit. However, employers who are not eligible for the Canada Emergency Wage Subsidy would still be able to furlough employees who will receive up to $2,000 a month.

Taxable Income:

The wage subsidy received by an employer would be considered government assistance and be included in the employer’s taxable income. Assistance received under either wage subsidy would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

For further details, please refer to the CRA website at https://www.canada.ca/en/department-finance/economic-response-plan/wage-subsidy.html
We are committed to serving our valued clients during this difficult time and our team is ready to assist you via phone email or video conferencing.

Stay Safe!