Business owners – COVID-19 emergency support measures
Details available as of September 28, 2020
The economic impact of the COVID-19 pandemic is being felt widely throughout the business community and has prompted the federal government to propose several financial support measures. This content is intended to provide business owners with high-level details on the measures.
The pandemic situation continues to evolve and measures continue to be introduced and refined. Therefore, some of the details here may fall out of date. We recommend that you refer to the Government of Canada website for the most up-to-date information.
Income tax deadlines
The CRA has published the following schedule summarizing revised due dates for income tax filings and payments. We recommend that you check this page if further changes to due dates are announced.
- Self-employed individuals will still have until June 15, 2020 to file their 2019 income tax returns – this date has not changed.
- Corporations that otherwise have a filing due date for their tax return after March 18, 2020 and before June 1, 2020 will have their return filing deadline extended to May 31, 2020.
- All businesses can defer until September 30, 2020 the payment of income tax balances and instalments that become owing between March 30, 2020 and before September 1, 2020. No interest or penalties will accumulate on these amounts during this period.
- Furthermore, the CRA has confirmed that they will not charge late-filing penalties as long as the return is filed by the extended payment due date of September 30, 2020.
Deferral of GST/HST/QST payments
Businesses, including self-employed individuals, are now able to defer GST, HST, and QST payments until June 30, 2020. This applies to any amounts that would have been owing on or after March 27, 2020 and before June 30, 2020.
The filing deadline for GST, HST, and QST returns is technically unchanged; however, the tax authorities will not impose penalties where a return that was due between March 27, 2020 and before June 30, 2020 is filed by June 30, 2020.
Canada Emergency Wage Subsidy (CEWS)
The CEWS is Canada’s largest direct support program for employers who keep employees on their payroll and have suffered a decrease to gross revenues.
There are currently nine claiming periods confirmed for the CEWS covering the period between March 15, 2020 to November 21, 2020.
In the first four claiming periods between March 15, 2020 and July 4, 2020, employers who are eligible for the CEWS will have 75% of their employees’ remuneration (salary, wages, and other amounts an employer is regularly required to withhold and remit to the CRA) covered by the government. The maximum subsidy per employee for the first 4 claiming periods is $847 per week, with no cap at the employer level.
In the fifth to ninth claiming periods between July 5, 2020 and November 21, 2020, the CEWS will be comprised of:
- A base subsidy available to employers with any level of revenue decline. The amount of the base subsidy, however, will be calculated on a sliding scale, depending on the level of revenue decline. This revised base subsidy essentially provides any employer who can demonstrate a revenue decline to benefit from the CEWS.
- An additional “top-up” subsidy of up to 25%. The top-up subsidy is only available for employers who have experienced a decrease of more than 50% to their 3-month average revenues.
The amounts of the base and top-up subsidies that are available in the fifth to ninth claiming periods will vary and are complex to calculate. Please refer to the following webpage for more details as well as an online calculator.
The CEWS is only available in respect of an employee if “remuneration” was paid to that employee. For owner-managers, remuneration does not include dividends. Therefore, owner-managers who historically only pay themselves dividends from their corporation, rather than salaries, cannot claim the CEWS in respect of those dividends.
The CEWS currently covers nine claiming periods between March 15, 2020 and November 21, 2020.
On September 23, 2020, the government announced that it is proposing to extend the CEWS until the summer of 2021. No further details have been provided on this extension.
The CEWS is available to employers of all sizes, whether incorporated or unincorporated (i.e., individuals and partnerships), as well as non-profit organizations and charities. An employer applies for the subsidy for each claiming period.
- For the first claiming period covering March 15 to April 11, 2020, an employer will be eligible for the CEWS if it suffered a minimum reduction in gross revenues of 15% during the claiming period.
- For the second to fourth claiming periods covering April 12, 2020 to July 4, 2020, an employer will be eligible for the CEWS if it suffered a minimum reduction in gross revenues of 30% during each of the claiming periods.
- From the fifth to ninth claiming periods covering July 5, 2020 to November 21, 2020, there will no longer be a minimum gross revenue reduction required. Instead, any employer that can show a revenue decline can receive a base subsidy, the amount of which will depend on the magnitude of the revenue decline. Furthermore, if an employer can show a decrease of more than 50% to their 3-month average revenues, then they will receive an additional “top-up” subsidy of up to 25%. The maximum subsidy for these claiming periods will decrease over time.
The reference points for comparing revenue declines in the first four claiming periods is either the revenues from the same month in 2019, or the average revenues of January and February 2020. The reference points for comparing revenue declines in the fifth to ninth claiming periods in computing the base subsidy is similar in computation to the first four periods, with some added flexibility. The reference points for eligibility for the additional top-up subsidy available from the fifth to ninth claiming periods will be based on a 3-month revenue average.
How to apply
The CRA has released the following webpage on the CEWS, which provides helpful information for employers to determine whether they are eligible. The webpage also includes a calculator that employers can use to determine how much the subsidy may be.
The application is available through CRA My Business Account. A separate online application form is also available. The application process requires businesses to prove that their gross revenues have decreased by the required amount, and that they are currently paying their employees remuneration.
On the application, the employer is required to designate someone who has principal responsibility over the financial activities of the employer to attest to the application.
The CEWS is extremely complex and it is imperative for business owners to seek professional accounting advice to navigate eligibility and application.
Refund for payroll contributions
On top of the CEWS, an employer may be able to receive a 100% refund of employer contributions to the following plans for employees on leave with pay:
- Employment Insurance (EI)
- The Canada Pension Plan (CPP)
- The Quebec Pension Plan (QPP)
- The Quebec Parental Insurance Plan (QPIP)
It is important to note that the employer must actually pay their employees first. Employers are still required to collect and remit employee and employer contributions to EI, CPP, QPP, and QPIP. If accepted, the CRA will then pay the CEWS to the employer as well as provide the potential payroll refund. The CEWS and payroll refunds are taxable to the employer.
Temporary Wage Subsidy for Employers (TWS)
Businesses that do not qualify for the CEWS should review whether they qualify for the TWS, which is a separate wage subsidy program. For more details on the TWS, please visit the CRA website.
The TWS subsidizes 10% of remuneration paid from March 18, 2020 to before June 20, 2020 up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
Eligibility for the TWS is more limited than the CEWS—only individuals, certain partnerships, non-profit organizations and registered charities, and Canadian-controlled private corporations eligible for the small business deduction can apply.
How to apply
This particular subsidy, unlike the CEWS, is essentially “received” by a business through reductions in required income tax remittances from employee remuneration. This can make the TWS more attractive than the CEWS, as it creates immediate cash available, rather than having to wait for the government to pay the CEWS out. The reduction in remittances only applies to income tax, not to other withholdings such as CPP and EI.
Note that any TWS claimed in a period will reduce any CEWS receivable for the same period.
Canada Emergency Response Benefit (CERB)
The CERB is an income support program, primarily for individuals who involuntarily cease working because of COVID-19.
The CERB provides eligible individuals with taxable payments of $500 per week, for a maximum of 28 weeks (i.e., $2,000 a month for 7 months). It is important to note that no income tax withholdings will be made on the CERB payments and thus recipients must budget for this on their 2020 income tax returns.
The CERB eligibility period is from March 15, 2020 until September 26, 2020. Eligible individuals have to apply for each 4-week period.
Eligible individuals include the following:
- Workers who stop working due to COVID-19 and do not have access to paid leave or other income support
- Workers who are sick, quarantined, or taking care of someone who is sick with COVID-19
- Working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures
- Workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work
- Wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance
Furthermore, eligible individuals:
- Need to have earned at least $5,000 of income in 2019 or in the 12 months prior to application.
- Owner-managers can use non-eligible dividends received as part of this test.
- In the first claim, cannot earn more than $1,000 in income for at least 14 days in the application period.
- For subsequent claims, cannot earn more than $1,000 for the entire application period.
In other words, the CERB will still be available for individuals who may continue to work during the pandemic, but earn less than $1,000 a month.
How to apply
Applications for this benefit are completed through the CRA website. The CRA will continue to accept and process retroactive applications for the final eligibility period that ended September 26, 2020.
Updates to Employment Insurance (EI)
Once the CERB ends, individuals who still require income support may be able to transition into a more simplified and accessible EI program starting September 27, 2020. Relevant changes are intended to allow more individuals to access EI and include:
- Providing a one-time, temporary insurable hours credit for Canadians, which effectively allows individuals who have completed at least 120 insurable hours in the past 52 weeks to access EI benefits.
- Providing a minimum EI benefit rate of $400 per week (or $240 per week for extended parental benefits) for new EI applicants as of September 27, 2020.
- Providing a minimum entitlement duration of 26 weeks for regular EI benefits.
How to apply
Please refer to the Employment Insurance website for further details on how to apply for EI benefits.
Post-CERB recovery programs - proposed
Three additional recovery benefits were proposed for individuals who continue to require income support after the CERB ends but may not be able to transition to EI. All three benefits will be available for one year starting September 27, 2020:
- Canada Recovery Benefit (CRB) – The CRB provides $500 per week for up to 26 weeks to workers who are not eligible for EI. This benefit is intended for individuals who are unable to qualify for EI after CERB, such as self-employed individuals. The CRB includes a claw-back—individuals have to repay $0.50 of the CRB they receive for each dollar of their annual net income above $38,000 (excluding the CRB).
- Canada Recovery Sickness Benefit (CRSB) – The CRSB provides $500 per week for up to two weeks for individuals who cannot work because they are ill or have to self-isolate due to COVID-19. This benefit is intended for individuals who do not have a paid sick leave program.
- Canada Recovery Caregiving Benefit (CRCB) – The CRCB provides $500 per week for up to 26 weeks for individuals who cannot work because they are caring for a family member as a result of COVID-19. This benefit is intended for individuals who do not have a paid leave program.
How to apply
The three post-CERB recovery programs are proposed and are not yet enacted into law. Once enacted, the benefits will retroactively apply to begin as of September 27, 2020. It is expected that applications will be available through the CRA. Please refer to the following webpage for further details and updates.
Canada Emergency Business Account (CEBA)
The CEBA will provide loans of $40,000 to qualifying Canadian operating businesses who require additional credit because of COVID-19. Furthermore:
- The CEBA is interest-free until December 31, 2022.
- 25% ($10,000) of the loan may be forgivable if the business pays back $30,000 on or before December 31, 2022. If the loan cannot be paid back by that date, the financial institution will convert the balance into a term loan.
The CEBA is available to incorporated Canadian operating businesses. Self-employed individuals are now also eligible.
Ordinarily, the business must also have had between $20,000 and $1.5 million in total payroll in 2019 to qualify. However, the government has extended the eligibility criteria for businesses that had lower than $20,000 in total payroll, such as small businesses that only pay employees through dividends rather than salaries. In order for businesses with payroll under $20,000 to be eligible, they would need all of the following:
- A business operating account at a participating financial institution.
- A CRA business number, and to have filed a 2018 or 2019 tax return.
- Eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses include rent, property taxes, utilities and insurance.
How to apply
The CEBA is now available through the business’s primary financial institution. Businesses should contact their primary financial institutions for more information and to apply.
Canada Emergency Commercial Rent Assistance (CECRA)
The federal government has reached an agreement in principle with all provinces and territories to deliver the CECRA program, which aims to lower rent by 75% for eligible small businesses.
The CECRA will provide loans to qualifying commercial property owners to cover 50% of monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship between April and September 2020.
The loans will be forgivable if the mortgaged commercial property owner agrees to reduce the eligible small business tenants’ rent by at least 75% under a rent forgiveness agreement.
Under the rent forgiveness agreement, the commercial property owner would reduce the eligible small business tenant’s monthly rent by at least 75%, and the agreement will need to include a moratorium on eviction. Therefore, under the agreement, the rental costs will be allocated in the following manner:
- Eligible small business tenant: 25%
- Commercial property owner: 25%
- Federal and provincial government: 50%, which can be forgiven and disbursed directly to the commercial property owner.
In order to qualify for the CECRA, a commercial property owner must own commercial real property occupied by “impacted small business tenants” and must enter into a legally binding rent reduction agreement that reduces an impacted small business tenant’s rent by at least 75%. The agreement must include a moratorium on eviction and a declaration of rental revenue.
Impacted small business tenants are businesses paying less than $50,000 per month in rent, generate no more than $20 million in gross annual revenues, and have experienced a decrease in pre-COVID-19 revenues by at least 70%.
Businesses that qualified for the CECRA for April, May, and June 2020 will automatically qualify for July, August, and September 2020.
How to apply
Applications for the CECRA are now available through the Canada Mortgage and Housing Corporation (CMHC). The CMHC webpage provides a link to the application and additional instructions.
The deadline to submit new applications to CMHC is September 30, 2020. New applications can cover rent assistance from April to August 2020. The deadline to opt-in for the final September rent assistance is October 30, 2020.
Contact us should you have any questions.