June 17, 2020 extension of CEWS program to August 29, 2020.
The government of Canada is providing wage subsidies for a period of three months equal to 75% of the remuneration paid during that period, subject to a number of limits and restrictions. The subsidy is retroactive to March 15, 2020.
Businesses, charities and non-profit organizations whose revenues have decreased by at least 30% because of the COVID-19 pandemic are eligible to apply for the CEWS.
Employers may be eligible for a subsidy of up to 100% of the first 75% of pre-crisis wages of existing employees.
On May 15, 2020, the Canadian government announced that the CEWS program is extended for an additional 12 weeks to August 29, 2020.
The government confirmed that eligibility criteria for month 4 [June 7 to July 4] will remain the same as the first three months.
Further details will be announced for potential changes for months/periods 5 and 6 [July 5, 2020 - August 29, 2020].
10% Wage Subsidy
On March 18, 2020, the Canadian government introduced a 10% federal wage subsidy for small businesses (the “10% Wage Subsidy”).
The 10% measure is restricted to individuals, registered charities, non-profit organizations and Canadian-controlled private corporations that are eligible for the small business deduction, and partnerships that meet certain criteria.
The program covers 10% of wages paid from March 18, 2020, to June 19, 2020, and up to $1,375 for each eligible employee to a maximum of $25,000 total per employer.
Employers are responsible for manually calculating the 10% subsidy and can claim it by reducing their current payroll remittance of federal, provincial or territorial income tax by the subsidy amount.
Canada Emergency Wage Subsidy (CEWS) [75% wage subsidy]
On April 1, 2020, the Canadian government introduced CEWS to businesses, charities and non-profit organizations that experienced a 30% decrease in revenue due to COVID-19.
- It will apply at a rate of 75% of the first $58,700 normally earned by employees, representing a benefit of up to $847 per week.
- Employers eligible for the subsidy are required to make their best effort to top-up employees’ salaries to bring them to pre-crisis levels.
- Employers will also obtain a 100% refund of certain employer-paid contributions to EI, the CPP, the QPP, and the QPIP. This refund covers 100% of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees. This refund is not subject to the weekly maximum benefit per employee of $847 that an eligible employer may claim.
- The subsidy program will be in place for a 12-week period, from March 15 to June 6, 2020. (extended to Dec 19, 2020).
- There will be no overall limit on the subsidy amount that an eligible employer may claim.
- Eligible employers include individuals, taxable corporations, partnerships consisting of eligible employers, non-profit organizations and registered charities.
- Public bodies are not eligible, including municipalities and local governments, crown corporations, public universities, colleges, schools and hospitals.
- For non-profit organizations and registered charities similarly affected by a loss of revenue, the government announced that it will continue to work with the sector to ensure the definition of revenue is appropriate to their circumstances and determine whether additional support is needed.
- The entitlement to the wage subsidy will be based entirely on the salary, wages or other remuneration actually paid to employees.
- Employers will also be eligible for a subsidy of up to 75% of salaries and wages paid to new employees.
- Eligible employers apply for the subsidy through the CRA’s My Business Account portal or a web-based application.
Employers are allowed to calculate their revenues under either the accrual method or the cash method, but not a combination of both.
Eligible employers that experienced a decline in gross revenues of at least:
- 15% in March 2020 (compared to March 2019)
- 30% in April 2020 (compared to April 2019)
- 30% in May 2020 (compared to May 2019)
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.
Employers are allowed to calculate their change in revenue using an alternative benchmark to determine their eligibility. Under this alternative approach, employers are allowed to compare their revenue using an average of their revenue earned in January and February 2020.
- Employers would select the general year-over-year approach or this alternative approach when first applying for the CEWS and would be required to use the same approach for the entire duration of the program
- Once an eligible employer is found eligible for a specific period, it will automatically qualify for the next period of the CEWS program.
- An employer’s revenue for this purpose will be revenue from the business carried on in Canada earned from arm’s-length sources.
- Revenue will be calculated using the employer’s normal accounting method and will exclude revenues from extraordinary items and amounts on account of capital.
- Special rules for the computation of revenue will be provided to take into account certain non-arm’s length transactions.
- Affiliated groups are allowed to compute revenue on a consolidated basis.
Integration with the 10% Wage Subsidy
Organizations that do not qualify for the CEWS may still qualify for the 10% Wage Subsidy.
In addition, some employers can qualify for both the 10% Wage Subsidy and the CEWS. If that is the case, any amount under the CEWS will be reduced by any 10% subsidies claimed for the same period.
The Canadian government warned of “severe” consequences for any party that tries to take advantage of the CEWS and indicated potential penalties for fraudulent claims and the introduction of new offences if an employer provides false or misleading information concerning the program.
In addition, employers will be required to repay amounts paid under the Canada Emergency Wage Subsidy if they are discovered not to meet the eligibility requirements or pay their employees accordingly.
Tax Treatment of CEWS
The usual treatment of tax credits and other benefits provided by the government to employers will apply to the CEWS. Accordingly, the wage subsidy received by an employer will be considered government assistance and will be included in the employer’s taxable income (if the employer is taxable).
How to Apply:
- Most businesses may apply using My Business Account
- If you represent a business, you may apply using Represent a Client
- Alternatively, you may apply using a separate online application form
Assitance line for CEWS questions: 1-833-966-2099
Click here for access to the CEWS Application Guide