Business owners – COVID-19 emergency support measures
Details available as of July 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 move quickly 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 Therefore, some of the details here may fall out of date.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 June 1, 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.
Between March 15, 2020 to 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 is $847 per week, with no cap at the employer level.
Between July 5 to December 19, 2020, the CEWS will no longer be a fixed amount but will rather be comprised of:
- A base subsidy calculated on a sliding scale, depending on the eligible employer’s revenue decline.
- An additional “top-up” subsidy of up to 25% available for employers who have experienced a decrease of more than 50% to their 3-month average revenues.
Over time, the maximum CEWS that an employer can claim will be $960 per week per employee for the July 5 to August 1, 2020 application period, but decrease to $508 per week per employee for the October 25 to November 21, 2020 application period.
On top of the subsidy, 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.
The CEWS is only available in respect of an employee if “remuneration” was paid to that employee. Unfortunately 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. Starting to pay salaries during the claiming periods will also not work, as the calculation of the subsidy in such a scenario will take into account an owner-manager’s remuneration prior to March 15, 2020, which would be zero.
The CEWS covers March 15, 2020 to November 21, 2020 (with the possibility of a further extension to December 31, 2020), and 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 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 to November 21, 2020, there will no longer be a minimum gross revenue reduction required. Instead, all employers that can show a revenue decline will receive a base subsidy, the amount of which will depend on the magnitude of the revenue decline. Furthermore, if employers 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, presumably to gradually wean employers off of the CEWS program as businesses pick back up.
Example: An employer who consistently shows a revenue drop of 70% or more between July 5 and November 21, 2020 will receive the maximum base and top-up subsidy of $960 per week per employee for the July 5 to August 1, 2020 application period, which will gradually decrease to the maximum $508 per week per employee for the October 25 to November 21, 2020 application period.
The reference points for eligibility for the first four claiming periods (i.e., where the CEWS requires a minimum revenue reduction) is either the revenues from the same month in 2019, or the average revenues of January and February 2020. The reference points for the fifth to ninth claiming periods in computing the base subsidy is similar in computation, 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 deadline for applying for the CEWS for all claiming periods is January 31, 2021.
The CEWS is extremely complex and it is imperative for business owners to seek professional accounting advice to navigate eligibility and application.
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 24 weeks (i.e., $2,000 a month for 6 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 is available from March 15, 2020 until October 3, 2020. Eligible individuals will have to reapply for each 4-week period, and have until December 2, 2020 to apply for retroactive payments.
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.
Interaction of the CERB with the CEWS
There are rules that integrate the CERB with the CEWS which effectively prevent employers from claiming the CEWS in respect of an employee that was able to claim the CERB in a period. Employees who are rehired by their employer may need to repay the CERB.
Interaction of the CERB with EI
There are also rules that integrate the CERB with EI:
- Individuals who are eligible for EI before March 15, 2020 will have claims processed under EI rules
- Individuals can switch to the CERB if EI ends before October 3, 2020 and they are still jobless due to COVID-19
- Individuals who are eligible for EI on or after March 15, 2020 will have claims processed through the CERB
- Individuals can be put back on EI benefits after CERB payments end
- The period that the CERB is received will not impact EI entitlement
How to apply
Applications for this benefit are completed through the CRA website. At this time, the government is approving all applications and will confirm eligibility after; therefore, it is important that individuals make sure they are indeed eligible before applying, as they may otherwise need to repay benefits received in the future.
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 in 2020. 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 three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, June and July 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%.
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.
Support for your employees
The COVID-19 pandemic has left many small businesses in Canada with no choice but to cut hours or close down entirely and in many cases lay off staff, leaving countless individuals and families in a precarious financial situation. We have compiled the following list of new measures as a quick reference to help any of your employees who require additional financial support during this challenging time. For more information and to apply for the subsidies, please visit the Government of Canada website.
Income tax deadlines and administration
The CRA has published the following schedule summarizing revised due dates for income tax filings and payments.
- Individuals who are not self-employed will have until June 1, 2020 to file their 2019 income tax returns.
- Individuals will have until September 30, 2020 to pay any required income tax payments (instalments and balances due). No interest or penalties will accumulate on these amounts during this period.
Even though the filing and payment deadlines are extended, individuals are encouraged to file early if they are expecting a refund or are claiming credits, such as the GST/HST credit. Furthermore, even though the filing due date of the 2019 income tax return is June 1, 2020, 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.
Canada Emergency Response Benefit (CERB)
Please refer to the details provided previously on the CERB on this page.
Other EI relief
- The federal government has removed, for at least six months, the one-week waiting period for individuals in imposed quarantine that claim EI sickness benefits. This temporary measure will be in effect from March 15, 2020.
- The requirement to provide a medical certificate to access EI sickness benefits has also been removed.
Goods and Services Tax Credit (GSTC) and Canada Child Benefit (CCB): Low-to-modest income families
For over 12 million low and modest-income families, who may require additional financial assistance, the federal government is providing a one-time special payment starting April through the GSTC. This will double the maximum annual GSTC payment amounts for the 2019-2020 year. The average boost to income will be close to $400 for single individuals and close to $600 for couples. This measure will inject $5.5 billion into the economy.
For over 3.5 million families with children, who may also require additional support, the government is increasing the maximum annual CCB payment amounts, only for the 2019-2020 year, by $300 per child. These families will also receive an extra $300 per child as part of their May payment.
Together, the proposed enhancements of the GSTC and CCB will give a single parent with two children and low to modest income nearly $1,500 in additional short-term support.
Canada Emergency Student Benefit (CESB)
The CESB is an income support program for post-secondary students who face financial hardship as a result of COVID-19 but may not be eligible for the CERB program. For example, a student who worked a summer job in 2019 but earned less than $5,000 of income that year is not eligible for the CERB.
The CESB will provide eligible students with $1,250 a month for up to 4 months (May to August 2020). For eligible students with dependents or with disabilities, the monthly benefit is increased to $2,000.
A student is eligible based on the following criteria:
- They are a Canadian citizen, permanent resident, person registered as an Indian under the Indian Act, or a protected person under section 95(2) of the Immigration and Refugee Protection Act.
- Enrolled, at any time between December 1, 2019 and August 31, 2020, in a post-secondary educational program that leads to a degree, diploma or certificate; or
- Graduated from secondary school in 2020 and has applied for enrollment in a post-secondary educational program that is scheduled to begin before February 1, 2021.
Furthermore, eligible students must meet both of the following conditions:
- Due to COVID-19, be unable to find work, seeking work and unable to find it, or working but being paid less than $1,000 during the 4-week period for which such individual applies for the CESB.
- Not receive more than $1,000 of employment or self-employment income, EI benefits, allowances, or the CERB, during the 4-week period for which such individual applies for the CESB.
Interaction of the CESB with the CERB
If an eligible student claims the CERB, the CESB cannot be claimed for the same application period. Therefore, it appears in most cases where a student is eligible for both the CESB and the CERB, that such student claims the CERB as it provides a higher standard monthly benefit ($2,000 versus $1,250).
How to apply
Applications for this benefit are available through the CRA website. There are 4 application periods covering May 10, 2020 to August 29, 2020, with each application period spanning 4 weeks. Eligible students must reapply in each period.
The applications will be available until September 30, 2020. After this date, retroactive applications will no longer be accepted, even if a student was eligible.
Moreover, students that are able to work must attest that they are seeking work in order to obtain the CESB. To that end, the Government of Canada Job Bank provides students with job opportunities available and allows them to keep track of job search activities in one place.
Other measures: Vulnerable groups
To ensure that certain groups who may be vulnerable to the impact of COVID-19 have the support they need, the government is proposing targeted help by:
- Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings. This will provide flexibility to seniors who are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements. Similar rules would apply to individuals receiving variable benefit payments under a defined contribution Registered Pension Plan.
- Providing $305 million for a new distinctions-based Indigenous Community Support Fund to address immediate needs in First Nations, Inuit, and Métis Nation communities.
- Placing a six-month interest-free moratorium on the repayment of Canada Student Loans for all individuals currently in the process of repaying these loans.
- Providing the Reaching Home initiative with $157.5 million to continue to support people experiencing homelessness during the COVID-19 outbreak. The funding could be used for a range of needs such as purchasing beds and physical barriers for social distancing and securing accommodation to reduce overcrowding in shelters.
- Supporting women and children fleeing violence, by providing up to $50 million to women’s shelters and sexual assault centres to help with their capacity to manage or prevent an outbreak in their facilities. This includes funding for facilities within Indigenous communities.
Mortgage default management tools
The Canada Mortgage and Housing Corporation (CMHC) and other mortgage insurers providing more flexibility for lenders to postpone mortgage payments associated with government-insured mortgages for borrowers experiencing financial difficulties due to the pandemic. Insurers will now allow lenders to authorize deferred payments.
Contact us should you have any questions.