Business owners – COVID-19 emergency support measures
Details available as of May 26, 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 new 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 Therefore, some of the details here may fall out of date.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 and administration
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 1, 2020 the payment of income tax payments (instalments and balances due under Part I of the Income Tax Act) that become owing between March 18, 2020 and before September 1, 2020. No interest or penalties will accumulate on these amounts during this period.
Tax audits are temporarily suspended, with the exception of high risk/exceptional cases, or cases of high risk GST/HST refund claims which require some contact before they can be paid out. Collection activities on new debts will be suspended until further notice. Objections relating to entitlement to benefits and credits will continue to be delivered during this time as it is considered a critical service, while other objections are being put on held. The CRA has the following webpage which has more details on their collections, audit, objections and appeals process.
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. The government has estimated the cost of the CEWS to be $73 billion. This program is for employers who keep employees on their payroll and have suffered a minimum decrease to gross revenues.
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.
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 currently covers March 15, 2020 to August 29, 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; however, public sector entities, such as public universities and hospitals, are not eligible. Previously, the CEWS was only available for three claiming periods until June 6, 2020, but it has now been extended to August 29, 2020.
There are claiming periods for the CEWS, and an employer will be eligible for the subsidy for a particular claiming period if its gross revenues have decreased by a minimum amount. For the first three claiming periods covering March 15, 2020 to June 6, 2020, the reference point for eligibility in each period will either be revenues from the same month in 2019, or the average revenues of January and February 2020. Once a reference point is chosen for one period, the same methodology must be used for the remaining periods.
Claiming period 1: March 15 to April 11
- Required reduction in revenue: 15%
- Reference period for eligibility: March 2020 over March 2019, or Average of January and February 2020
Claiming period 2: April 12 to May 9
- Required reduction in revenue: 30%
- Reference period for eligibility: April 2020 over April 2019, or Average of January and February 2020
Claiming period 3: May 10 to June 6
- Required reduction in revenue: 30%
- Reference period for eligibility: May 2020 over May 2019, or Average of January and February 2020
If an employer is eligible for one period, they are automatically eligible for the next period, even if they may not necessarily meet the revenue reduction requirement in that following period.
Example: If an employer meets the 15% revenue reduction requirement in claiming period 1, it will automatically qualify for claiming period 2, even if it does not meet the 30% revenue reduction requirement for that period. However, the employer will have to meet the 30% revenue reduction requirement in claiming period 3 in order to obtain the CEWS for that final period.
The government will provide further details on the claiming of the CEWS for the additional 12 weeks to August 29, 2020.
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.
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 a taxable benefit of $2,000 a month for up to 4 months for eligible individuals. 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. There are seven eligibility periods over this timeframe, with each period spanning four weeks. Eligible individuals will have to reapply for the CERB in each eligibility 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.
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 became available starting April 6, 2020 on 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 only available to incorporated Canadian operating businesses. Self-employed individuals are ineligible.
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 three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June 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% for the three corresponding months 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 for the period of April, May, and June 2020 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 1, 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. If individuals are expecting a balance owing for their 2019 return, it is important that they file their returns by the June 1, 2020 deadline to avoid late-filing penalties.
Canada Emergency Response Benefit (CERB)
Employees who may no longer work or earn minimal income as a result of COVID-19 should review whether they are eligible for the CERB, which can provide a $2,000 per month taxable benefit, up to a total of $8,000. 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.
It is likely that similar to the CERB, no income tax withholdings will be made on the CESB payments once they become available; thus, eligible students must budget for this on their 2020 income tax returns.
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. This suggests that international students are not currently eligible for the CESB.
- 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 not yet available but are expected to be posted on the CRA website in the near future. It is expected that there will be 4 application periods, with each application period spanning 4 weeks. Eligible students will likely have to reapply for each period.
Once open, 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 between May and August 2020.
Moreover, the CESB rules require students to attest that they are seeking work. 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.