COVID UPDATE–APRIL 01, 2020


On April 01, 2020, the Feds released more info on the Canada Emergency Wage Subsidy. This is our summary of the latest details.

WHO GETS IT

Eligible parties for this subsidy include all “private” businesses and entities who have experienced a 30% drop in arm’s length revenues. Who doesn’t get it? Mostly crown corporations.

This 30% drop is to be calculated using “normal accounting methods”, and appears to be calculated by looking at last year’s monthly gross revenue, and comparing it to this year’s monthly revenue. In other words, look at your  March/19 revenue, and compare it to your March/20 revenue. If you’re down 30%, you qualify.
The calculated periods will cover: March 15 – April 11; April 12 – May 09; May 10 – June 06;

HOW MUCH

The subsidy covers wages for an employee who worked in the business prior to the crisis. The subsidy covers either:

  • 75% of the employee’s wage, up to a max of $847/week (approx. $3,388/mo), OR
  • Actual wages paid, up to a max of 75% of pre-covid earnings (up to $847/week.)

In other words, the math looks like this:

  • Hypothetical $1,000/week wage: The government covers $847 of the $1,000 (Employer is expected to make an effort to cover the remaining $153 where possible.)
  • Hypothetical $600/week wage: The government will cover the full $600.

CAUTION: we have no word on when this money is going to start flowing. We have heard a minimum of six weeks. This means employers need to finance payroll for at least the next month. Fortunately, it appears the subsidy will be back-dated, so that should help a bit.

WHAT ABOUT OWNER-EMPLOYEES?

Non-arm’s length employees have some special rules:

  • Covers the period March 15/20 to June 6/20.
  • Be on the payroll prior to March 15, 2020
  • Limited to actual amounts paid during that period (no unpaid bonuses floating around.)
  • Capped at $847/week (similar to above.)

This appears to indirectly confirm our guess that owners receiving exclusively T5 compensation from an incorporated business/professional corporation likely won’t qualify for the wage subsidy in terms of owner compensation – staff payroll will still be fine. Owners who have received a T4 (or T4/T5 blend) from their business should qualify.
(**CW Note: This T4/T5 thing is still a bit fluid, and we are trying to get more clarification here. Stay tuned for updates.**)

HOW TO APPLY

We have been told clients apply to this via CRA’s MyBusiness account (link included below). If you have online banking, you should be able to log in to CRA’s system immediately using the online banking login info. Otherwise you’ll need to apply via CRA’s portal, which can take a few days to process.

WATCH – CERB

If you have employees already receiving Canada Emergency Response Benefit (CERB) payments, they won’t qualify for purposes of this wage subsidy. You’ll want to make sure you coordinate with staff in terms of applying for the wage subsidy.

WATCH – AGRESSIVE PLANNING

My gut feeling says that this payroll subsidy is a genuine effort by the Feds to support employees, and that if a business owner tries to “game the system” and take advantage of the situation, CRA will come down very hard and do very nasty things to that owner. This may not happen fast, but CRA has a long memory.
Tread lightly if you decide to do some clever tax planning here.

Other Info:

MyAccount – https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/business-account.html?utm_campaign=not-applicable&utm_medium=vanity-url&utm_source=canada-ca_my-cra-business-account
Detailed Fed Release – https://www.canada.ca/en/department-finance/news/2020/04/the-canada-emergency-wage-subsidy.html
Usual Disclaimer: This isn’t tax advice. Tax is complicated, and the rules change all the time. Don’t rely on this info to make decisions – Hire someone to help you.