Monday, April 13, 2020
No finding the afikoman or Easter egg hunt for members of the federal Government this past weekend. On April 11, 2020, the federal Government passed the Canada Emergency Wage Subsidy (the “Subsidy”) into law. Please see our previous update here for background information.
Here is what you need to know about the enacted legislation:
Who? Almost every business is eligible for the Subsidy – except for public bodies. There is no requirement to be Canadian owned or controlled.
What? An eligible employer can get a subsidy of up to 75% of weekly wages, to a maximum of $847 per week, from the period from March 15 to June 6, 2020 (and this could be extended). The amount of the Subsidy depends on whether the employee was employed before March 15, 2020 or is a new hire. However, employees that do not deal at arm’s length with the employer must have been employed before March 15, 2020. The Subsidy for a pre-existing employee is the lesser of 75% of the average weekly remuneration paid from January 1 to March 15, 2020 and $847 per week. The Subsidy for a new hire is 75% of remuneration paid, up to a maximum of $847 per week. There is no cap on the amount of the Subsidy per employer.
The Subsidy also includes a refund of 100% of the employer contributions for pension plan premiums and employment insurance premiums for employees that are on leave with pay and for which the employer is eligible to claim the Subsidy. The refund is not capped and is in addition to the Subsidy.
How? To qualify, an employer must look at its revenue in Canada from arm’s length sources for March, April and May 2020 and determine the change in revenue based on two possible benchmarks:
- compare March 2020 to March 2019 (and April 2020 to April 2019, etc.); or
- compare monthly revenues to the average revenue for January and February 2020.
The calculation can be done using the accrual or cash method and must be the chosen method for the entire length of the Subsidy. If your business meets the requirements for a specific period, it is automatically deemed to meet the requirements for the next period. The legislation also includes special rules that contemplate revenue from non-arm’s length sources and allows for the consolidation of revenues if the business is part of an affiliated group.
When? Soon. But ensure you apply before October 2020.
Where? Businesses can apply for the Subsidy using the Canada Revenue Agency’s My Business Account portal or a web-based application – both are not yet available. Direct deposit will be the fastest delivery of the Subsidy, but cheques may also be delivered. Employers are required to attest that the application is complete and accurate and appropriate records should be kept.
Why? To ensure the hire back of as many people as possible. A word of caution though as the legislation states that the Subsidy will be denied where an employer takes actions to reduce revenue to qualify for the Subsidy, and there is a 25% penalty plus repayment of the Subsidy for employers who artificially reduce revenue in order to claim the Subsidy.
If you have any questions with respect to the matters discussed above, please contact Marija Tasevska at email@example.com, Katy Pitch at firstname.lastname@example.org, or any other member of our Tax practice group.
This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.