Businesses in Canada have been experiencing many negative effects from the COVID-19 pandemic. While some businesses had to close down temporarily or permanently, the businesses that remain open must abide new and ever-changing restrictions. The Canadian government launched several initiatives to help keep businesses open and employees on the payroll. Since their launch, there has been several changes and proposed changes. As of November 23, 2020, this is the update for businesses in need of COVID-19 relief:
- The Canada Emergency Business Account (CEBA) provides zero-interest, partially forgivable loans to small businesses that have experienced diminished revenues due to COVID-19 but face ongoing costs, such as rent, utilities, insurance, taxes and employment costs
- Originally, the CEBA loan was $40,000, of which $10,000 would be forgivable if the balance is repaid by on or before December 31, 2022
- Since the launch in April 2020 – over $765,000 CEBA loans (as of early October 2020) have been approved, equating to $30 billion of aid for businesses
- Coming soon there will be an expansion, where an additional $20,000 CEBA loan would be available, $10,000 of which would be forgivable if the balance is repaid by on or before December 31, 2022
- The application deadline has been extended to December 31, 2020
- Businesses using a personal bank account will be able to apply for CEBA, however must open a business account with a Canadian financial institution participating in CEBA
- Further details, including the launch date and application process will be announced in the coming days. An attestation of the impact of COVID-19 on the business will be required to access the additional financing.
- Have an active CRA Business Number, with effective date of registration on or prior to March 1, 2020
- Have an active business chequing/operating account with the Lender at the time of applying for CEBA (or open one if using a personal bank account)
- Have not previously used CEBA or will not apply at other financial institutions
- Intends to continue to operate business or to resume operations
- There are two streams to apply
- Payroll Stream – Applicants with employment income paid in the 2019 calendar year between $20,000 and $1,500,000
- Non-deferrable Expense Stream – Applicants with $20,000 or less in total employment income paid in the 2019 calendar year
- Must have eligible non-deferrable expenses between $40,000 and $1,500,000 (such as rent, utilities, property taxes, insurance). These will be subject to verification and audit by the Government of Canada
- Filed an income tax return for tax year ending in 2019 or 2018 if the 2019 tax year return has not been submitted yet
- The new Canada Emergency Rent Subsidy (CERS) which would provide simple and easy-to-access rent and mortgage support until June 2021 for qualifying organizations affected by COVID-19
- The rent subsidy would be provided directly to tenants, while also providing support to property owners
- The new rent subsidy would support businesses, charities, and non-profits that have suffered a revenue drop, by subsidizing a percentage of their expenses, on a sliding scale, up to a maximum of 65% of eligible expenses until December 19, 2020
- Subsidy rate is as follows:
- Revenue drop of 70% or more = 65% base subsidy rate
- Revenue drop of 50% to 69% = 40% + (revenue drop – 50%) x 1.25
- Revenue drop of 1% to 49% = Revenue drop x 0.8
- Organizations would be able to make claims retroactively for the period that began September 27 and ends October 24, 2020
- A top-up Canada Emergency Rent Subsidy of 25% for organizations temporarily shut down by a mandatory public health order issued by a qualifying public health authority, in addition to the 65%
- The above is for a new program (CERS), however as of early October, the Government of Canada has delivered over $1.8 billion in rent support, through the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. Rent assistance has helped over 130,000 small businesses, supporting 1.18 million jobs in Canada.
- The new rent subsidy would pick up where the previous program left off, delivering direct, targeted, and accessible rent support to qualifying organizations affected by COVID-19 without the need to work through their landlords. It would provide a subsidy for eligible fixed property expenses, including rent and interest on commercial mortgages
- There is a proposed change to the expectation that the rent must be paid in order to claim it as an eligible expense. A legislative amendment has been filed and CRA has been notified to have “rent owed” considered a qualifying expense at the time of application, providing the organization committed to using the subsidy to pay this rent owing.
- The current rates for the subsidy are only guaranteed until December 19, 2020 (despite the program itself running until June 2021)
- Applications are now open on the CRA website, and applications will begin being reviewed on November 30, 2020 – with qualified applicants receiving payment via direct deposit as early as December 4, 2020.
- Same as CEWS point #1
- Must have either a payroll account as of March 15, 2020 or been using a payroll service provider, or a business number as of September 27, 2020 (and satisfy CRA that it is a bona fide rent subsidy claim)
- Must meet revenue reduction requirements via same calculations and periods as CEWS
- Qualifying eligible expenses include commercial rent, property taxes (including school taxes and municipal taxes), property insurance, and interest on commercial mortgages (subject to limits) for a qualifying property, less any subleasing revenues. Any sales tax (e.g., GST/HST) component of these costs would not be an eligible expense
- Eligible expenses would be limited to those paid under agreements in writing entered into before October 9, 2020 (and continuations of those agreements) and would be limited to expenses related to real property located in Canada. Expenses that relate to residential property used by the taxpayer (e.g., their house or cottage) would not be eligible. Payments made between non-arm’s-length entities would not be eligible expenses. Mortgage interest expenses in respect of a property primarily used to earn, directly or indirectly, rental income from arms-length entities would not be eligible
- Expenses for each qualifying period would be capped at $75,000 per location and be subject to an overall cap of $300,000 that would be shared among affiliated entities
- To qualify for the Lockdown Support, the public health order required the organization to completely shut down or cease some or all of the activities (which in pre-pandemic reference period) were responsible for at least 25% of revenue at that location. If the organization had to cease activities for only part of a qualifying period, the support would be pro-rated by number of days affected
- See the CRA website for more information on calculating your CERS eligibility and subsidy etc. https://www.canada.ca/en/department-finance/news/2020/11/canada-emergency-rent-subsidy.html
- The Canada Emergency Wage Subsidy (CEWS) originally provided a subsidy of 75% of eligible remuneration, paid by an eligible entity (eligible employer) that qualifies, to each eligible employee– up to a maximum of $847 per week
- Since its in April launch, over 3.7 million Canadians have had their jobs supported through the Canada Emergency Wage Subsidy, with more than $41 billion paid out in subsidies as of October 4, 2020.
- A proposed extension of the Canada Emergency Wage Subsidy until June 2021, which would continue to protect jobs by helping businesses keep employees on the payroll and encouraging employers to re-hire their workers.
- The subsidy would remain at the current subsidy rate of up to a maximum of 65% of eligible wages until December 19, 2020. This measure is part of the government’s commitment to create over 1 million jobs and restore employment to the level it was before the pandemic.
- Further details still to come, the government intends to introduce legislation to implement the new rent subsidy and the wage subsidy extension in the near future
- Must be a corporation or a trust, other than a corporation or a trust that is exempt from tax under Part I of the Income Tax Act or is a public institution (see Q3-01); an individual other than a trust; a registered charity (other than a public institution); a person that is exempt from tax under Part I of the Act (other than a public institution), that is: an agricultural organization; a board of trade or a chamber of commerce; a non-profit corporation for scientific research and experimental development; a labour organization or society; a benevolent or fraternal benefit society or order; and a non-profit organization; a partnership, each member of which is a person or partnership described in this list; a prescribed organization, including certain Indigenous businesses
- To be an eligible employer by meeting the following criteria:
- on March 15, 2020,
- it had an open payroll program account with the CRA (see note below) or,
- it employed one or more individuals in Canada, had another person or partnership (payroll service provider) administer its payroll, and that payroll service provider,
- had an open payroll program account with the CRA on March 15, 2020, and
- used its business number to make payroll remittances in respect of employees of the eligible employer;
- it registers subsequently with the CRA for its own payroll program account (see Q3-8);
- Must meet the reduction in revenue requirements
- Makes a wage subsidy application for the claim period, in a prescribed form and manner, before February 2021; and
- The individual who has principal responsibility for the eligible employer’s financial activities attests that the application mentioned above is complete and accurate in all material respects.
- See the CRA website for more information on how to apply, calculating your CEWS eligibility and subsidy etc. https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-wage-subsidy.html
Further details are still to come, please visit the CRA website for updated information as it becomes available.