The COVID-19 pandemic has struck Canadians and their families hard. As a parent of a 2-year-old home from daycare, I understand the strain that such a profound and unexpected interruption to daily life this pandemic, and the subsequent response to it, has put on families. I pray that you and your loved ones are safe and, like all of you, hope to resume some semblance of normalcy sooner rather than later. In the meantime, I encourage you to follow the important recommendations made by all levels of government in compliance with medial health officials. For ongoing updates to COVID-19, it’s important to obtain information from official sources such as the Government of Canada’s official COVID-19 information page here.
In response to the significant economic impact COVID-19 is having on Canadians, the Federal Government has stepped in with efforts to support Canadian families and businesses with newly announced initiatives. Some of these initiatives are without precedent and, as such, are causing confusion among Canadians. I have been inundated with questions and concerns from clients wondering what is available, how exactly these various measures can apply to them and what they must do to take advantage of them. As such, I’m writing this blog to elucidate, as best as I can, what we know about current initiatives. The situation is dynamic and changing by the day. I will do my best to keep this space updated with new information as it becomes available, however, this is not intended to be a substitute for officially sourced information, but rather an overview of some key initiatives. Follow the link above for the most detailed and updated information.
Wage Relief for Businesses
The 75% Emergency Wage Subsidy
Perhaps the most significant support from the Federal government is the announcement of the 75% Wage Subsidy to eligible employers. Eligibility for this benefit extends to individuals, taxable corporations, partnerships, non-profit organizations and registered charities. Public bodies are not eligible. Furthermore, there is no current lower or upper limit defined on the number of employees the subsidy can be applied to. Employees not operating at arms length from the employer may also be included in the subsidy. Any subsidy amounts will count towards the employer’s taxable income.
Eligibility also requires that the employer can demonstrate a 30% drop in revenues when comparing the employer’s revenue for the month they wish to receive the subsidy with their revenue for the same month last year.
There are three claim periods, and the 30% requirement will have to be met for each period the subsidy is to be claimed. These periods include:
- For March 15 to April 11 Wages: compare March 2020 to March 2019 or average of January and February 2020
- For April 12 to May 9 Wages: compare April 2020 to April 2019 or average of January and February 2020
- For May 10 to June 6 Wages: compare May 2020 to May 2019 or average of January and February 2020
The first period was later changed to 15% drop in revenues, looking at an average of the preceding 2 months (January and February) or March 2019. The baseline used to determine the baseline cannot be changed for the different periods once selected as the average or the prior year same period.
For newly established businesses eligibility would be determined by the government comparing their monthly revenues to some reasonable benchmark which is currently not defined but is expected to be clarified shorty.
For qualifying employees the subsidy amount for a given employee on eligible remuneration paid between March 15 and June 6, 2020 would be the greater of:
75 per cent of the amount of remuneration paid, up to a maximum benefit of $847 per week; and
the amount of remuneration paid, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration, whichever is less.
The aim of this subsidy program is to encourage those employers who have laid off their employees to put them back on payroll, or for those thinking of laying off employees to reconsider. Employers are expected, where possible, to maintain existing employees’ pre-crisis employment earnings. The subsidy would also apply to new employees.
There will be harsh penalties for those employers that do not abide by the direction of the government and choose to hold these subsidies. To apply for the subsidy, one must register through the CRA’s My Business Account portal as well as a web-based application. Further details on the application process will be made available shortly. Records must be kept regarding revenue and employee remuneration calculations. Employers are also encouraged to sign up for direct deposit in order to receive the subsidy quicker.
The program will start taking submissions Monday April 27th on the business CRA website for all businesses. There is a website that goes through all the details and it even has a neat calculator to let you know what your reimbursement will be, you can find it here. Another thing that should be noted it seems like the government site calculates businesses that have already used the 10% subsidy from previous months and it will reduce the total reimbursement, this also applies if the business had applied with the Work Sharing benefit program with EI.
If you find yourself ineligible for the 75% subsidy you can still apply for the 10% wage subsidy.
The 10% Wage Subsidy
This was the initial wage initiative offered by the federal government before offering the significantly more beefed up 75% version.
Eligibility extends to individuals, Canadian-Controlled private corporations, partnerships, non-profit organizations and registered charities. These entities would also need to have had a payroll account number with CRA as of March 18, 2020, meaning that you cannot just create one and employ someone after that date to take advantage of the subsidy.
The subsidy offers 10% of the remuneration you pay to your employee for a 3-month period covering March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total for an employer. However, associated Canadian-Controlled private corporations will not be required to share this maximum subsidy of $25,000 per employer.
The subsidy would work, not as money coming back from the government as the 75% version described above, but instead as a reduction of the Federal and Provincial tax portion of payroll remittances you make to the government.
The CRA has said that they will not calculate the subsidy for you, but here is an example for everyone that is not clear on how this works.
Super Plumbers Bros. Corp has 3 employees earning a monthly salary of $5,000 for a total monthly payroll of $15,000. The maximum wage subsidy with be 10% of $15,000 which is $1,500, or $500 per employee. If the salaries don’t change over the 3-month period, the total salary over this time would equate to $45,000, or $15,000 per employee. 10% of $45,000 is $4,500 which falls below the total subsidy threshold of $25,000, but individually, 10% of $15,000 is $1,500, which exceeds the individual threshold of $1,375 per employee. Thus, your actual limit is $1,375*3 employees for a total limit of $4,125 over the 3 months. Thus, if you remit monthly, you would remit $1,500 less in month 1 ($500 per employee), $1,500 less in month 2 ($500 per employee), but be capped at reducing your remittance by only $1,125 for month 3 ($375 per employee) since you have reached the individual employee caps.
It’s important to reiterate that these reductions in remittances can only be made on the Federal and Provincial personal tax portion of the remittance and not CPP and EI deductions. EI and CPP must continue to be fully remitted on behalf of your employees as well as the employer’s share. If the Federal and Provincial tax amounts are not sufficient to cover the amount of the subsidy, you can continue to reduce the tax portion of payroll remittances beyond the end of the subsidy period until you have reached your allowable total subsidy.
The subsidy is considered a taxable income and therefore any entity that receives this benefit will have to declare it as income in the year they have received it. Remittance filing dates remain unchanged.
Tax Filing & Payment Extensions
The CRA has also taken a proper step in extending the individual filing deadline from April 30th for regular filers to June 1, 2020. The submission of business entities such as sole proprietorships and partnerships remains June 15th. For any trust having a taxation year end of December 31, 2019, their filing deadline has been extended to May 1, 2020.
The extension of these deadlines also come with additional benefits of payment deferral. If you owe the government any money when you file your personal or business tax returns for all taxes owed from March 18, 2020 onwards, they will be deferred until August 31, 2020. This doesn’t mean if you owed instalment payments in 2019 that it would be forgiven, but any payments due on or after March 18 will be deferred with the interest forgiven.
Businesses will also be given an extension until June 30th to remit GST/HST due to the government. This applies to monthly filers collected in February, March and April, Quarterly filers for amounts collected between January 1 to March 31, and Annual filers, that have their GST/HST instalments due March April or May. Also deferred to June 30th are custom duties remittances collected in March, April and May.
Canada Emergency Response Benefit (CERB)
All Canadians who have had their employment terminated due to COVID-19, whether they are EI-eligible or not, may be eligible to receive the CERB.
The benefit, which is a flat rate of $2,000 per month for up to four months, may be more than most people’s EI benefits which is 55% of their income capped at $573 on $54,200 annual income. These benefits have no taxes withheld, which means each person receiving the $2,000 per month will pay taxes the following year.
CERB eligibility is extended to workers residing in Canada who have lost their job, are sick, quarantined or taking care of someone who is sick with COVID-19. Also, working parents who must stay home without pay to care for children who are sick or home because of school and daycare closures or anybody who is still technically employed but not receiving any income because of a COVID-19 related situation.
Additional measures were added stating that an individual can make less than gross $1,000 in these periods, not enough information has been provided about this because there are people that earn less than $1,000 on a monthly basis as part time employees even pre-COVID-19. The Prime Minister mentioned that these individuals would have to have a reduction in hours but again no detail as to what this actually means. Calls to CRA CERB line proved to be useless as their employees working the phone lines couldn’t give a definitive answer. My suggestion is only apply if you’ve had hours reduced, and if your situation is status quo pre-COVID-19 then do not apply.
Additional eligibility requires these individuals to have had a minimum income of $5,000 in 2019 or in the 12 months prior to the date they apply and are expected to be unemployed for at least 14 days. CERB benefits are not just for wage earners but also contract workers and self-employed individuals that are not normally eligible to receive EI benefits.
Individuals receiving The CERB cannot simultaneously receive EI benefits so one must determine which benefit will pay them more. If you are eligible for CERB, apply for this benefit first if your EI benefits will be lower than $2,000 per month. CRA will likely require more paperwork for the CERB benefits.
EI Benefits were later converted to CERB for anyone let go as a result of the COVID-19 pandemic for the next 4 CERB periods. CRA requirement was very minimal for people to apply for CERB but individuals have been told that CRA will later confirm if they actually qualified for these benefits. The EI Service Canada website still requires weekly or biweekly reports but the CRA site only requires you to input your qualification once every four weeks.
Individuals that are qualified should set up an online account at My Account on the CRA site and likewise register for direct deposit to ensure expedited delivery of their benefits. It’s advisable to complete these steps as soon as possible as applications will be accepted starting on April 6th online or over the phone. The CRA understands that there will be a large influx of applicants and have laid out the following schedule:
- Those born on January, February, March should apply on April 6th.
- Those born on April, May, June should apply on April 7th.
- Those born on July, August, September should apply on April 8th.
- Those born on October, November, December should apply on April 9th.
This was more of a measure to help people not to flood the website but not a requirement as people could apply anytime.
The $40,000 Canada Emergency Business Account
These are Government backed loans that will be administered by banks. They are interest-free up to $40,000. Qualified employers will be required to demonstrate they paid between $50,000 to $1 million in total payroll in 2019 (generally with a T4 Summary). If the full balance of the loan is paid on or before December 31, 2022 this will result in the government forgiving 25% or $10,000 of the loan. These are currently rolling out and interested employers should contact their bank.
The requirement later changed to $20,000 payroll, still no help to those that have paid dividends to themselves in the past years. It is a bit unfair how it’s structured. The program has since rolled out and it’s implementation appears to be seamless.
- In May of 2020 there will be a one-time boost to the Canada Child Benefit of $300 per child, for those that qualify. While eligibility criteria has not yet been specified, it will likely be similar to regular qualification of CCB benefits, which is income-based.
- There Is no need to apply, those that qualify will receive the benefit.In May of 2020, the CRA will provide a one-time payment of the GST credit of close to $400 for single individuals and close to $600 for couples. Again, it will be qualification based and will be automatically applied. The government promised and delivered sooner, April 9th qualified people received around the number they were promised by the Prime Minister, it was more of a doubling up of their 2018 GSTC benefits.
- There will be no income tax or GST/HST audits for the next 4 weeks. Although this would be rare to begin with as the CRA’s round of audits usually start a couple of months after the filing deadline for post-assessment audits. This does not include pre-assessment audits which can still go forward.
- Collections by CRA will be suspended on new debt until further notice, and there will be flexible payment schedules for individuals during these tough times. If you have prior debt I suspect there will be greater flexibility on those as well.
- The usual one week waiting period for EI Sickness benefits is waived for the next 6 months for those workers that are asked to self-isolate or are in quarantine. The requirement of a medical certificate will also be waived.
- Many banks and financials institutions are working with individuals to defer mortgages and any loans for up to 6 months. Deferral does not mean interest forgiveness.
- Extension of the EI Work Sharing Program: This program is a way that employers could keep their staff during a temporary reduction in normal business by reducing the hours of employees whereby Service Canada would set up that employee to be EI eligible for that time-frame. These programs would usually last up to 38 weeks but has temporarily been increased to 76 weeks. The submission of applications for a work sharing program will also be reduced to 10 calendar days before the requested start date of the program from the normal 30 days.
Recently the government also introduced the Canada Emergency Commercial Rent Assistance as details become available you will be able to get there here. There is already a plan in place by the Federal government but the implementation has not been discussed.
Information provided by the government regarding the Canada Emergency Student Benefit and other related student benefits can be found here. Detail about all student related benefits is still limited but once more information is provided I will update the link.
Again, these are just some highlights of recent COVID-19 related initiatives. I encourage you to keep informed through trusted news and official government sources (including the link provided in the introduction of this blog) for any initiatives that may be specific to your individual situation especially as the situation is so fluid at the moment.
I wish you continued health and hope that some of these initiatives will help provide you and your loved ones some level of economic stability in these turbulent times.