The Federal Government continues to tinker with the specifics of their giant subsidy program for Canadian businesses. We are sending you information based on announcements made, to date. Draft legislation has yet to be released, so things are still in flux. But here is what we know at this time:
Payroll Assistance for Employers
1. Corporations, partnerships, proprietors, charities and not-for-profit organizations of all size are eligible for a subsidy from the Government regarding their payroll costs, called the ‘Canada Emergency Wage Subsidy.’
2. To qualify for the subsidy, the entity must be able to prove a greater-than-30% decline in revenues, for the eligible periods March 15 through June 6, 2020, comparing revenues of March of 2019 to March of 2020 through May of 2019 to May of 2020, monthly. Those businesses who file monthly GST returns will already be set up to make this calculation, even though, as of today, they are almost a month away from the filing due date of the March 2020 GST return. Others who file less frequently, or who didn’t exist in March of 2019 will have more difficulty in making this calculation. Details are to follow for those businesses soon, we hope.
3. Starting from March 15, 2020, you can apply for a taxable subsidy for a maximum of 75% the first $58,700 of salary costs per employee, for a maximum of $847/week/employee. You might ask: why such odd numbers ? There’s no answer offered for that, but the weekly subsidy is calculated as 75% x $58,700 divided by 52 weeks.
4. What about the other 25% ? At this time, there is no apparent obligation for employers to ‘top up’ the wage by digging into their own pockets. Therefore, businesses can, if necessary, drop their payroll by 25% and have the Federal Government cover the entirety of their new, lower wage cost.
5. The Government only ‘encourages’ Canadian businesses to maintain payrolls at their previous levels, using their “best efforts” – there is no current obligation to do so.
6. If you have laid off employees for the simple reason that there is no work to be done (for example, restaurants and bars, or many others forced to close due to ‘social distancing’ and other requirements), then you cannot get a subsidy for them while they are laid off. Those workers may, individually, be eligible for the ‘CERB’ benefit, outlined below.
7. Wages for this purpose apparently include non-arm’s length wages, so long as they remain reasonable as to the amount paid. Therefore, owner-managers of wage paying entities should be able to include their own wages in the subsidy application.
8. Businesses must apply for the subsidy through a CRA portal that does not yet exist. It will be available in 3 to 6 weeks. Another up to 6 weeks could be needed to receive the funds – so your subsidy could be as much as 12 weeks delayed, from now. If you lack the finances to maintain payroll, even at a 75% level, then you won’t get a subsidy, or the subsidy you receive will presumably have to be repaid.
9. Since the online CRA portal does not yet exist, businesses have time to firstly calculate whether they have indeed suffered a 30% revenue loss, March 2020 vs. March 2019.
10. Those businesses that do not qualify for this new subsidy may continue to qualify for the previously announced wage subsidy of 10% of remuneration paid from March 18 to June 19, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. Employers can reduce the remittance of payroll income tax according to their calculation of the amount of the subsidy.
11. Your business should register for direct deposit with CRA to ensure the funds are received on a timely basis. We encourage clients to register for “My Business Account” with CRA online to manage that.
Assistance for the Self-Employed and Other Individuals
There is another program aimed directly at persons who have been laid off, or who otherwise have lost their income. It is called the ‘Canada Emergency Response Benefit’ (CERB).
1. It also runs from March 15th, 2020, for up to 16 weeks, maximum. Applications will begin the week of April 6, 2020.
2. The CERB applies to workers who have stopped working due to COVID-19, are sick, are quarantined, giving care to someone with COVID-19, or who must stay home because they are parents of children who are sick or at home because of school and daycare closures, for at least 14 consecutive days in the initial 4-week period.
3. The CERB applies to wage earners, contract workers, self-employed persons and others not otherwise eligible for EI (Employment Insurance).
4. It is for a maximum of $2000 for a 4-week period ($500/week).
5. You will be able to apply online or by phone. We encourage clients to register for “My Account” with CRA online.
Business Credit Availability
The Government of Canada has announced a small business lending program to provide greater access to capital. It is called the ‘Canada Emergency Business Account.’
1. Applications must be made through your financial institution.
2. The program will provide interest-free loans of up to $40,000 to small businesses and non-profits to help cover operating costs where their revenues have been reduced due to COVID-19.
3. Repaying the balance of the loan by December 31, 2022 will result in loan forgiveness of 25% (up to $10,000).
Please contact us for any additional information.
The Lohn Caulder Team