At Finally CPA, this week is all about relief and resources for our business community as we continue to navigate through the resources available for businesses as a result of COVID-19.
First up, we’ll look at the Canada Emergency Wage Subsidy (CEWS). This information is accurate as of April 9th. We will update this post as new information becomes available.
Who is Eligible?
Eligible employers who experience a minimum decline in revenue of 15% in March and a decline in revenue of 30% in April or May. To determine eligibility, employers can:
- Compare their revenue of March, April and May 2020 to (a) that of the same month of 2019, or to (b) an average of their revenue earned in January and February 2020.
- Choose between cash and accrual accounting to measure the revenue decline
How is revenue determined?
Using the employers normal accounting method, excluding revenue from extraordinary items and amounts on account of capital.
If your revenue was down only 10% in March but you expect it to be down 40% in April and 35% in May, then you would be eligible in April and May only.
What is it?
The amount of the subsidy is the greater of:
- 75% of the remuneration paid to the employee between March 15 and June 6, 2020 to a maximum of $847 per week and
- The amount of remuneration paid, up to a maximum benefit of 75% of the employee’s pre-crisis remuneration to a maximum of $847/week
Note for non-arm’s length employees, the subsidy will be limited to the eligible remuneration paid in any pay period between March 15 and June 6, 2020, up to a maximum benefit of $847 per week or 75 per cent of the employee’s pre-crisis weekly remuneration.
There is no limit on the overall subsidy amount an employer can claim.
Refund for Certain Payroll Contributions
The Government is also proposing to expand the CEWS by introducing a new 100 per cent refund for certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.
This refund would cover 100 per cent of employer-paid contributions for eligible employees for each week throughout which those employees are on leave with pay and for which the employer is eligible to claim for the CEWS for those employees.
How can you apply?
Applications can be made through your CRA’s My Business Account portal. The portal is not live as of the date of this blog post but the post will be updated when it is live.
Eligible remuneration includes salary, wages, and other remuneration but does not include items such as severance pay, employee stock option benefits or the personal use of an employer’s vehicle.
Can I see an example?
In this case, the firm would receive a weekly subsidy of $8,008. If the firm’s revenue was down at least 30% in April and May, they would receive this subsidy each week for the period April 12 – June 6, 2020.
Is it Taxable?
The CEWS is considered government assistance and will be included in the employer’s income and taxed in the year it’s received.
What about the Temporary Wage Subsidy (TWS) 10%?
This program remains an option for businesses that have not experienced a 30 per cent decrease in revenue. Under this program, the maximum amount of subsidy is $1,375 per employee and $25,000 per employer. Any benefit received from the 10% TWS for remuneration paid during the relevant period would reduce the amount that may be claimed under the CEWS.
The TWS is calculated manually and the employer can choose to reduce its payroll income tax remittances to the CRA by the amount of the TWS. Although the TWS is based on remuneration paid to employees between March 18 and June 19, there is no deadline for claiming the TWS (through reduced income-tax remittances.)
For a full list of government relief programs as part of Canada’s COVID-19 Economic Response Plan click here.