CRA Tax Update – Response to COVID-19

On April 1st, Federal Finance Minister Bill Morneau had no time for any April Fools jokes as he addressed Canadians to deliver additional information on the newly announced Canada Emergency Wage Subsidy (CEWS). While more details from the government are forthcoming, we would like to update you on what was learned:

• The Temporary Wage Subsidy for Employers is still available to businesses, however any amount received under this program will generally reduce the amount that can be claimed under the CEWS. This subsidy is equal to 10 percent of remuneration paid from March 18 to June 20, 2020, up to a maximum of $1,375 per employee and $25,000 per employer.
• The CEWS is a separate program that will apply at a rate of 75 percent of the first $58,700 normally earned by employees – representing a benefit of up to $847 per week. This program will be in place for a 12-week period, from March 15 to June 6, 2020.
• Eligible employers who suffer a drop in gross revenues of at least 30 percent in March, April or May, when compared to the same month in 2019, would be able to access the subsidy.
• Eligible employers would include employers of all sizes and across all sectors of the economy, with the exception of public sector entities.
• An eligible employer’s entitlement to this wage subsidy will be based entirely on the salary or wages actually paid to employees. All employers would be expected to at least make best efforts to top up salaries to 100 percent of the maximum wages covered.
• Eligible employers would be able to access the CEWS by applying through a Canada Revenue Agency (CRA) online portal.

What we still need to know about the CEWS:
1. How will the 30 percent decline in gross revenue be measured? Will consideration be given to issues such as
bad debts or will gross revenue be determined by cash-based accounting?
2. What will be considered “best efforts” with respect to employers topping up salaries to 100 percent?
3. What are reasonable benchmarks that are to be used by new businesses that don’t have comparable
monthly financial statements from the prior year.
4. What is the special rule that will apply to owner-managed employees in the case of a family business?
5. How will the program be administered taking into consideration the liquidity issues being faced by businesses due to the pandemic? Employers who are monthly payroll remitters may not have sufficient cash to remit payroll deductions by the due date – will the late remittance penalties be waived?

Even though there are still some outstanding questions, there are things that can be done by you now so that you are able to access these programs if eligible:
• Sign up for My Business Account with the CRA.
• Set up direct deposit with the government to facilitate payments from the CRA.
• Complete monthly financial statements → your March 31, 2020 statements should be ready as soon as possible in order to apply for the subsidy when the online portal is open.
• Evaluate the different government programs to determine which will be most beneficial to your employees and your business.

What do we know about the support programs that small businesses will receive from the Government? 

The CEBA is designed to support small business owners in meeting their immediate cash flow needs and includes:

The Government announced that Canada’s major banks will be launching a fully digital application process for clients eligible for the new Canada Emergency Business Account (CEBA) as part of the federal government’s $25 billion loan program for Canadian small businesses.

A $40,000 interest-free (until December 31, 2022), government guaranteed loan to help you pay for operating costs that you’re not able to defer as a result of COVID-19.

$10,000 (25%) of the $40,000 loan is eligible for complete forgiveness if $30,000 is fully repaid on or before December 31, 2022.

If the loan is not repaid by December 31, 2022, it will be extended for an additional 3‑year term bearing an interest rate of 5% per annum.

The loan can be prepaid at any time without penalty. 

For the latest information regarding the CEBA program, please visit Small Business BC Supports

We understand that government is responding to the current crisis as quickly as possible. We will continue to work with government resources to get further clarity on these programs and provide you with insights as to how to move forward in these evolving circumstances. This situation is dynamic and government programs can change.