April 1, 2020
Finance Minister Announces New Details Around the Canada Emergency Wage Subsidy
The Federal government announced changes to the Canada Emergency Wage Subsidy program on April 8, 2020. Highlights of these changes can be found here.
Today Canada’s Finance Minister, Bill Morneau announced more details around the Canada Emergency Wage Subsidy (i.e. the “75% Wage Subsidy”). The legislation has not yet been released but background information can be found here. Please note that the information provided above is not based on the current legislation and is therefore subject to change.
The main purpose of the 75% Wage Subsidy is to encourage businesses to retain employees.
How much is available?
The amount of the subsidy is 75% of remuneration paid, up to $847 per week per employee.
If an employee’s remuneration was more than $1,130 per week but was subsequently reduced due to COVID-19, the subsidy amount will be the remuneration paid to this employee, up to a maximum of $847 per week.
Remuneration includes salary, wages and other remuneration paid but does not include severance pay, or non-cash benefits such as stock option benefits or personal use of a corporate vehicle.
There is no overall limit on the aggregate subsidy amount available for employers.
Who is eligible?
Eligible employers include individuals, corporations, partnerships, non-profit organizations and registered charities.
The 75% Wage Subsidy is available to eligible employers who see a decrease in gross revenues of at least 30% in March, April or May of 2020 when compared to the same month in 2019.
Revenue for this purpose is the employer’s revenue from its business carried on in Canada earned from arm’s-length sources. Income earned from a business carried on outside of Canada or from non-arm’s length parties would not qualify as “revenue”.
The government is working with non-profit organizations and charities to define “revenue” for purposes of the subsidy.
The 75% Wage Subsidy will be available for 12 weeks from March 15 to June 6, 2020.
For established employers, the eligibility for each claiming period will be based on the following:
Reference period for eligibility
March 15 – April 11
March 2020 over March 2019
April 12 – May 9
April 2020 over April 2019
May 10 – June 6
May 2020 over May 2019
For employers who established their business after February 2019 the reference period for eligibility would be determined by comparing monthly revenues to a reasonable benchmark.
How will employers apply?
Applications will be made through CRA’s My Business Account portal. We recommend all businesses register for access to CRA’s “My Business Account” as soon as possible. It is strongly recommended that employers set up direct deposit with the CRA to expedite receipt of the 75% Wage Subsidy.
It is anticipated the application for the 75% Wage Subsidy will be available on CRA’s My Business Account portal within three to six weeks.
What else do I need to know?
Any subsidy received will be taxable to the employer. This should be offset by the wages paid to employees.
Remuneration paid to non-arm’s length employees will have special rules with respect to eligibility. The eligible amounts will still be $847 per week but may be limited. We will provide additional information once more details with respect to the “special rules” become available.
Public sector entities such as municipalities, public universities, hospitals are not eligible for the 75% Wage Subsidy.
Several references have been made to the application of penalties to employers who provide false or misleading information to obtain these benefits or misuse the funds.
How will the 75% Wage Subsidy interact with other COVID19 relief measures?
Currently, there are only details on how the 75% Wage Subsidy will interact with the Temporary Wage Subsidy announced on March 18, 2020 (the “10% Wage Subsidy”) and the Canada Emergency Response Benefit.
The 10% Wage Subsidy is still available (details can be found here), however, any benefits received under the 10% Wage Subsidy will reduce the employer’s entitlement to the 75% Wage Subsidy.
Employers cannot claim the 75% Wage Subsidy for remuneration paid to an employee during the period of time in which the employee is eligible to receive payments from the Canada Emergency Response Benefit. If employers are considering re-hiring workers previously laid off, as the Canada Emergency Response Benefit program works in 4 weeks blocks, re-hiring employees may impact access to benefits of these programs.
Employers who are not eligible for the 75% Wage Subsidy can still furlough employees so that the employees are eligible for the Canada Emergency Response Benefit of $2,000 per 4 week period.
The above content is believed to be accurate as of the date of posting. Canadian tax laws are complex and are subject to frequent changes. Professional tax advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained herein.