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Michael Ronse

Tax Partner at Manning Elliott LLP Surrey
by Michael Ronse
March 25, 2020

CRA Publishes Guidance on the Temporary Wage Subsidy

*UPDATED March 25, 2020*

As part of the relief measures announced by the Government of Canada, discussed here, there was an announcement that eligible employers would be provided with a temporary wage subsidy for three months. The Canada Revenue Agency (CRA) has published guidance on how employers can expect the temporary wage subsidy to function.

What is the temporary wage subsidy?

As part of the relief measures announced by the Government of Canada, eligible employers can receive a wage subsidy equal to 10% of the remuneration paid between March 18, 2020, and June 20, 2020, up to a maximum of $1,375 per employee and to $25,000 maximum per eligible employer.

Who is eligible for the temporary wage subsidy?

Eligible employers consist of:

  1. Non-profit organizations;

  2. Registered charities;

  3. Canadian-controlled private corporations (CCPCs) with taxable capital employed in Canada of the company and its associated group of companies of less than $15 million;

  4. Individuals other than a trust; and

  5. Partnerships, where all of the members of the partnerships are registered charities, CCPCs as described above and individuals other than a trust.

These entities must have a business number and payroll program account with CRA on March 18, 2020, and pay salary, wages, bonuses, or other remuneration to an employee between March 18, 2020, and June 20, 2020.

How does it work?

The subsidy is granted by reducing the current remittance of federal, provincial and territorial income tax that has to be sent to CRA by the amount of the subsidy.  Please note that this relief is only applicable to the federal, provincial or territorial income tax remittances and not any remittances under the Canada Pension Plan or remittances of Employer Insurance premiums.

Any subsidy received is then included in the employer’s income and employees should not be affected by this subsidy.

Does this affect my employees?

There is no effect on employee source deductions as this is an employer subsidy.

What records do I need to keep?

Records to be maintained are the total remuneration paid between March 18, 2020, and June 20, 2020; the income tax that was deducted from that remuneration; and the number of employees paid during that period.

Eligible employers would manually calculate the subsidy from the above based on CRA’s guidelines.

Concluding remarks

Please note that the information provided above is based on CRA’s guidance and not based on the current legislation and is therefore subject to change. CRA has stated that they are updating their reporting requirements in respect of the temporary wage subsidy and we expect more information to be available in the near future.

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.

Source: CRA’s full guidance can be found here