75% Canada Emergency Wage Subsidy Updates
On April 11, 2020, the 75% wage subsidy (the “subsidy” or “CEWS”) received royal assent and is now law. The practical application of the subsidy has left many employers scratching their heads. Here are some answers to some of the frequently asked questions:
Who is eligible for the subsidy?
- corporations, unless it is tax-exempt or a public institution;
- an individual;
- registered charities;
- partnerships with members of any of the above;
The criteria have been further expanded to include employers:
- acting as pay masters to a group of related companies;
- providing goods or services to related corporations;
- which second (loan) employees to a joint venture.
Who misses out on the subsidy?
- Start-ups with no revenues;
- Operating companies with seed capital and no revenues;
- An exempt organization:
- First nations bands;
- Local governments;
- Crown corporations;
- Health authorities;
- Public universities;
What are the criteria and how is it measured?
If I qualify in Period 1, do I need to apply again?
If you qualify in Period 1, you are deemed to meet the condition in the following period, however the required reduction in revenue must be met for each qualifying period.
What accounting method is required for the calculation?
You can use the cash or accrual method, but you must be consistent throughout the duration of the CEWS program.
What if I operate a group of companies?
You can elect to consolidate revenue across a group of companies, but if you elect this method, you cannot apply consolidation selectively, it must be across all companies.
How does the 75% subsidy differ from the previous 10% subsidy?
The 75% subsidy is cash paid by the government to eligible employers, rather than a reduction of calculated payroll remittances.
What if I qualify for both the 10% subsidy and the 75% subsidy?
Those eligible for both subsidies would claim the 10% subsidy, and then reduce amounts eligible under the 75% subsidy.
How do I calculate the 75% subsidy?
The amount of the subsidy will vary depending on whether the employee was employed prior to March 15, 2020 and whether the employee is at arm’s length.
In all cases, the subsidy is capped at $847 per week per eligible employee.
The subsidy is not available for those employees who have been without pay for 14 or more consecutive
days. This is to prevent overlap between the CEWS and the Canada Emergency Response Benefits.
Pre-crisis weekly remuneration is the average weekly remuneration paid between January 1 – March 15, excluding any 7-day period where the employee was not paid.
What about my employees on leave?
The premiums you pay to employees on leave can be included in the subsidy calculation.
How is it taxed?
The subsidy is treated as government assistance and is taxable to the employer in the year received.
How and when do I apply?
Employers must apply through the CRA My Business Account portal. The portal should be online in 3-6 weeks, with payments to follow.
We recommend all employers ensure they are registered with CRA for direct deposit and assemble records so that when the application opens you are ready.
What if I receive the CEWS but I do not meet the criteria?
If you receive the CEWS payments for a period you do not qualify for, you will need to repay the amounts to CRA if you do not meet the eligibility criteria.
Any fraudulent claims or abuse of the system will result in a penalty of up to 225% of the CEWS benefits received and up to 5 years in jail time. There is also a shaming provision, where your name will be publicly disclosed – We don’t recommend trying to game it.
Any other tips?
The CEWS is nuanced, and clearly proper recordkeeping will need to be kept in case of audit. Our friends at Tax Templates have developed a handy excel worksheet to help calculate the CEWS.
We understand these are challenging times – we are offering consultations to help guide business
owners, please send us an e-mail at email@example.com or call us at 416-440-1600 to speak to one of
our Partners today.