Here are some common questions and answers for businesses during the COVID-19 crisis. Programs for individuals are not covered in this article.
{updated July 14, 2020 at 11:41am EST}
There are thousands of web pages outlining the details of these programs, so we wanted to address your concerns as best as possible in a Q&A format.
With new announcements coming from the Government on a regular basis, we understand it can be a little confusing and overwhelming when it’s not 100% clear how it affects you as a business owner.
So let’s get into it. Here are the some of the COVID-19 programs and subsidies available to businesses:
A subsidy of 75% of employees’ wages up to $847 / week for up to 12 weeks (March 15 - June 6, 2020) for individuals, corporations, charities and partnerships who have seen a 15 - 30% decrease in revenues. The Canadian government is essentially giving you money to pay your employees so you don't have to terminate their employment.
How do I apply for the 75% wage subsidy? The CRA has outlined a very detailed process here. There are three ways you can apply, 1) using My Business Account 2) Having your accountant apply using their Represent a Client access or 3) filling out a separate online application.
What if I have more than one RP (payroll) account? An application must be made for each separate RP account.
How much money will I receive under the 75% wage subsidy? 75% of an individual salary up to $58,700 (or $847/week/employee).
If I paid someone before March 15th, can I include that in the subsidy calculation? No, this subsidy starts on March 15, 2020.
When will I receive the funds in my account? Approximately one week after the application is submitted. However, the PM announced April 27th that the first payments are going out on May 7, 2020.
How do I get paid? The fastest way is to set up direct deposit in your My Business Account. Alternatively, cheques will be mailed.
Do I need to setup a direct deposit account for RP if it's already setup for RC? YES! If you don't have one setup for your RP account, a cheque will be mailed. As long as you register before May 4th, you'll be fine.
What are the periods and related eligibility?
What about CEWS period after July 5th? Eligibility for periods 5-10 to be determined. Here are the periods: Period 5 - July 5 - August 1; Period 6 - August 2 - August 29; Period 7 - August 30 - September 26; Period 8 - September 27 - October 24; Period 9 - October 25 - November 21; Period 10 - November 22 - December 19
How do I calculate the CEWS if I'm on semi-monthly payroll? This is COMPLEX. We had to build our own conversion tool because the government calculator was not enough. The CRA set this up so that you calculate wages for the eligible periods based on either a bi-weekly or a weekly pay schedule. If you use a different pay schedule (ie. semi-monthly, which is extremely common), you have to use the weekly calculations, which involves manipulating all the data because semi-monthly pay schedules don't fit neatly into weeks. Major thanks to our Partner of Strategy and Finance, Dave MacPherson, for building out this tool which will accurately calculate the weekly amounts for each employee.
How many periods do I qualify for this wage subsidy if the first period has a decrease in revenue over 15%? Once you qualify for one period, you automatically qualify for the next period. However, you will need to see a 30% decrease in revenue to be eligible for the 3rd period.
What do I do for the second period of the 75% wage subsidy if I qualify for the first? Nothing. You’re automatically enrolled and you don’t need to re-apply until May 10, 2020.
If I think I will be eligible for the first 2 periods, but not the third, can I apply for period 1 and 2 so that I am eligible for period 3 too? Yes. You can apply each period and if you are eligible for period 1 and 2, you would subsequently be eligible for period 3 (by being eligible for period 2).
How do I calculate revenue for the 75% wage subsidy? Computation of revenue is based on “normal accounting practices” which is a term they don’t define, however the government has indicated it only includes revenue arising in the course of ordinary business activities and excludes extraordinary items.
If I already took the 10% wage subsidy, am I eligible for the 75% wage subsidy? Yes, any amounts claimed under the 10% wage subsidy will be included in the application and the subsidy paid to you will be reduced by this amount. This means you’ll need to have the amount you claimed on hand during your application.
Should I include vacation pay that is paid out on each paycheque in the CEWS calculation? Yes, the calculation includes the amounts employers would normally be required to make payroll deductions on such as salary, wages, and other taxable benefits
If I get paid in dividends as a business owner, am I eligible for the 75% wage subsidy? No. This is limited to salaried employees only.
Can I increase my salary as an owner to benefit from the 75% wage subsidy? No, unfortunately this can only be applied at a maximum of $847 / week or 75% of the employee’s pre-crisis weekly wages, whichever is less. The subsidy is limited to 75% of the average pre-crisis weekly wage based on one of 2 periods, either January 1 – March 15, 2020 or March 1 - May 31, 2019. Both options exclude any period of 7 or more consecutive days without remuneration.
What happens if I increase my pay anyway and take the subsidy? If you receive the subsidy and you were not eligible, the subsidy will have to be repaid along with a 25% penalty. So please don’t do this.
Do I need to move to weekly payroll in order to qualify for the 75% wage subsidy? No. You can use a spreadsheet to calculate the total eligible amount per week. This can be quite complex for semi-monthly payroll and we suggest you talk to your accountant before submitting any final numbers during your application.
Are new employees eligible for the 75% wage subsidy? Yes, however it is limited to 75% of the new employee’s wage or the $847 / week whichever is less.
Can I bring back people that I laid off to qualify for the wage subsidy? Yes! That’s the goal of this program - to keep (and bring) employees back to work. It gets a little tricky because in order for an employee to be eligible you have to rehire them, amend any ROE’s, pay them and THEN include them in your calculation of the subsidy. Their CERB eligibility may also be in question, so they may need to amend this personally. Here’s how they can repay the CERB if needed.
Can I back date their start date to qualify for the subsidy? Yes, back to March 15th. But as noted above, there will most likely be adjustments to the CERB and additional steps you’ll need to take in order for them to be included in your subsidy calculation.
How do I calculate the baseline remuneration for the 75% wage subsidy? The government released a spreadsheet here to use.
How does SR&ED affect the 75% wage subsidy (CEWS)? There is no finite guidance on this as of yet. Anything discussed is speculation at best. We assume that they will be kept out because they are not a 'revenue source' but rather a reimbursement of expenses. One consideration to note is that CEWS funding is taxable and that will affect your SR&ED calculation.
Will I have to pay tax on the CEWS? Yes. This amount will be included in taxable income in the fiscal year in which it was received. As an example, if you receive $50,000 from the CEWS you’ll pay approximately $6,250 in tax.
If I own multiple companies, can I be included in each subsidy calculation? No. There are special rules here and the general rule of thumb is that you can’t double dip as an owner.
What happens if I make a mistake on the original application for the 75% wage subsidy? The application can now be amended to reflect any mistakes identified.
Do I have to pay employees the other 25% of their salary for the CEWS? The government encourages you to do so, but if you’re not able to, you’ll need to discuss this with your employees and ensure your payroll system is updated accordingly.
Would a Canadian branch of a foreign owned company with a Canadian payroll account be eligible? No, the CEWS is only eligible for corporations who are taxable under Part 1 tax and these types of branches are taxable under Part 14 tax.
10% Wage Subsidy
What is the 10% Wage Subsidy?
A subsidy of 10% of remuneration paid up to a maximum subsidy of $1,375 per employee and $25,000 per employer for Canadian Controlled Private Corporations, sole proprietorships, partnerships, non-profit organizations and charities. In short, you get 10% of the salary you pay to your employees back from the government.
I am the only employee of my company, am I eligible for the 10% wage subsidy? Yes. The subsidy is available to companies with one or more employees so long as the company had a payroll account set up before March 18, 2020 you’re eligible to apply.
How do I sign up for the 10% wage subsidy? There is no formal sign-up process. Once you’ve calculated the subsidy, reduce the amount of income tax remittances you pay to the government (usually on the 15th of the following month). If your payroll provider submits remittances for you, it’ll be ideal to read documentation they’ve released on the topic or reach out to them directly for help.
I haven’t claimed the subsidy and don’t know if I will have a chance. Am I out of luck? Not at all! If you don’t claim this subsidy during the period of March 18 – June 19, 2020, you can still calculate the 10% and the CRA will pay the amount to you or transfer it to your 2021 payroll remittance balance.
How does the 10% wage subsidy affect our T4s? It won’t. The full amount that should have been remitted will be listed on the T4 and the CRA presumably will adjust for the difference on their end prior to completing your 2020 file.
Will I have to pay tax on the 10% wage subsidy? Yes, any benefits received from this subsidy will need to be included in your taxable income in the fiscal year received.
Is the 10% wage subsidy based on pay date or pay period? Pay date. Meaning any remuneration paid between March 18 - June 19, 2020 is eligible, regardless of the pay periods. The language in bill C-13 around the 10% subsidy is extremely clear and the Canadian Payroll Association also confirmed our interpretation was correct.
Canadian Emergency Response Benefit (CERB)
What is the CERB?
Individuals who have lost their job or have seen a significant decrease in income (below $1,000 / month) as a result of COVID-19 are eligible if they had income of at least $5,000 in 2019 or the last 12 months. With the CERB you would receive $500 per week for up to 24 weeks.
I don’t pay myself a wage but instead take draws / dividends. Am I eligible for this program? Yes, so long as you received over $5,000 in non-eligible dividends in 2019 or the past 12 months.
What is a non-eligible dividend? Non-eligible dividends are the type of dividends generally paid out by small companies eligible for the small business deduction. If you're not sure about this, reach out to your accountant or reach out to us here.
I am still working for my company and making some money, should I apply? Yes, so long as you are making less than $1,000 / month (including non-eligible dividends), you will be eligible.
I have no work for my employees but I don’t want to lay them off, would they be eligible?Yes, so long as they have not made over $1,000 for 14 days in a row.
Do I need to issue ROE’s for an employee (or owner) to receive a CERB? No, employees do not need to be laid off to receive this benefit.
Canada Emergency Business Account (CEBA)
What is the CEBA?
Small business and not-for profits with 2019 payroll between $20,000 - $1,500,000 are eligible for an interest free loan of up to $40,000. If the loan is repaid in full before December 31, 2022, 25% of the loan (up to $10,000) will be forgiven.
Is there a minimum amount of 2019 payroll required to apply? No, the government has changed the eligibility. The original requirement was 2019 payroll of $20,000 - $1,500,000. Now if you have 2019 payroll less than $20,000 you can still apply if you have a business account with a participating financial institution, you have a CRA business number and have filed a 2018 or 2019 tax return and have eligible non-deferrable expenses between $40,000 - $1,500,000, such as rent, property tax, etc.
Can I apply if I have no employees and I paid myself dividends in 2019? Yes, so long as you meet the requirements noted above.
What if I pay my team (or myself) as a contractor, can I get a CEBA loan? Yes. The government has expanded the eligibility to include companies that depend on contract workers.
Can I apply if I don’t expect to see much of a decline in revenue? Although there is no set percentage decrease in revenue required to apply, it is meant to help cover operating costs for businesses that have seen a reduction in revenue because of COVID-19.
What happens if I can’t repay the funds before December 31, 2022? Any balance remaining at this time will be converted to a 3-year loan with 5% interest. You do not have to reapply at that time.
Business Credit Availability Program (BCAP)
What is the BCAP?
A low interest loan available through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). The type of loans available are individually structured based on your business needs.
What if I need more than $100,000? You will need to speak with a BDC Account Manager.
NRC IRAP Innovation Assistance Program (IAP)
What is IRAP IAP?
Funding for small to medium sized companies who are not eligible for the Canada Emergency Wage Subsidy (CEWS) or the Business Credit Availability Program (BCAP). This is a great alternative for those in the tech sector who are still in the pre-revenue stages of their company.
When can I apply? The applications closed on April 29, 2020.
What type of employees are eligible? All members on staff as of March 1, 2020 who will receive a T4 or T4A are eligible. This includes employees who were laid off and called back, so long as they were on staff at March 1, 2020. For employees hired after March 1, this funding is not available.
What amount of funding will I receive? The funds will match the high end of the CEWS program. For each employee, the program will pay $847 / week for 12 weeks.
When will I receive the payment? 80% of the funds will be received in mid May and the other 20% will be received in June.
What if I am ineligible for CEWS in period 1 and apply for the IRAP funding but become eligible for the CEWS in period 2 or 3? If you are not eligible for CEWS when you apply for the IRAP IAP, you will stay on IRAP funding as this is for 12 weeks and not broken up into individual periods like CEWS.
Temporary changes to Canada Summer Jobs program
What is the Canada Summer Jobs program?
A 100% wage subsidy (up to provincial minimum wage) for private and public sector employees.
Can I hire a summer student and get this Canada summer jobs subsidy even though I have never claimed it before? No. This is only for companies who have already applied. There was originally an expectation the applications would re-open, but now it doesn't look like it will.
When can I hire a student under this program? This program will start on May 11, 2020.
How do I find students to work for me under this program? You can post your listing of the Government of Canada job bank here https://www.jobbank.gc.ca/home.
Extension of tax deadlines
What are the tax deadline extensions?
Any corporate taxes payable due after March 18, 2020 are now due on August 31, 2020. This applies to tax balances and instalments for both personal and corporate taxes. Corporate tax returns with filing deadlines in June, July or August now have until August 31, 2020 to file.
What do I need to do to delay the filing and tax payment? Nothing! So long as the taxes are paid by August 31, 2020 and the return is filed before June 1, 2020, there will be no interest or penalties charged for late filing.
What if I am getting a refund? Will they still pay this now? Yes, refunds are still being paid and returns filed before the new June 1, 2020 deadline are still being processed.
Do I still have to file my GST/HST return on time during COVID-19? GST/HST remittances due after March 18, 2020 have been extended to June 30, 2020. Although there are no official extensions to GST/HST filing deadlines, the Government has noted they will be lenient with interest and penalties for any late filed GST returns, so long as they are filed before June 30, 2020.
Decrease in rent for April, May and June 2020 of 75% for small businesses paying less than $50,000 / month in rent that have seen a decrease in revenues of 70%. The Canadian Government will cover 50% of your rent and your landlord will cover the other 25% if they agree to take part in this program.
What if I am not able to pay my 25% of the monthly rent? This will be something you will need to discuss with your landlord. This program requires a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. Open communication with your landlord is key to these types of agreements.
What if my landlord does not agree to take part in this program? This is an optional program for landlords. If your landlord does not want to participate, we recommend discussing your concerns with them. It’s better for them to keep a tenant in which they will be receiving 75% of the monthly rent than to have an empty property.
How do I apply? The application will be in the hands of the landlord and tenants will not have to apply.
How do I determine if my revenue has decreased by 70%? More details are to follow, however it appears that this will be based on your pre-crisis revenues and January and February 2020 may be the baseline months to compare your current revenues to.
What if my rent is $55,000 / month? Unfortunately, you would not be eligible for this program.The Government has noted that further assistance will be provided for larger companies soon.
How do I determine if my revenue has decreased by 70%? Average revenue for April - May 2020 and the forecast revenue for June will be compared to April - June 2019 revenue. If the company was not in business April - June 2019, then then the average of January - February 2020 revenues will be used. The entire period is considered in this application and therefore you cannot only apply for 1 or 2 months. You must apply for all 3 months.
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Every business we've worked with during this crisis is going through their own unique set of challenges. If you're interested in seeing how our back-office approach could help your situation, please reach out here.
