Businesses across Canada are feeling the devastating impact of the ongoing COVID-19 outbreak. Our federal and provincial governments have announced economic response plans and are continuing to release details of implementation.
At CapriCMW, our Benefits Advisors are staying on top of the updates to keep you informed and support you through this crisis.
Canadian Emergency Wage Subsidy
All businesses and non-profit organizations can apply for this wage subsidy for compensation paid between March 15, 2020 to August 29, 2020. The wage subsidy will be the greater of:
- 75% of compensation paid, up to a maximum of $847 per employee per week
- amount of compensation paid, up to $847 per employee per week or 75% of the employee's pre-crisis weekly compensation, whichever is less
Special rules apply for "non-arms length" employees.
You can only claim the CEWS for employees working within Canada who you paid income to during the eligibility period, and did not have more than 14 consecutive days without income during the eligibility period.
Eligible compensation includes salaries, wages and taxable benefits. It does not include severance pay, stock options or personal use of vehicle payments. There is no maximum per business for this subsidy.
Calculations are based on pre-crisis or baseline earnings. To calculate the eligible compensation, the employers will need to consider an employee's average pay between January 1 to March 15. Any periods of 7 days or more without income can be excluded. Employers will also be able to claim up to 75% of salaries and wages paid to new employees.
Revenue Reduction Requirement
Applicants must demonstrate a loss in revenue of at least 15% in March and 30% in April and May, measured against revenue from the same time period in the previous year, or the average of January and February 2020. On May 15, the federal government announced it will be reviewing the revenue test and consulting with businesses for other potential changes moving forward.
|Claiming Period||Revenue Reduction||Reference Period|
|March 15 - April 11||15%||March 2020 over March 2019 or the average of January and February 2020|
|April 12 - May 9||30%||April 2020 over April 2019 or the average of January and February 2020|
|May 10 - June 6||30%||May 2020 over May 2019 or the average of January and February 2020|
The employer can choose to calculate revenue based on the accrual or cash method. Whichever method is selected at the time of application must be used for the duration of the program. A business that calculates a 15% reduction for March 2020 will not be required to do the calculation for April, but must do so for May 2020. Organizations comprised of more than one business may choose to consolidate all revenue or provide revenue for each company separately. You may wish to connect with your accountant to determine the option that is best for your specific situation.
Online CEWS Calculator
Use the online CEWS calculator to get an estimate of the wage subsidy amount your business would receive. There is also an Excel spreadsheet available for download.
Refund of Certain Payroll Contributions
The federal government has introduced a new 100% refund of certain employer-paid contributions to EI, CPP, QPP and Quebec Parent Plan. Employers would be able to claim the refund on employees who are on leave with pay and included in the CEWS claim.
Employers would still collect and remit both employer and employee contributions to each program.
The refund would not be subject to the $847 maximum benefit per employee per week. Those claiming $847 for the wage subsidy would claim the employer contribution of EI and CPP on top of the $847. For those that fall under the maximum, the employer would claim 75% of compensation paid and their contribution to EI and CPP on top.
Employers will be able to apply through the CRA My Business Account portal and the Web Forms application. Eligible employers can apply for both the CEWS and refund at the same time.
The Government of Canada is strongly encouraging everyone to help speed up processing by registering for direct deposits.
Compliance with Eligibility Requirements
Those who collect CEWS payments despite not meeting eligibility requirements will be required to repay the amounts received. A 25% penalty will be applied to any fraudulent claims, including artificial transactions reported aimed at reducing revenue.
Interaction with Other Programs
Those who qualify for both the Canadian Emergency Wage Subsidy and the Temporary Wage Subsidy will have the CEWS claim reduced by 10% during the time period that the TWS is in effect.
EI received by employees under the Work-Sharing program will reduce the benefit the employer is entitled to receive under the CEWS. Employers would be claiming for a subsidy on the reduced income paid to employees rather than pre-crisis wages.
Is the Subsidy Taxable?
Both the wage subsidy and the refund of payroll contributions are considered government assistance that would be included in taxable income.
Temporary Wage Subsidy
Eligible employers will receive a wage subsidy of 10%, from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee and to a maximum of $25,000 total per employer. Applicants are not required to show a loss in revenue, but must have had a CRA account on March 18, 2020 and pay wages, bonuses, and other remuneration (including taxable benefits) to employees. Those who can apply include:
- individuals (excluding trusts)
- non-profit organizations
- registered charities
- Canadian-controlled private corporations eligible for the $500,000 small business deduction (taxable capital fr the prior year must be below $15 million including associated businesses)
*Partnerships are only eligible for the subsidy if their members consist exclusively of individuals (excluding trusts), registered charities or CCPCs which are eligible for small business deduction.
The subsidy amount is deducted from the current remittance of federal, provincial or territorial income taxes. You can claim it by reducing your remittance for the period of March 18 to June 20. You cannot reduce your remittance of CPP contributions and EI premiums. It is considered taxable income and will need to be reported as income in the year the subsidy is received.
Business Credit Availability Program (BCAP)
Established to provide $65 billion of additional support through Business Development Bank of Canada (BDC) and Export Development Canada (EDC), this program includes the following:
Canada Emergency Business Account
This is an interest-free loan of up to $40,000 to help small businesses and non-profit organizations cover operating costs while experiencing temporarily reduced revenues. Funds can only be used to pay non-deferrable operating expenses and cannot be applied to refinance existing debt.
If 75% of the loan is repaid on or before December 31, 2022, it will result in loan forgiveness of 25% (up to a maximum of $10,000). If 75% of the loan has not been repaid by December 31, 2022, the balance and accrued interest will be due on December 31, 2025.
Applications are now being accepted through your primary financial institution. You will not be required to personally guarantee the loan if you meet eligibility criteria.
- The applicant must be a Canadian business in operation as of March 1, 2020 registered with the CRA.
- Total employment income paid in the 2019 calendar year must be between $20,000 and $1.5 million. If payroll was less than $20,000, the applicant must have a business operating account, CRA business number, a filed 2018 or 2019 tax return and eligible non-deferrable expenses between $40,000 to $1.5 million. Applications based on the updated criteria are being accepted as of June 19, 2020.
- The borrower must have an active business chequing/operating account with the lender. The account must have been opened on or prior to March 1, 2020 and not be arrears on existing borrowing facilities (if applicable) with the lender by 90 days or more as of March 1, 2020.
- The borrower can only apply and be accepted once. You cannot apply at multiple financial institutions.
- The borrower acknowledges its intention to continue to operate its business or resume operations.
- The business agrees to participate in post-funding surveys conducted by the Government of Canada and any of its agents.
Loan Guarantee for Small and Medium-Sized Enterprises
EDC is partnering with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million for SMEs. Effective March 24, EDC is supporting export companies by offering their banks a guarantee on loans up to $5 million.
You can learn more on the EDC website or call 1 800 229 0575.
Co-Lending Program for Small and Medium-Sized Enterprises
BDC is partnering with financial institutions to offer co-lend term loans that will help SMEs with operational cash flow requirements.
Loans up to $100,000
SMEs can apply for loans up to $100,000 here. This includes a 6-month interest-only payment period, followed by a 5-year loan amortization with no prepayment penalty.
Loans over $100,000
Those seeking loan requests over $100,000 should contact their primary financial institution for a referral to BDC. Financing available through BDC includes capital loans of up to $2 million with flexible repayment terms such as principal postponements and reduced rates on new loans.
There are early indications that interest will be 2.8% and the length of the term will be 36 months. The loan will be interest only in the first 12 months, and the remaining 24 months will be principal and interest. 40% of the principal will be paid during the 24 months and a balloon payment of 60% will be due at the end of 36 months. Businesses will not be permitted to use this loan to refinance existing debt.
To apply, you will need:
- cash flow statements from the past 6-12 months
- 3 years of financial statements prepared by an accountant
- an in-term financial statement if year-end was more than 3 months ago
- finance application
- statement of personal affairs
- details of ownership, percentage and investor information
Learn more on the BDC website.
Mid-Market Financing Program
BDC’s Mid-Market Financing Program will provide commercial loans ranging between $12.5 million and $60 million to medium-sized businesses whose credit needs exceed what is already available through the Business Credit Availability Program and other measures.
BDC anticipates that qualifying companies will have annual revenues in excess of approximately $100 million.
More details will be made available soon.
Mid-Market Guarantee and Financing Program
EDC’s Mid-Market Guarantee and Financing Program will bring liquidity to companies who tend to have revenues of between $50 million to $300 million, to sustain operations during this uncertain period. EDC will continue to work with Canadian financial institutions to guarantee 75 per cent of new operating credit and cash-flow loans – ranging in size from $16.75 million to a maximum of $80 million. These expanded guarantees are available to exporters, international investors and businesses that sell their products or services within Canada.
More details will be made available soon.
BDC is also offering 6-month principal postponements to many existing clients. Contact your Account Manager for more details.
Large Employer Emergency Financing Facility
This program will provide bridge financing to eligible large businesses and certain non-profit organizations affected by COVID-19. Learn more in our blog post.
Regional Relief and Recovery Fund
This program will provide nearly $962 million through local Regional Development Agencies. These funds are targeted to operations that have not qualified for other measures or programs. It is expected to aid sectors such as manufacturing, technology and tourism.
Canada Emergency Commercial Rent Assistance Program
Under this program, eligible small businesses, non-profit and charitable organizations will see a 75% reduction in rent for the months of April, May and June. Learn more in our blog post.
Work-Sharing is a program designed to help employers avoid layoffs when there is a temporary reduction in business activity for reasons beyond the control of the employer. The program provides income support to employees who work a temporarily reduced schedule.
Temporary special measures have been introduced to specifically support employers and employees affected by a downturn in business due to the COVID-19 outbreak:
- The maximum duration of Work-Sharing agreements has been extended to 76 weeks from 38 weeks.
- Businesses that have been in operation for a minimum of one year (previously two years) can now apply.
- The mandatory waiting period has been waived so that employers with a recently expired agreement may immediately apply for a new agreement.
Temporary special measures are in effect from March 15, 2020 to March 14, 2021. Employers can now submit applications 10 calendar days (previously 30 days) prior to the requested start date.
The amount of the benefit paid will be based on a comparison of missed hours against the hours an employee would have normally worked. For example, if a normal working week is 40 hours and an employee only works 30 hours, there are 10 hours missed (25% of normal hours). The benefit amount would be 25% of the employee's normal weekly earnings.
- Eligible employers includes organizations (private, public or non-profit) that have been in operation for at least one year and have at least two employees.
- Eligible employees include year-round permanent full-time or part-time employees who carry out day-to-day functions of the business, meet EI requirements, and agree to reduce their normal working hours by the same percentage as other eligible employees and share the available work.
- Employees who are not eligible include senior management, executive-level marketing/sales agents, outside sales representatives, technical employees engaging in product development and employees that hold more than 40% of voting shares in the business.
- The employer must maintain all existing employee benefits for the duration of the Work-Sharing agreement. This includes health/dental, disability, pension and vacation.
- The reduction in regular scheduled hours must be a minimum of 10% and a maximum of 60% on average over the term of the agreement.
- Employers must identify the employees that are participating.
Income Tax Payments
Payment of income taxes owing on or after March 18, 2020 and before September 2020 can be deferred until September 1, 2020 without interest or penalties.
Sales Tax Remittance and Customs Duty Payments
For monthly filers, GST/HST as well as customs duties owing for February, March and April 2020 can be deferred until June 30, 2020. For quarterly filers, amounts owing for January to March can be deferred.
Provincial (BC) Programs
Filing and payment deadlines for the following taxes have been extended to September 30, 2020:
- Employer Health Tax
- Sales taxes including provincial sales tax, carbon tax, motor oil tax and tobacco tax.
Delayed PST Budget 2020 Tax Changes
The following changes have been postponed until further notice:
- Eliminating the PST exemption for carbonated beverages that contain sweeteners
- Expanded registration requirements for Canadian sellers of goods
Delayed Carbon Tax Increase
There will be no increases until further notice.
Reduced School Tax Rates for Businesses
The school tax rate for commercial properties will be reduced by 50% for the 2020 tax year.
Enhanced BC Climate Action Tax Credit
An additional one-time payment will be made in July 2020 on top of the regular climate action tax credit amounts.
In response to the COVID-19 crisis, there is a new unpaid, job-protected leave for reasons specifically related to COVID-19. Employees can take this leave for as long as needed without putting their jobs at risk. In addition, the temporary layoff period has been extended from 13 weeks in a 20-week period to 16 weeks in a 20-week period.
Rates have been reduced by 1% as of April 1 and residents that have lost their jobs or are unable to work due to COVID-19 will receive a bill credit of three times their average monthly bill. Small businesses forced to close can also apply for this subsidy. Some residential and commercial clients may be able to defer payments based on certain criteria.
Your CapriCMW Benefits team is here to help with short and long-term strategies around the structure of your employee benefits and retirement programs.