SUMMARY OF EMERGENCY GOVERNMENT PROGRAMS FOR COVID-19

By April 6, 2020All Top Stories, CERB, covid

Business Support Programs

Further Clarification

As of April 28th, 2020

Updates Highlighted for Further Clarification

 

Three Programs Designed To Keep Employees Working

Work Sharing Program:

  • This program is administered by Employment and Social Development Canada and is designed to keep employees employed that have a shortage of work due to Covid-19
  • The main function of this program is to utilize the existing program in place but to enhance it thru an extension of the qualifying period from 38 to 76 weeks
  • To be classified as an eligible employer the employer must:
    • Have been in business in Canada year-round for two years.
    • Be a private or public company or a not for profit organization
    • Demonstrate that the shortage of work is temporary and beyond their control
    • Demonstrate a recent decrease in business of at least 10%
    • Submit a recovery plan designed to show return to normal working hours by the end of the work share agreement.
  • An eligible employee is defined as:
    • Be a core employee which means permanent full time or part time
    • Be eligible to receive Employment Insurance Benefits
    • Agree to a reduction of their normal working hours in order to share the available work
    • Employees laid off prior to this agreement are eligible to participate.
  • Employees that are shareholders of the company do not qualify for this program.
  • Work sharing agreements must include a reduction in work activity of the employees’ regular work schedule between a minimum of 10% (one half day) and a maximum of 60% (three days)
  • All employee benefits must be maintained in full during the duration of the agreement.

Canada Emergency Wage Subsidy (CEWS) – NOW OPEN FOR APPLICATIONS:

  • This program is administered by CRA and is designed to encourage employers to keep employees on payroll.
  • Eligibility for employees is limited to individuals employed in Canada, and employees that have not been without remuneration for more than 14 consecutive days in the eligibility period. The eligibility periods include: March 15 to April 11, April 12 to May 9, and May 10 to June 6. This rule replaces the previously announced restriction that an employer would not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.
  • The total subsidy paid to the employer during this program must be included in the annual revenue reported the employer. As well, the subsidy received will reduce the amount of remuneration expenses for any federal tax credits that may apply to the employer.
  • To register for this subsidy, go to canada.ca – My Business Account
  • The claim submission periods are:
    • March 15 – April 11
    • April 12 – May 9
    • May 10 – June 6
  • The qualifying points are the employer must be registered with a business number (BN) and for payroll with CRA by March 18, 2020 AND must be suffering from at least a 15 % reduction of gross revenue in March and then a 30% decline in gross revenue during April and/or May.
      • Each claim period must qualify for the reduced revenue of 30%
      • Revenue must be from arms-length customers only. No inter-corporate or connected corporation activity qualifies.
      • The reduction in revenue will need to be substantiated.
      • Revenue can be reported on either the accrual method or now on a cash method. Once a method is selected the same method must be used on every submission. The cash method is available as it has been recognized that revenue earned in March may not be paid until after the crisis is over.  Using the cash method allows the employer to have access to needed subsidies sooner.
  • The operating entities that qualify for this program are:
    • Individuals (sole proprietors) that run businesses
    • Taxable Corporations (includes large corporations and Canadian subsidiaries of foreign controlled companies)
    • Partnerships
    • Non-Profit Corporations
    • Registered Charities
  • This subsidy is for 75% of employees wages up to a maximum subsidy of $847 per employee per week during this period. There is no maximum subsidy per employer.
  • For employees hired before March 15th , the subsidy will cover the lesser of:
    o 75% of the pre-crisis weekly remuneration or
    o The current weekly remuneration paid to the employee
  • For employees hired after March 15th it will cover 75% of the current pay up to the maximum amount of $847 per employee.
  • You will have to pay the employee first then receive the reimbursement. All employers are expected to make their best efforts to top up employee’s income to 100%.

For example:
1. if you have an employee that earned $1,000 per week pre-crisis and now during the crisis the employee earns $800 per week, the subsidy you will receive is $750 (75% of $1,000)
2. if you have an employee that earned $1000 per week pre-crisis and now during the crisis the employee earns $500 per week, the subsidy you will receive is $500 (75% OF $1,000)
3. If you have a new employee that earned $500 per week, the subsidy you will receive is $375 (75% of $500)

  • There are now two options you can choose from to base your claim:
    Option 1: The claim submission periods are:
     March 15 – April 11 (Compare March 2020 over March 2019)
     April 12 – May 9 (Compare April 2020 over April 2019)
     May 10 – June 6 (Compare May 2020 over May 2019)
    Option 2: Compare the months gross revenue that you wish to receive the subsidy (i.e. March or April or May) against the average gross revenue from January & February 2020.
  • Once you choose an option you must stay with that for all subsidy months you are applying for.
  • A 100% refund of employer paid contributions to CPP and EI is on top of the 75% subsidy and there is no limit imposed for employees on leave with pay or for which the employer is receiving the CEWS subsidy. This refund is applied for after the regulated payment is made.

10 per cent Wage Subsidy and its’ interaction with CEWS:

On March 18, 2020, the Prime Minister announced a temporary 10 per cent wage subsidy. For employers that are eligible for both the Canada Emergency Wage Subsidy (CEWS) and the 10 per cent wage subsidy for a period, any benefit from the 10 per cent wage subsidy for remuneration paid in a specific period would generally reduce the amount available to be claimed under the Canada Emergency Wage Subsidy in that same period.

  • The subsidy has a maximum of $1,375 per employee and $25,000 per employer.
  • The qualifying period is March 18 thru to June 19th.
  • A temporary wage subsidy for employers for three months that will allow the employer to reduce the amount of payroll deductions, excluding CPP and EI.
  • Eligible employers are individuals, partnerships, non-profits, registered charities and CCPC’s that qualify for the small business tax deduction (SBD).
  • Must have an existing business number and payroll account prior to March 18th.
  • Partnerships are only eligible for the subsidy if their members consist exclusively of individuals, charities, or CCPC’s eligible for the SBD.
  • Associated CCPC’s will not be required to share the maximum subsidy of $25,000 per employer.
  • Payroll remittances are NOT subject to deferral like the income tax measures.
  • If the incomes taxes deducted exceed the payroll remittances, you can reduce future payroll remittances even if that exceeds the June 19th final date.
  • The wage subsidy is to be reported as taxable income to the claiming entity.

CEWS Interaction with the Canadian Emergency Response Benefit (CERB):

An employer would not be eligible to claim the Canada Emergency Wage Subsidy for remuneration paid to an employee in a week that falls within a 4-week period for which the employee is eligible for the Canadian Emergency Response Benefit.

Employers who are not eligible for the Canada Emergency Wage Subsidy would still be able to furlough employees who will receive up to $2,000 a month.

CECRA – Canada Emergency Commercial Rent Assistance

  • This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19.
  • The program will provide forgivable loans to qualifying commercial property owners to cover 50 per cent of three-monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
  • The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25 per cent of the rent.
  • Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70 per cent drop in pre-COVID-19 revenues. This support will also be available to non-profit and charitable organizations.
  • The Canada Mortgage and Housing Corporation will administer and deliver the CECRA, a collaboration between the federal government and provincial and territorial governments, which are responsible for property owner-tenant relationships.
  • Provinces and territories have agreed to cost share total costs and facilitate implementation of the program. They will cost share up to 25 per cent of costs, subject to terms of agreements with the federal government.
  • It is expected that CECRA will be operational by mid-May, with commercial property owners lowering the rents of their small business tenant’s payable for the months of April and May, retroactively, and for June.
  • Under a rent forgiveness agreement, which includes a moratorium on eviction, the mortgaged commercial property owner would reduce the small business tenant’s monthly rent by at least 75 per cent. The tenant would be responsible for covering 25 per cent, the property owner 25 per cent, while the federal government and provinces would share the remaining 50 per cent. The forgivable loans would be disbursed directly to the mortgage lender.

Programs Designed To Increase Access To Credit For Businesses

CEBA – Canadian Emergency Business Account:

  • This program allows qualifying small business and not for profit customers to borrow up to $40,000 from a government approved financial institution. This loan is guaranteed to the institution by the federal government.
  • This loan is interest free until December 31, 2022
  • No minimum monthly principal payments are required until December 31, 2022
  • If the outstanding balance is paid in full prior to December 31, 2022 a $10,000 loan forgiveness is available.
  • If the loan is not repaid by December 31, 2022, the remaining balance will be converted to a three-year term loan at 5 per cent interest.
  • The eligible criteria to qualify for this program are:
    • The person applying has the power to bind the organization
    • The business is an operating business and not a holding company
    • The payroll expense for the organization in calendar 2019 was between $20,000 and $1.5 million. The T4 summary will be required as proof.
    • The payroll expense for the organization in calendar 2019 was between $50,000 and $1 million. The T4 summary will be required as proof.
    • Funds must be used for operating costs that cannot be deferred such as payroll, utilities, property tax, rent etc.
    • There is an active business operating bank account open at the lending financial institution and it has been open prior to March 1, 2020.
    • Only one CEBA application is permitted regardless of the number of financial institutions your business may utilize.

BCAP – Business Credit Availability Program:

  • Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) have been provided $65 Billion by the government of Canada to qualifying SME’s to borrow.
  • Available to companies that would be able to service the new debt prior to Covid-19
  • BDC is offering working capital loans in three distinct categories:

o $100,000 or less online application only
o Up to $2 million for the purpose of covering fixed costs that can’t be eliminated.
o Above $2 million up to $6.25 million for special circumstances

  • There is currently a backlog of applications. Typically it is one month before funds are available. Start with local bank branch first and you MUST have a minimum of a six month cash flow forecast attached to your application.
  • BDC is offering working capital loans of $2 million with flexible repayment terms.
  • With existing BDC loans under $1 million postponement of principal payments for up to six months.
  • The Bank of Canada has lowered the interest rate and has also lowered all banks Domestic Stability Buffer by 1.25%. This will allow the banks to free up an additional $300 Billion to lend.

Business Tax Programs

Income, HST and Import Tax Payments:

  • Income tax payments, including tax installment payments, are deferred and not due now until September 1.
  • All post HST assessments and income tax audits will be stopped for the next four weeks, possibly mid to late April.
  • Businesses, including self-employed individuals, to defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports.

Ontario Specific Items:

  • Any premium payments for WSIB are deferred to August 31st.
  • The provincial EHT exemption limit will be increased from $490,000 to $1 million for the 2020 calendar year.

Individual Support Programs

CERB – Canada Emergency Response Benefit:

  • Applies to a qualifying individual that lost their job or cannot work due to Covid-19. That includes those that are not eligible for employment insurance as well as those that do qualify. You cannot receive EI benefits and CERB at the same time however if you qualify for any provincial programs you may also receive CERB benefits.
  • The qualifying person is a wage or salaried earner, contract worker or a self- employed individual.
  • To be eligible you must:
    • be at least 15 years old and a resident of Canada
    • Had employment income, self-employment income, maternity or parental benefits of at least $5,000 in 2019 or in the 12 months prior to the date of application. This includes dividends received as non-eligible dividends (dividends paid out from corporate income taxed at the small business tax rate). The income does not have to be earned in Canada but you must reside in Canada.
    • You are, or expect to be without employment income for at least 14 consecutive days in the initial 4 weeks? For subsequent benefit periods they expect to have no employment income.
  • This program provides a benefit of $500 per week for sixteen weeks and is considered as taxable income to the recipient, however no income tax will be deducted at source.
  • The eligibility period runs from March 15, 2020 to October 3, 2020. You can apply no later than December 2, 2020.
  • You apply online via canada.ca – My Account. Cheques will be received approximately 10 days after you apply. Consider setting up direct deposit.
  • Your individual application date is based on your birth month:
    • January to March apply on April 6th
    • April to June apply on April 7th
    • July to September apply on April 8th
    • October to December apply on April 9th
    • Any month from April 10th on
  • It includes employees, contract workers and self-employed entrepreneurs, including sole proprietors.

Individual Benefits and Income Tax:

  • Those individuals that are currently receiving payments under the GSTC program will receive double that amount in the month of May. This is a one-time payment.
  • If you are receiving the Canada Child Benefit (CCB) the payment will be increased by $300 per child starting in May and will continue for the 2019/2020 qualifying period.
  • For those currently paying any Canada Student Loan there is a six-month interest free moratorium on payments.
  • Seniors that are required to withdraw funds from their Registered Retirement Income Funds (RRIF’s) annually the minimum withdrawal for 2020 is now reduced by 25%.
  • The income tax filing deadline has been extended from April 30 to June 1 however the government strongly advises that if you qualify for the GSTC or CCB programs you should still file by April 30.
  • If any income tax or HST is payable there is an extension to August 31st without any interest or penalties.
  • CRA has announced that they will recognize and accept electronic signatures for your personal income tax returns and authorizations. This will allow the taxpayer to fully utilize electronic services from their accounting firm.

Canada Emergency Student Benefit (CESB):

  • For post-secondary students and recent graduates who are ineligible for the Canada Emergency Response Benefit or for Employment Insurance, but who are unable to find full-time employment or are unable to work due to COVID-19
  • The CESB would provide $1,250 per month for eligible students from May through August 2020, and $1,750 for students with dependents and those with permanent disabilities.
  • This new grant would provide income support to post-secondary students who will experience financial hardship over the Summer due to COVID-19.
  • The CESB will be delivered by CRA and more details will be communicated later.

Canada Student Service Grant:

  • While the COVID-19 pandemic will limit employment opportunities for students, it presents an opportunity for students and youth to mobilize and take part in national service activities that can provide valuable labour market and skills development experiences, while giving back to their local communities.
  • To encourage students to participate in the COVID-19 response, the government will launch a new national service initiative to recognize students’ significant contributions to the COVID-19 efforts, and provide support through a new Canada Student Service Grant which will provide up to $5,000 to support student’s post-secondary education costs in the fall.
  • More details will be made available on the “I Want to Help” platform over the coming weeks, including more detailed information about eligibility, the levels of funding available under the grant, how to apply for a national service position, and how applications will be assessed.

To our valued clients:

The government continues to release detailed information on the new programs that have been put in place to support Canadian families and businesses.

As we monitor official sources for updated information we will post through social media content and our website.  If you have specific concerns, don’t hesitate to connect with us via email.

Everyone here at DSK is available to help you thru this pandemic and the constant changes being announced. Primarily we are working virtually with a limited staff at each office to ensure your documents physically dropped off are being logged in and secured. If you require any support, please contact us and we can arrange a phone or an online meeting. We check our secure portal a couple times a day to ensure your business activities are addressed. As future changes are announced we will bring them to your attention.

THANK YOU FOR YOUR SUPPORT AND YOUR CONTINUED TRUST IN US AS YOUR BUSINESS AND TAX ADVISOR.

TOGETHER WE WILL GET THRU THIS.