Note (August 18, 2020): We’ve partnered with Punchcard Systems and Video Tax News to produce the CEWS 2.0 Estimator. The Estimator takes all the rules associated with CEWS 2.0, outlined in the 26-page legislation, and provides a free and easy-to-use tool that allows business leaders to model revenue and remunerations, and understand how to properly navigate the wage subsidy program. The tool is available at https://wagesubsidycalculator.ca.
Updated May 20, 2020
The Canadian wage subsidy programs are support measure that will allow eligible employers to either reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA), or request a rebate for wages paid to employees.
Individuals, partnerships, small businesses, sole proprietors, charities, non-profits, and Canadian-controlled private corporations (CCPC) are eligible for these subsidies, and require an existing business number and payroll program account with the CRA (e.g. CRA My Business).
There are two subsidies available:
Temporary Wage Subsidy for Employers (10%)
The subsidy is equal to 10% of the remuneration paid to your staff, up to $1,375 per employee and $25,000 per employer.
This subsidy is not tied to any measured decline in gross revenue.
What period does this apply to?
The original period applied to payroll between March 18, 2020 and June 20, 2020. Presumably, this program has been extended to August 29, 2020 to match the updated CEWS eligibility period.
How do I receive this subsidy?
You’ll have to manually calculate your subsidy, and reduce your current remittance of federal, provincial, or territorial income tax that you would normally pay to the CRA. Talk to your accountant or payroll specialist to help set this up.
What remittances does this apply to?
Only your income tax — CPP and EI deductions cannot be included in the calculation of the subsidy. You need to pay those as usual.
When does this become available?
Immediately, when you submit your payroll remittances to the CRA.
Canada Emergency Wage Subsidy (75%)
For-profit, non-profit, and charitable organizations who have seen, at least, a 15% drop in monthly gross revenues in March 2020 and a 30% drop in monthly gross revenues in April through August 2020, there will be a 75% wage subsidy available. There will be no caps on the number of employees supported through the subsidy.
How much is covered?
The greater of either of the following scenarios:
- Scenario 1: 75% of an employee’s salary of up to $58,700 will be covered; this works out to $847 per week.
- Scenario 2: 75% of an employee’s pre-crisis salary, of up to a maximum benefit of $847 per week.
The intent of the second scenario is to provide an option for employers to keep their employees at 75% of salary in the event that all business income has ceased.
What period does this apply to?
Updated May 15, 2020: March 15, 2020 through August 29, 2020
How do I qualify?
Any Canadian business with a 15%/30% decline in gross revenue compared to the same period in 2019, or compared to an average of January/February 2020.
The employer must have had a CRA payroll account on March 15, 2020.
On May 15, 2020, eligible organizations were updated to include:
- Partnerships that are up to 50-per-cent owned by non-eligible members;
- Indigenous government-owned corporations that are carrying on a business, as well as partnerships where the partners are Indigenous governments and eligible employers;
- Registered Canadian Amateur Athletic Associations;
- Registered Journalism Organizations; and
- Non-public colleges and schools, including institutions that offer specialized services, such as arts schools, driving schools, language schools, or flight schools.
What periods are eligible?
For the revenue comparison, CRA will be looking at the following periods:
|Payroll Period||Reference Period||Decline|
|March 15 –
|March 2020 over March 2019,
or March 2020 over an average of both January and February 2020
|April 12 –
|April 2020 over April 2019,
or April 2020 over an average of both January and February
|May 10 –
|May 2020 over May 2019,
or May 2020 over an average of both January and February
An organization that qualifies for a period will automatically be qualified for the following period, but will require re-qualification for the following period after that.
Update April 11, 2020: The legislation passed allows for flexibility to extend this program to the end of September 2020.
Update May 15, 2020: The government has officially updated the CEWS program to extend to August 29, 2020. [su_highlight]The government has stated that they will be reviewing the thresholds required for eligibility, so it is unknown at this time what the comparison and revenue decline requirements will be.[/su_highlight]
How do I calculate the 15%/30% decline?
An organization looking to use this subsidy would be calculated with the following rules:
- Business carried on in Canada, earned from arm’s-length sources
- Calculated using your organization’s normal accounting method
- Exclude revenues from extraordinary items and amounts on account of capital
- Non-profits and charitable organizations may include/exclude government funding in calculating revenue
For non-profits and charities, the government will continue to work with the sector to ensure the definition of revenue is appropriate to their specific circumstances.
Update April 11, 2020: If an organization meets the eligibility requirement for a period, they will be automatically eligible for the following period. For example, an employer with a 15% revenue drop in Period 1 will be eligible for Period 2. This is called the deeming period.
Updated April 21, 2020: The Government of Canada has released an online and Excel calculator to calculate your subsidy amounts.
How do I report the revenue decline?
Organizations can choose to report either (not both) by:
- Accrual accounting (as they are earned/invoiced), or
- Cash accounting (as the cash is received).
Special rules would also be provided to address issues for corporate groups, non-arm’s length entities and joint ventures.
What records will I need to keep?
The CRA expects that you will maintain adequate books and records to ensure that your claim is accurate and complete, and clearly supports your eligibility for the wage subsidy for a claim period.
Books and records includes ledgers, journals, financial statements, contracts, elections, calculations or other working papers, payroll records, sales invoices and any other relevant document. For additional information about adequate records and recordkeeping, please see What are records and who has to keep them?
Employers will also be expected to report the eligible remuneration paid to each employee in respect of the claim periods using three new codes in the “Other information” area at the bottom of the employees’ T4 slips.
What employee remuneration can be subsidized?
Unlike the 10% subsidy, the CEWS can include salary or wages; effectively, amounts for which an employer would be required to withhold income tax. This does not include severance, stock options, or personal use of a corporate vehicle.
Update April 8, 2020: The Federal Government will 100% refund the certain employer-paid contributions to Employment Insurance, the Canada Pension Plan, the Quebec Pension Plan, and the Quebec Parental Insurance Plan.
Update May 6, 2020: CC Champion Tammy Christiansen has pointed out an important note for calculation, from the Government of Canada’s documentation, “The wage subsidy calculation is based on an eligible employee’s pay for each of the weeks in the relevant period regardless of the eligible employer’s pay cycle.” This means that, in calculating the payroll amount, you have to use the gross earnings based on the earnings period, not based on the pay date.
How do I receive this subsidy?
Employers will apply via the CRA My Business portal, and will have to apply/confirm eligibility every month. Funds will be available in 3-6 weeks.
Update April 1, 2020: Organizations will have to attest that they are doing what they can to pay the remaining 25% of the employee salary. Subsidy will not be manually calculated.
Can I claim both subsidies?
Organizations that have claimed the initial 10% will deduct that amount from their 75% submission. If you had not claimed the initial 10%, you will have to complete a special form.
The 75% subsidy assumes that you have already claimed the previous subsidy, and the amount claimed will be discounted by the 10%.
If you hadn’t claimed the previous subsidy, you’ll have to complete a special form (to be released later), to have that amount credited to you.
Updated May 20, 2020: When submitting your CEWS claim, employers can elect to claim the 10% Temporary Wage Subsidy to be 0%, meaning that the employer did not reduce that period’s remittances by the 10% amount.
What if my employees have applied for the Canadian Emergency Response Benefit?
From the Department of Finance backgrounder:
“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.”
What if I’m using the work-sharing program?
The 75% subsidy will be reduced for EI amounts received by an employee/employer using the work-sharing program.
Is this taxable?
Yes. This is taxable revenue, to be claimed when you complete your tax filings for the current year.
Are there any penalties?
Yes. “Employers that engage in artificial transactions to reduce revenue for the purpose of claiming the CEWS would be subject to a penalty equal to 25 per cent of the value of the subsidy claimed, in addition to the requirement to repay in full the subsidy that was improperly claimed.”
When will this be available?
The subsidy application will be made through the CRA My Business portal, and will be available after the end of each of the periods. Applications commenced on April 27, 2020.
It is important to note that the legislation passed on April 11, 2020 states the following: “The Minister may communicate or otherwise make available to the public, in any manner that the Minister considers appropriate, the name of any person or partnership that makes an application under the 75% wage subsidy.” Effectively, if you use the subsidy, the Government can let the general public know.
Other frequently asked questions?
The Government of Canada has released an extensive FAQ, and is keeping it up-to-date as the program develops.
Student Wage Subsidy
There will be updated to the Canada Summer Job Program which will include:
- Student wages to be subsidized at 100%
- Job placements to be extended to winter (to support jobs starting later in the year)
- Part-time works to be included in the program
To calculate your wage subsidy and understand further eligibility requirements:
- Canada Emergency Wage Subsidy (CEWS) – Eligibility and Calculation
A few additional resources that you might find valuable:
- The CRA has released an FAQ answering some common questions (March 20, 2020)
- Our friends at Video Tax News have prepared some excellent videos outlining things you need to know (March 20, 2020 and April 1, 2020)
- Funding details from the Government of Canada (April 1, 2020)
- The Canada Emergency Wage Subsidy Backgrounder (Department of Finance, Government of Canada, April 1, 2020)
- Message from Prime Minister Trudeau regarding the Wage Subsidy (CBC, April 8, 2020)
- Government provides further flexibility for employers to access the Canada Emergency Wage Subsidy (Government of Canada, April 8, 2020)
- Extending eligibility for the Canada Emergency Wage Subsidy (Government of Canada, May 15, 2020)
- CEWS FAQ Updated (Video Tax News, May 19, 2020)
So the subsidy is not available for companies that operate for a profit?
Only non-profit, charitable or GC? What is being done for small and medium sized businesses otherwise?
The 10% subsidy is available to all companies that pay wages to employees, including for-profit corporations.