Canada's COVID-19 Economic Response
More sweeping changes were announced in the daily Federal press conferences over the past week, including yesterday morning.
Here is what we think will be relevant to you:
THE CANADA EMERGENCY WAGE SUBSIDY (CEWS)
The government is proposing to introduce a wage subsidy of 75 percent for qualifying businesses, for up to 3 months, retroactive to March 15, 2020.
Eligible employers would include individuals, taxable corporations, and partnerships consisting of eligible employers as well as non‑profit organizations and registered charities.
The details we have for now are as follows:
This subsidy would be available to eligible employers that see a drop of at least 30 percent of their revenue, year over year (i.e. March 2020 versus March 2019). Employers will need to attest to the decline in revenue and re-apply monthly.
UPDATE - The 30% revenue qualification for March 2020 was later changed to 15%. The 30% revenue decline qualification stayed in tact for April 2020 and beyond.
The subsidy will provide support of up to 75% of an employee’s wages for a 3 month period retroactive to March 15, 2020, to a maximum of $847/week (75% of the first $58,700 of an employee’s salary).
The Canada Revenue Agency (CRA) will coordinate the CEWS through an online portal that is to go live in 3-6 weeks.
For employers that do not qualify for the CEWS, they can still qualify for the 10 percent Wage Subsidy announced on March 18, 2020. More on that can be found on our recent post here.
More information related to the CEWS can be found on the Government of Canada’s website here.
ConnectCPA’s take: Although we applaud the government for trying to move quickly to help businesses, many companies will be left in the dust. What happens if revenues decreased year-over-year by 25% or 29%? What about new companies that just launched? And lastly, we service many startups; whether they are pre-revenue or more mature (and anything in between) they typically hire well in advance. Unfortunately, this measure may not achieve the objective of avoiding layoffs for them. Hopefully when the details are fine-tuned, there will be more access to the subsidy for a wider range of businesses.
We’ll provide more information on how to apply when there are more details available. We have selected a client candidate that we will guide through the application process and the plan will be to record the process and share it with you.
September 2020 Update: Click here for another one of our blog posts where we provide an updated to the CEWS program.
INTEREST-FREE LOANS FOR SMALL BUSINESSES (CEBA)
The government will be extending $40,000 loans to qualifying businesses interest-free for one year, of which $10,000 will be forgiven if $30,000 is fully repaid on or before December 31, 2022. At the moment, CIBC has been the only bank to comment and mentioned that the application will be completely digital. If the loan cannot be repaid by December 31, 2022, it can be converted into a 3-year term loan at an interest rate of 5%. Lastly, to qualify for this loan, businesses must demonstrate that they paid between $50,000 to $1 million in total payroll in 2019.
September 2020 Update: Click here for another one of our blog posts where we provide an updated to the CEWS program.
GST/HST and CUSTOMS DUTY DEFERRAL
The CRA will allow all businesses to defer, until the end of June 2020, any GST/HST payments or remittances that become owing on or after March 27, 2020, and before June 2020. This means that no interest will apply if your payments or remittances are made by the end of June 2020. We will continue to file GST/HST returns as always even though the payment portion is deferred.
Customs duties for statements of accounts for March, April, and May are being deferred to June 30, 2020. Businesses in need of information about their particular accounting and payment obligations on imported goods may contact the Canada Border Services Agency for more details.
CANADA EMERGENCY RESPONSE BENEFIT (CERB)
This program will replace the previously announced Canada Emergency Care Benefit and Canada Emergency Support Benefit. Applications are set to become available April 6 through CRA’S MyAccount portal and will provide a $2,000 taxable benefit every month for 4 months to:
workers who must stop working due to COVID19 and do not have access to paid leave or other income support.
workers who are sick, quarantined, or taking care of someone who is sick with COVID-19.
working parents who must stay home without pay to care for children that are sick or need additional care because of school and daycare closures.
workers who still have their employment but are not being paid because there is currently not sufficient work and their employer has asked them not to come to work.
wage earners and self-employed individuals, including contract workers, who would not otherwise be eligible for Employment Insurance.
To be eligible for the CERB, applicants must have had $5,000 in employment income, self-employment income, or maternity or parental leave benefits for 2019 or in the 12-month period preceding the day they make the application.
CRA will begin to accept applications on April 6 and there are specific rules to follow when applying (i.e. based on the month you were born). Please review the details on the Government of Canada website here.
If you don’t have access to CRA MyAccount, we recommend setting one up as soon as possible, as the process can take 5-10 days.
We will continue to update you as more information becomes available.
Stay healthy and safe,
The ConnectCPA Team
