Covid-19 Economic Response for Businesses
We’ve been busy helping our clients navigate the Covid-19 financial measures. Here is a summary of the programs supporting small businesses. We’ve chosen to primarily leverage the language used by the CRA found on canada.ca and encourage you to consult this website directly for precise guidance on the measures.
Temporary Wage Subsidy (TWS)
The 10% Temporary Wage Subsidy for Employers is a three-month measure that will allow eligible employers to reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency (CRA). This wage subsidy is calculated and applied at source as long as the subsidy is not greater than the federal taxes withheld. If this is the case you have until the end of the year to either claim the subsidy, or the CRA will pay the amount to you or transfer it to your next year’s remittance.
You are an eligible employer if you:
individual (excluding trusts),
partnership (exceptions apply),
registered charity, or
Canadian-controlled private corporation (subject to business limit test);
have an existing business number and payroll program account with the CRA on March 18, 2020; and
pay salary, wages, bonuses, or other remuneration to an eligible employee.
An eligible employee is an individual who is employed in Canada.
The subsidy is equal to 10% of the remuneration you pay from March 18, 2020 to June 19, 2020, up to $1,375 for each eligible employee to a maximum of $25,000 total per employer.
Canada Emergency Wage Subsidy (CEWS) - extended to 24 weeks
CEWS is a subsidy available from March 15, 2020 to the newly announced extension date of August 29, 2020.
It will provide a subsidy of 75% of eligible remuneration, paid by an eligible entity up to a maximum of $847 per week for each eligible employee.
Eligible employers will have experienced a drop of at least 15% of their qualifying revenues in March 2020 and 30% for the months of April and May, when compared to their qualifying revenue for the same period in 2019 or in some circumstances in comparison to the average of January and February 2020. The revenue test for the extended periods of June, July and August have not yet been announced.
For the purposes of the wage subsidy, an eligible employer means:
a corporation (other than a public institution) that is not exempt from tax under Part I of the Income Tax Act (the Act);
an individual (including a trust);
a registered charity (other than a public institution);
a person that is exempt from tax under Part I of the Act (other than a public institution).
a partnership, each member of which is a person or partnership described in this list.
One of the interesting pieces of the CEWS is the deeming provision, which states that once an eligible employer has determined that it has experienced the required reduction in revenue for a particular claim period, it is automatically deemed eligible for the immediately following claim period.
Employers have until September 30, 2020 to claim CEWS if eligible.
Extended Work Sharing Program (WS)
WS is a program that helps employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer. The program provides Employment Insurance (EI) benefits to eligible employees who agree to reduce their normal working hours and share the available work while their employer recovers. Work-Sharing is an agreement between employers, employees and the Government of Canada.
Due to Covid-19, effective March 15, 2020 to March 14, 2021, and not limited to one specific sector or industry, the Government of Canada is introducing temporary special measures:
Extension of the maximum possible duration of an agreement from 38 weeks to 76 weeks
Mandatory cooling off period has been waived for employers who have already used the Work-Sharing program so that eligible employers may immediately enter into a new agreement
Reduce the previous requirements for a Recovery Plan to a single line of text in the application form
Reduce the requirement and expand eligibility to employers affected by accepting business who have been in business for only 1 year rather than 2, and eliminate the burden of having to provide sales/production figures at the same time, and
Expand eligibility for staff who are essential to recovery, Government Business Enterprises (GBEs) and non-for-profit organization employers.
Canada Emergency Business Account (CEBA):
CEBA provides interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).
To qualify, these organizations will need to demonstrate they paid between $20,000 to $1.5 million in total payroll in 2019. In addition, businesses should be aware funds are to be used to pay non-deferrable operating expenses, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.
Canada Emergency Commercial Rent Assistance (CECRA)
CECRA is the latest addition to support measures for small businesses. 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% 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 small business tenants’ rent by at least 75% 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% 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% drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations.
It is expected that CECRA will be operational by mid-May, and further details will be announced soon.
Business that do not qualify for support:
The Federal Government has finally acknowledged that certain businesses simply do not qualify for any of the programs launched to date. These are primarily sole proprietors with no payroll from current or previous years. Recently announced the government is providing $675 million to give financing support to small and medium-sized businesses that are unable to access other COVID-19 business supports, through Canada's Regional Development Agencies. Link found here: https://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07662.html
These are a round up of the most properly programs launched by the Federal Government in response of Covid-19, however there are other programs not listed above and all details can be found at https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses