Canada: Canada Emergency Wage Subsidy – COVID-19

The Canadian Government has made this resource to explain the Canada Emergency Wage Subsidy ("CEWS").

What Is It?

The CEWS is a $71 billion subsidy intended to assist Canadian businesses to keep and return their workers to their payroll during COVID-19, reduce claims on employment insurance, and to ease the challenge of returning to normal operations following the crisis.

It is different than the 10% Temporary Wage Subsidy ("TWS") for small businesses. The TWS is a reduction of payroll remittances that an employer must pay to the government. Whereas, the CEWS is a cash subsidy paid by the government to the employer.

Eligible employers can apply for both the CEWS and the TWS, but assistance under the TWS will be deducted from the amount an employer can receive under the CEWS.

Subsidy Amount:

The subsidy will pay up to 75% of the amount of remuneration paid, up to a maximum benefit of $847 per employee per week, up to a maximum of $58,700. Note: Finance Minister Morneau announced that it would be capped at $58,700, however the Government of Canada website states that: "There would be no overall limit on the subsidy amount that an eligible employer may claim."

To gain access to this benefit, employers must attest that they are making every effort to pay their employee the remaining 25%.

The Federal Government made it clear that there will be severe consequences for employers who are later found to have abused this program.

Eligibility:

To be eligible, the employer must attest to a drop of at least 30% in revenue as compared to the same time period in 2019, see below "Eligible Period" chart for clarification. Revenue must be from business carried on in Canada earned from arm's-length sources. Revenue is to be calculated using the employer's normal accounting methods, and would exclude revenue from extraordinary items and amounts on account of capital.

Employers will have to apply for the wage subsidy for each of the following claim periods:

For employers who were established after February 2019, their eligibility will be determined by comparing monthly revenues to a reasonable benchmark, the details of this have not been released yet.

Eligible employers include:

• Individuals;
• Non-profit organizations and registered charities;
• Taxable corporations; and
• Partnerships consisting of eligible employers.

Public bodies are not eligible.

Note: Employers may be asked to provide documentation to substantiate their eligibility to receive the CEWS to the CRA at a later time.

How to Apply:

Applications can be made through the Canada Revenue Agency ("CRA")'s My Business Account portal. A web-based application will also be available. The applications will not be available for another 3-6 weeks.

Employers will have to reapply every claim period as outlined in the "Eligible Period" chart above.

Practically speaking, employers will be expected to pay their employee's wages, and submit the amount paid through the CRA and be reimbursed for the subsidy.

Taxable:

Assistance received under the CEWS is considered government assistance and is included in the employer's taxable income. However, the employer will be entitled to a deduction for the amount of remuneration paid to employees.

Assistance received under the CEWS would reduce the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.

Interaction with Other Available Benefits:

10% Small Business Temporary Wage Subsidy

Any benefit from the 10% wage subsidy would reduce the amount available to be claimed under the CEWS during the same time period.

Canadian Emergency Response Benefit ("CERB"):

Employers will not be eligible to claim the CEWS for remuneration paid to an employee in a week that falls within the 4 week period for which the employee is eligible for the CERB.

For greater clarity, your employee may not receive the CERB and CEWS at the same time.

Next Steps for Employers:

Employers should:

• assemble their records in order to demonstrate the 30% reduction in revenues;
• assemble their records to demonstrate the pre-COVID-19 remuneration paid to their employees; and

ensure they are registered with the CRA for direct

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.