On November 19, 2020, Bill C-9 (An Act to Amend the Income Tax Act (Canada Emergency Rent Subsidy and Canada Emergency Wage Subsidy)) was enacted into law. Bill C-9 establishes, among other things, a new rent support program, the Canada Emergency Rent Subsidy ("CERS"), that fills the gap left by the expiry of the Canada Emergency Commercial Rent Assistance ("CECRA") program on September 30, 2020. Unlike CECRA, eligible entities for CERS can apply for the subsidy directly, without the need to claim the assistance through their landlords. The CERS application portal is now open and can be accessed here. The Government of Canada has provided additional guidance on how to complete the application form here.
For more information on CECRA, see our post here. This post was originally published on November 9, 2020 and was updated on November 26, 2020 with updated information and links.
The CERS Program
- CERS will support commercial tenants directly, rather than requiring tenants to negotiate and enter into rent-reduction agreements with their landlords;
- CERS will include support for property owners that do not use the qualifying property primarily to earn rental income or property owners that use the qualifying property primarily to earn rental income from a non-arm's length person or partnership (where such other person or partnership does not use the qualifying property primarily to earn rental income);
- To be eligible for the CERS program, applicants must be individuals, taxable corporations and trusts, non-profit organizations or registered charities. Public institutions are generally not eligible for the subsidy. A comprehensive list of eligible entities is available here.
- To be eligible for the CERS program, applicants must also meet at least one of the following conditions: (i) the applicant had a CRA business number on September 27, 2020; or (ii) the applicant had a payroll account on March 15, 2020, or another person or partnership made payroll remittances on the applicant's behalf; or (iii) the applicant purchased the business assets of another person or partnership who meets condition (ii) above, and has made an election under the special asset acquisition rules; or (iv) the applicant meets other prescribed conditions that might be introduced;
- To apply for the CERS program, eligible entities must have a qualifying property. Properties that qualify include any building or land in Canada that an eligible entity owns or rents and uses in the course of their business activities. Homes, cottages or other residences used by an applicant, an applicant's family members, or other non-arm's length persons do not qualify;
- Rent expenses (or commercial mortgage interest expenses) of eligible entities will be reimbursed, on a sliding scale, up to a maximum of 65% of qualifying rent expenses;
- Qualifying rent expenses include, but are not limited to, gross rent, percentage rent, base rent, operating expenses (including insurance and utilities), property taxes and other amounts payable to the landlord for services ancillary to the rental of the property (but exclude, most notably, sales taxes, fees payable for discrete items or special services and reconciliation adjustment payments);
- CERS applies to any qualifying rent expense for any of the following qualifying periods: (i) September 27, 2020 to October 24, 2020; (ii) October 25, 2020 to November 21, 2020; and (iii) November 22, 2020 to December 19, 2020;
- Eligible entities must submit a separate application for each qualifying period no later than 180 days following the end of the applicable qualifying period. The application portal is now open;
- Qualifying rent expenses are limited to amounts that are paid or payable by the qualifying renter to an arm's length party for the qualifying period pursuant to a written agreement entered into before October 9, 2020 or pursuant to the renewal (on substantially similar terms) or assignment of a written agreement entered into before October 9, 2020. Amounts that are not paid at the time of the application will have to be paid no later than 60 days following payment of the subsidy for the applicable claim period;
- The amount of qualifying rent expenses for a single qualifying property is capped at $75,000 per qualifying period, thus the maximum base subsidy amount that can be received per location is $48,750 per qualifying period (being 65% of $75,000);
- The amount of qualifying rent expenses for an eligible entity with multiple locations is capped at $300,000 per qualifying period, thus the maximum base subsidy amount that can be received per entity is $195,000 per qualifying period (being 65% of $300,000);
- As with CECRA, eligibility for CERS will be contingent on a demonstrated decline in revenue measured by comparing current revenues to (i) gross revenues in the same period for the prior year; or (ii) average revenues in January and February 2020 (there is no minimum revenue drop required to qualify for the subsidy); and
- A 25% top-up of the subsidy will be available specifically to eligible entities that experienced a reduction in revenues as a result of being forced to close or limit their activities for at least one week under public health orders. The maximum top-up amount combined with the base subsidy is subject to the $75,000 cap per business location. The $300,000 cap on qualifying rent expenses for entities with multiple locations applies to the base subsidy only and not the top-up subsidy.
Because the CERS program is intended to be responsive to changes in the seriousness of the COVID-19 pandemic, the program parameters as currently specified apply only until December 19, 2020, although CERS support is guaranteed to continue until June 2021.
CERS will be distributed through a deeming rule in the Income Tax Act, which deems an eligible entity to have made an overpayment of tax in the applicable qualifying period. The deemed overpayment is then refunded to the entity upon assessment by the Canada Revenue Agency ("CRA").
The CERS web page and the CRA Backgrounder include more detailed information about eligibility requirements, how payment periods are structured, how the subsidy is calculated and the application process.
Extension of Related Federal Programs
Bill C-9 also includes an extension of the Canada Emergency Wage Subsidy (CEWS), which will continue to apply until June 30, 2021.
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.