Bill C-30 will extend the Canada Emergency Rent Subsidy through September 25, 2021.
Update: On June 2, 2021, the Honourable Chrystia Freeland (Deputy Prime Minister and Minister of Finance) and the Honourable Mary Ng (Minister of Small Business, Export Promotion and International Trade) detailed the proposed extension of the Canada Emergency Rent Subsidy to September 25, 2021. The blog post below has been updated to reflect the rules applicable up to September 25, 2021. With different rules now applying to the various benefit periods, MLT Aikins LLP would be pleased to assist you in determining whether you are eligible for this program and the amount of the subsidy that you qualify for. Eligible employers can apply here.
Canadian Emergency Rent Subsidy: Eligible Businesses with 2020 Revenue Decreases
For qualifying expenses incurred on or after September 27, 2020, the Canada Emergency Rent Subsidy (CERS) is now available to qualifying businesses. The CERS expands and replaces the previous Canada Emergency Commercial Rent Assistance program. The rules and the application process for the CERS are similar to the Canada Emergency Wage Subsidy (CEWS), which should make it easier for qualifying businesses to access the program. For more detailed discussion of the CEWS, see our Federal Government Extends COVID-19 Wage Subsidy blog.
Like the CEWS, the CERS is available to a wide range of businesses, including:
- taxable corporations and trusts;
- registered charities;
- non-profit organizations; and
- partnerships, provided that at least 50% of the fair market value (FMV) of all interests in the partnership are held by partners that would otherwise be eligible for the subsidy.
The CEWS is not available to public institutions, which include public schools and school boards, public universities and colleges, hospitals, health authorities, municipalities, First Nations bands (although businesses owned by First Nations are eligible) or entities owned by the Crown or a municipality.
Qualifying expenses for the purposes of the CERS include amounts payable under a lease and certain expenses related to the ownership of real property. For leased property, the CERS can be claimed for base rent, variable rent based on sales or profits, and amounts payable under a net lease including regular expenses such as insurance, utilities, maintenance expenses and property taxes. For these other regular expenses, the key criteria is that the lease must require the tenant to pay the expenses.
If a business owns real property, the CERS may be claimed for certain expenses as long as the property is not used to earn rental income. Eligible expenses include interest paid on a mortgage on the property, insurance and property taxes.
The CERS claim periods match those used by the CEWS (each, a "Qualifying Period"). The Qualifying Periods that remain open for CERS applications are for:
- Period 3: qualifying expenses paid from November 22, 2020 to December 19, 2020
- Period 4: qualifying expenses paid from December 20, 2020 to January 16, 2021
- Period 5: qualifying expenses paid from January 17, 2021 to February 13, 2021
- Period 6: qualifying expenses paid from February 14, 2021 to March 13, 2021
- Period 7: qualifying expenses paid from March 14, 2021 to April 10, 2021
- Period 8: qualifying expenses paid from April 11, 2021 to May 8, 2021
- Period 9: qualifying expenses paid from May 9, 2021 to June 5, 2021
- Period 10*: qualifying expenses paid from June 6, 2021 to July 3, 2021
- Period 11*: qualifying expenses paid from July 4, 2021 to July 31, 2021
- Period 12*: qualifying expenses paid from August 1, 2021 to August 28, 2021
- Period 13*: qualifying expenses paid from August 29, 2021 to September 25, 2021
*The extension to September 25, 2021 is included in the federal budget legislation and will be formalized once Bill C-30 is passed.
The CERS may be claimed in respect of qualifying expenses that have already been paid by the eligible business or qualifying expenses that have not yet been paid, as long as they are paid within 60 days after the CERS is received (e.g. a business that is relying on the CERS in order to pay rent may claim the rental expense on its CERS application, even if it only pays its landlord once it receives the subsidy).
Calculating Applicable Subsidy Rates
The applicable CERS base rate for a business for a particular Qualifying Period is calculated using the same revenue reduction criteria as the CEWS. Depending on the business's revenue reduction in the Qualifying Period, the applicable CERS base rate is calculated as follows:
|Qualifying Periods||November 22, 2020 to July 3, 2021||July 4, 2021 to July 31, 2021||August 1, 2021 to August 28, 2021||August 29, 2021 to September 25, 2021|
|Base rate for employers with revenue reduction of 70% or more||65%||60%||40%||20%|
|Base rate for employers with revenue reduction of 50% to 70%||40% + (1.25 x percentage revenue reduction in excess of 50%)||35% + (1.25 x percentage revenue reduction in excess of 50%)||25% + (0.75 x percentage revenue reduction in excess of 50%)||10% + (0.50 x percentage revenue reduction in excess of 50%)|
|Base rate for employers with revenue reduction of 11% to 49%||Revenue reduction x 0.80||0.875 x percentage revenue reduction in excess of 10%||0.625 x percentage revenue reduction in excess of 10%||0.25 x percentage revenue reduction in excess of 10%|
|Base rate for employers with revenue reduction of 0% to 10%||Revenue reduction x 0.80||0%||0%||0%|
Businesses that are subject to a public health restriction for at least seven days during a Qualifying Period are eligible for an additional top-up subsidy. To qualify, the public health restriction must require the business to cease activities which previously accounted for at least 25% of the business's revenues. If a business qualifies for the top-up, the applicable top-up rate is 25%, pro-rated for the number of days in the Qualifying Period that the public health restriction was in effect. For example, if a restaurant is required to offer take-out dining only for 21 of 28 days in a CERS claim period, its top-up subsidy rate would be 18.75% (25% x 21/28 = 18.75%).
The CERS must be claimed on a property-by-property basis. The maximum amount of eligible expenses for a particular property is $75,000 per Qualifying Period. If a business is claiming the CERS in respect of multiple properties, it may claim eligible expenses of up to $300,000 per Qualifying Period. Where a business is affiliated with other businesses (e.g. two corporations are controlled by the same individual), the $300,000 limit must be shared between the affiliated businesses.
The CERS will be paid directly to qualifying businesses by the Canada Revenue Agency (the CRA) once their application has been received and processed. Before applying, qualifying businesses are required to register for a new CERS program identifier number via their CRA My Business Account.
Businesses can calculate their CERS claim using an online calculator on the CRA's website. The CRA will begin processing CERS applications on November 30 and aims to begin issuing payments within three to five business days. Applicants are encouraged to ensure they are able to receive direct deposits from the CRA to speed up the delivery of payments. Businesses have 180 days from the end of a Qualifying Period to apply for the CERS.
As you evaluate your expenses and obligations during this difficult time, you should consider the subsidies that may be available to your organization. In making these decisions, MLT Aikins LLP would be pleased to assist with determining whether your business and/or lease structure is eligible for this emergency relief program.
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.